​ 
Lessons from the Spider: Building Value for the Social Sector
Recently I was attempting to hose the fall’s detritus- and a spider and her web- from the picnic table as part of a late fall clean up. Several minutes of very aggressive spraying later, detritus gone.  Spider and web intact. I conceded defeat, accorded admiration and stopped to look carefully at the web. Virtually invisible threads of great strength and flexibility, woven together.  Highly effective at accomplishing its mission and strong in its simplicity. Perhaps some lessons to be learned.
 
How do you make your organization spider web strong?
 
Target
Stay targeted. The spider constructs her web for very specific purposes.  She knows the outcomes she wants and has the resources needed to get the job done. Too often organizations get diverted or mired down when making decisions. Have a checklist to ensure decisions align with mission, objectives, strengths and resources.
 
Simplify 
Simple is hard. Think of the last time you revised a mission statement or did a strategic plan- not easy but think of what you learned along the way and the benefits you gained from the process. If you can distill the complex to the simple, then you really understand. And you can make better, faster decisions.  
 
I learned early on that if I couldn’t draw a simple diagram of how a business worked and identify the key operating, strategic and financial levers that made it work - and be able explain it all clearly in no more than several sentences, then I had no business investing in it, consulting to it or recommending that someone else buy-in as a stakeholder. Can you, your staff and Board do this? To any stakeholder and for any program?
 
Build
Build strong. Spider silk has high tensile strength and ductility which gives the web strength and flexibility. How do you build tensile strength and ductility in your organization? I believe it takes three things-operating agility, financial acumen and the right resources.
 
Operating agility means effective, well-executed programs and an understanding of what are the strengths that enable this. It also means having a good grasp of the operating landscape, opportunities and risks. Financial acumen means using finance as an operating tool, not a report card. Use fundamental financial principles to support sustainable growth and understand how operating decisions affect financial health and financial health affects operations.
 
Finally, build strong by having the right resources. Not all money is the right money. Be investment ready- know what types of resources are needed and what the implications of those resources will be on programs and strategy. And know how to make the case – from a mission, impact, metrics, and financial perspective- to potential funders and investors.
 
Weave
Weave don’t compartmentalize. Build operating agility, financial acumen and strategic flexibility as strong, virtually invisible threads woven throughout the organization. Virtually invisible because they are part of the fabric of the organization and the way people think. Think about the strength that comes with this.
 
Have you ever seen cases of disappearing cash- programs are growing, revenues are covering expenses but cash in the bank is declining?  Strong programs with a sound strategy but without an understanding of how operating decisions can affect the organization’s financial health can lead to problems. What about being blindsided by a change in a major funder’s focus or shift in a government’s approach to addressing a community problem? Programs can be strong, financial management well developed but without a grasp of the operating environment, those strengths can quickly become irrelevant. And of course, great strategy, awareness and financial acumen won’t be of much use if programs and execution are weak.
 
Build spider web strong. 

An appropriate picture for Halloween, right?  Dementors are dark, cloaked figures who can drain happiness from and extract the souls of their victims. A visual I’ve never lost since reading “Harry Potter and the Prisoner of Azkaban” and perhaps an odd one to associate with success. On a recent train ride I was thinking through the most effective way to help a potential client evaluate a myriad of expansion and revenue opportunities that have come their way thanks to the success of their programs and business model. Revenue and growth opportunities usually connote positives - expanding mission, solidifying sustainability, increasing profitability- not a drain. But often overlooked in evaluating and executing on potential value builders is the drain of a critical and finite resource- time. What will the cost of distraction from time spent on new opportunities be to existing programs and businesses, versus the mission and financial value those new opportunities will bring?  Time- yours, your staff, your Board- has value. That value can be measured in direct costs, including salaries and benefits of existing staff and possibly new hires. And importantly, the less direct but very important cost of having people not doing as much of what they do best for the organization.  Remember, being terrific at running an existing program does not make one necessarily great at launching a new earned-income venture, and that program may not be as successful with less time spent managing it by those most capable.  
 
Treat time as a resource and value builder not to be drained away. Create a value filter to readily prioritize and evaluate opportunities, with time a criterion.  Keep the Dementors at bay. Happy Halloween! 

​San Francisco for SOCAP 2015- a crash course on the state of impact investing and a tremendous opportunity to meet and hear from a diverse group of investors, social enterprises, nonprofits and intermediaries.  What was clear is that the trajectory of market access, evolution, and growth is accelerating.  Increasing institutional investor and intermediary participation, use of consistent performance and impact metrics, and a growing demand for investment options is expanding the liquidity and infrastructure needed to bring increased and  (suitable) capital to the sector.
 
The big guys are in, and that is good. If the healthy numbers of financial advisors attending the conference wasn’t enough of a clue, the presence of and commentary from Deval Patrick (Managing Director, Bain Capital and former Massachusetts Governor) and Deborah Winshel (Managing Director, BlackRock) affirmed the increasing demand from retail and institutional investors.
 
Millenials’ force strikes again, pensions and endowments join in. Shifting demographics and efforts to align personal and organizational values with investment objectives are affecting asset ownership and investment trends. And in response, increased investment options that offer market rate returns that are aligned with investment values, and sustainable investing options across all asset classes.
 
Impact investing is a market AND a movement, not a market VERSUS a movement. Not everyone agrees. As a long time institutional investor and securities analyst, I instinctively support the benefits to capital flows of institutional market participation, standardization of performance and evaluation metrics, and a well developed market infrastructure. It was a bit of an eye- opener to see there are those who believe the greater size, standardization and (big) institutional participation will come at the expense of true impact focused investing in smaller, private social enterprises and nonprofits. Both can and should exist. The need is there, as is the demand for impact investing options across asset classes and with different impact and financial return expectations. There are also practical limitations on the adoption and application of consistent impact and financial metrics and return frameworks to such a diverse range of organizations that are the impact investing universe.
 
Scaling is tough but there are many players doing good things.  The range of creative and practical strategies to accommodate the needs of both investors and social enterprises bodes well for scaling investment opportunities and capital flows to smaller, private social enterprises.  The Ford and MacArthur Foundations highlighted the use of program related investments and grants to create appropriate blended capital structures to support mission and meet capital structuring challenges such as needed credit support and timely investor exit strategies. Deval Patrick captured another positive factor when he referenced the positioning of impact investing as “the articulation of a return to long term investing”. For Bain this is reflected in a private equity fund focused on investments with significant social impact.  For university endowments this longer -term investment horizon helps support alignment of investment strategies with university values, while meeting fiduciary requirements. 
 
Investment readiness brings in capital. I’m a big proponent of organizations being investment ready- ready to employ capital, able to raise capital, and knowledgeable that it’s the right capital. Performance of the UK’s Investment and Contract Readiness Fund has affirmed this in a big way. Grants used to help social enterprises prepare for and solicit funding have been leveraged very successfully, bringing in millions of pounds of investment to participating social enterprises (http://www.sibgroup.org.uk/beinvestmentready/review/).
 
Friends and family. I had the chance to see two organizations I’ve worked with in action. Julie Colombino, Founder of REBUILD globally was a SOCAP Scholarship Entrepreneur and showcased the direct impact REBUILD’s Deux Mains Haitian sandal making workshop is having on the lives of employees and their families. Check out their fabulous sandals and how REBUILD uses social enterprise to put people to work, support families and alleviate poverty (http://rebuildglobally.org ).  The Washington Regional Association of Grantmakers has done tremendous work educating and bringing resources to bear on the challenge of affordable housing in the DC area. WRAG’s Gretchen Greiner-Lott’s SOCAP TV segment put a human face (faces really) on the crisis that is affordable housing - and how collaboration and impact investing can address the problem (https://www.washingtongrantmakers.org).
 
The kids within.  And to tie it all up, SOCAP and Fleet Week overlapped, giving all a reason to step outside and watch the Blue Angels dive, roll and soar over the inspiring magnificence that is San Francisco Bay.