Non-profits everywhere are scrambling to make up for shrinking government budgets, increasing costs, and smaller donations. Meanwhile, hovering out there on the commercial markets horizon is a tantalizing new source of investment capital that might conceivably be tempted to invest in social service delivery — but on what terms?

Therein lies the challenge.  In the New World of pay-for-success service delivery, the term ROI, or “return on investment,” has become part of the new vocabulary. Potential investors ask, “What’s the ROI?”  No longer can we measure a project’s raison d’etre  by how many people we serve, or how many dollars we spend. Nowadays, the emphasis is on the results. Did the service we provide produce a measurable and successful result?  Did our efforts save the government money? Will there be a financial return  to the investor to compensate for the risk which was undertaken?

As a consequence of this new emphasis on measurable results, a whole new professional occupation has been created. Great minds now work to design new financial models to attract commercial capital, and to save government money in the delivery of social services.

But despite the enormous potential for society to save money and improve outcomes, and despite strong interest from many investors, these new models will not automatically or necessarily reach their potential if the interests of the many disparate partners are not successfully addressed. The task is not a simple one, and the financing models being developed may turn out to be considerably different from those originally conceived.

There’s no recipe for this stuff…it has to be invented. It’s figuring out how to create something. How do you put all the pieces on the table and do something new?

Robin Hacke
Director of Capital Formation
Living Cities

 

Financing Social Innovation:
Useful Reports and Publications
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