Disruption for Social Good

with Renee Kaplan

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Restricted vs unrestricted funding

Renee Kaplan

Chief Strategist, Change Maker, Impact Investment Expert

Lessons Learned

Use of unrestricted funds is determined by the entrepreneur themselves.

Restricted grants must be used for a specific program or purpose, & be attached to a set of metrics.

Unrestricted funding allows social entrepreneurs to think more broadly and be more creative.


Lesson: Disruption for Social Good with Renee Kaplan

Step #5 Unrestricted: Restricted vs unrestricted funding

There are two different ways that most foundations give money. One is an unrestricted or what they call operating support grant, which basically means we're going to agree to a few really key measures and you're allowed to use that money for whatever you need to do to get to those measures. You can build capacity. You can hire people in your staff. It's whatever operational or other you deem appropriate.

So, it's really trusting the entrepreneur, the leader, and we believe a lot in that level of funding because we say, "You know what? The entrepreneur, if they have a proven track record, if they've built some success and we're trying to help them scale, they know better than we do where those investments should go."

The alternative is restricted funding or maybe a more traditional grant, which has to be used for a specific program or purpose, usually has a much more intricate set of metrics and reports attached to that. Every foundation or funder has a different set of metrics or reporting requirements that really becomes hard for the entrepreneur to have to respond to.

That, we feel like, is the majority of funding available today to social entrepreneurs and that shouldn't be. We should trust. We have to build the right metrics and measurement systems, which are very important. But we can still do really flexible, unrestricted funding and get to the goals that we're trying to get to.

We were recently talking to an organization called Apopo that works in Africa and in other places that have landmines. Their whole purpose is to train rats to work on sniffing out--because rats have an incredible sense of smell--to sniff out landmines before they take human lives.

They came into our portfolio and I was talking to Bart who was the CEO. They're about a $1-$2 million organization. Our investment, our unrestricted funding, which at that point was a little over $1 million, allowed them to expand their program, really go into depth in terms of hiring, choose which operations they were going to setup in different countries in Africa.

Now they're an $8 million organization. He said within three to six years, that was the inflection. That was the infusion they needed. They knew they had a great track record. They had these trained rats that were operating and doing wonderful work. But they needed that money to be able to test and learn about how they could scale the program.

Now they're doing tremendous new work, even helping the rats test for tuberculosis and other diseases in labs. So they're learning. That whole research and development and quick turnaround, what we call agile approaches, wouldn't have happened if they didn't have flexible funding. So, now they're on a different growth trajectory and doing very well. That's one example of an organization that I think really benefitted from that.

The other example is they are even looking at rats testing for drugs and disease in airports, probably behind the scenes and not in the public-facing, walking around inside the airport, but where the luggage and the tarmacs and the different transition areas are. If there's one point I think flexible funding helps bolster, it's enhanced creativity and he ability to think bigger versus smaller and get deep into one program. That we see as an advantage too.

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