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Op-Ed: What social entrepreneurs really need

SAN FRANCISCO (JTA) — I take it as a good sign that, despite the economic downturn, we in the Jewish community are still concerned with entrepreneurship. So I read with interest Daniel Sieradski’s JTA opinion piece that keenly observes that, in the current organizational layout, an inspiring entrepreneur needs alternative means of support in order to succeed.

Also interesting was Maya Bernstein’s response that a true entrepreneur should be willing and able to take risks and put in the requisite “sweat equity” required for impact.

Both are right.

Entrepreneurship typically requires sacrifice and, as we witnessed in the first generation of Joshua Venture, entrepreneurs are resourceful either of their own volition and/or through the dogged layering of early stage support.

Based on what I have observed in my work at the Jim Joseph Foundation, it feels, however, as if the discussion in some ways misses the point. The Jewish community is growing more adept at identifying early stage ventures, even if we’re not supporting them to the necessary degree. The bigger challenge is the absence of a rational capital structure that nurtures these early stage ventures into maturity and supports the growth of individual entrepreneurs into full leadership. Few would counter that the Joshua Venture alumni have made their mark on our community since emerging from the program over a decade ago, but the remaining 10 stand-alone ventures (five are now embedded elsewhere) have struggled to identify funders that will actively help them grow to maturity.

Much of this has to do with a funding sector that is not set up to nurture entrepreneurship. When JDub gets a grant for two concerts or Keshet is supported for teacher training but not for their work with GLBT students, then we, as funding entities, are not increasing impact. Rather, we are pushing these entrepreneurs to fulfill only a portion of their vision and retarding organizational growth. This is not just about undesignated funding. This is about committing to funding entrepreneurs through a process of growth and being explicit about our skills as funders in that process.

As a foundation program director, I learn a great deal from observing the fate of entrepreneurs in the private sector. In that world, it is standard practice that a venture investor commits to the development of the entire enterprise and its entrepreneur rather than a distinct product line. Before investment, a venture investor, in addition to determining the potential in a given market, looks carefully at the growth stage of the venture and abilities of the lead entrepreneur.

The path to investment for business entrepreneurs is better articulated. Venture funds promote their portfolio companies publicly and a simple Google search will lead to dozens of blogs written by venture capital partners that clearly articulate investment strategy and current interest. Industry conferences make it easier for entrepreneurs to access venture investors. This doesn’t make the field any less competitive but allows entrepreneurs to develop a set of realistic targets from the outset. As a final point, venture partners tend to be explicit about the terms of engagement, managing a startup through a specific stage of growth and actively working with prior and replacement investors to ensure the move to the next stage of growth. Achieving these benchmarks is a reflection on both the startup and the investor.

With few exceptions, private foundations do not offer social entrepreneurs or potential partners a clear map of their investment strategy. We are explicit about our area of interest, but the path into or out of a grant is often vague. The result is that entrepreneurs struggle to identify their investor base and remain in the dark about the process of consideration.

A world of good would be accomplished if the foundation world offered a more explicit roadmap to funding and, from the outset, defined the foundation’s role in both achieving deliverables and designing a mutually beneficial exit strategy. My guess is the absence of the guessing game would come as a game-changing relief to the social entrepreneurs we’re focused on and convince more folks, like Sieradski, to take those risks.

While I do not speak here for the Jim Joseph Foundation, I do want to note that, in its early years, the foundation has adapted some of the private-sector practices described above. We take seriously the need to increase transparency about process and priorities. Our online communication is an attempt to provide the field with a timely view of our funding priorities, portfolio makeup and current questions. In our due diligence on a potential grantee, it is standard practice to take into account the life stage of the organization and consider seriously if what is proposed for funding is “core to mission,” i.e. fundamental to the primary strategies. Both these metrics play a part in our ultimate determination of a whether an investment will achieve impact in our “market” of Jewish education. To date, 88 percent of our grants are for three years or more, which provides a greater time horizon for our grantees.

Finally, we spend an enormous amount of time mining our networks of grantees and like-minded funding partners for ideas, advice and coordination. Much of this information is used here to adjust and scale our grant-making strategies to the needs of the field.

The Jewish philanthropic world needs the kind of role articulation and active management that characterizes the world of private investment. The lack of these guideposts has serious consequences for emerging Jewish social entrepreneurs. The struggle to move from the early stage funding (provided by the likes of Joshua Venture, UpStart and Bikkurim) to growth capital that builds both the entity and the leadership team remains a true struggle for emerging entrepreneurs and, frankly, across the nonprofit sector as a whole. What would give me pause in initiating something new is not the paucity of early stage support, but a lack of clarity in the funding space. 

(Adene Sacks is a program director at the Jim Joseph Foundation.)

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