The GuideStar Blog retired September 9, 2019. We invite you to visit its replacement, the Candid Blog. You’re also welcome to browse or search the GuideStar Blog archives. Onward!

GuideStar Blog

Why Investing in Social Innovation Is the Most Important Thing Grantmakers Can Do This Year

Why Investing in Social Innovation Is the Most Important Thing Grantmakers Can Do This Year

Institutional funding for social solutions is going through an exciting evolution. 

Available capital has soared over the past few years.

Between 2001 and 2011, some 20,000 new foundations were created in the United States, representing a 32 percent growth in the industry. In that same time period, giving grew by 61 percent, and assets grew by nearly 39 percent. Impact investors have ushered in new pools of cash, with more than $300 billion in capital invested in 2014, a 40 percent increase since 2012. In addition, creative new approaches like venture philanthropy and pay for success models are diversifying ways funding can be allocated to social solutions. 

Complicating this growth in additional capital is a new pool of investment opportunities.

The nonprofit sector is experiencing one of its largest spikes in history, both in size and giving. Approximately 1.41 million nonprofits were registered with the IRS in 2013, an increase of 2.8 percent from 2003. Total charitable giving reached $358.38 billion in 2014, an increase of $23.88 billion from 2013. The share of total giving by foundations rose from 6 percent of total giving in the five-year period ending in 1979 to 15 percent of total giving in the five-year period ending in 2014, according to the Urban Institute and the 2015 Giving USA Report, respectively. Technology advances are allowing nonprofits to evolve faster than ever, expanding their ability to explore new program and services. Additionally, the introduction of social enterprises and B-corps has presented progressive foundations with a new wave of investment opportunities. 

From our perspective, this rapidly changing environment—and the growing role that institutional funding plays in solving social problems—has placed even more responsibility on the funding community to ensure it is allocating capital as effectively as possible. 

The challenge of identifying the best and brightest programs is one that we've face first hand through the Classy Awards, as we strive to recognize excellence in social innovation. Last year, more than 3,600 programs, addressing hundreds of social issues in 115 countries worldwide, were evaluated as part of the Classy Awards process, making it one of the most diverse recognitions in the social sector. 

The 100-plus industry experts serving on the Leadership Council selected the winners, and our responsibility was to ensure we were presenting them with the greatest pool of organizations to select from. Our team spent more than a year extensively researching organizations from around the world, working with our partners and Leadership Council members to identify the most promising organizations. That collaboration and shared due diligence with other leaders from around the sector was the critical component to our success, and it helped us realize that in this rapidly changing environment, we needed a more effective platform to share ideas. 

That realization is one of the reasons we created the Collaborative—to convene a diverse array of influencers in the funding community with the best social innovators from around the world. Our theory is that by placing these leaders in an environment unbounded by the rigidity of conventional conferences, and instead immersing them in an exciting atmosphere of learning, discovery, and collaboration, we can provide a new level of transparency. 

We’re excited to have a diverse array of institutional investors participating in this year’s Collaborative + Classy Awards, including the Bill & Melinda Gates Foundation, MacArthur Foundation, Rockefeller Foundation, GE Foundation, Caterpillar Foundation, Draper Richards Kaplan Foundation, Thiel Foundation, Peery Foundation, Pershing Square Foundation, among many others. So whether your investments are focused on supporting human rights programs, early education, or environmental conservation, we’ve designed the Collaborative to allow you to join leaders from across the sector and learn about the most promising social innovations. We hope you can join us this June in Boston. 

If you’re a funder or investor looking to add more innovative investments to your portfolio, I encourage you to reach out to me directly at pat@classy.org. You can also purchase your ticket directly here.

Why Investing in Social Innovation Is the Most Important Thing Grantmakers Can Do This YearThe preceding is a guest post is by Pat Walsh, cofounder and chief impact officer at Classy.org, recognized by Fast Company as one of the Most Innovative Companies for Social Good. In his role, Pat leads the Collaborative, Classy Awards, and Progress. Pat was selected by Bloomberg BusinessWeek as one of the Top 5 Most Promising Social Entrepreneurs in America. 

Topics: Impact Trends Grantmaking