An address by Mario Morino, VPP,
about high-engagement philanthropy to the Northern Virginia
Technology Council's (NVTC) Titans of Technology, March 8,
2001.
Thank you. It is a pleasure to be here today,
to have this opportunity to speak with you, to celebrate the
good work of the Northern Virginia Technology Council, and
to commend you for caring about the community in which you
live and work.
The impact of your caring actions -- demonstrated
in today's announcement of the formation of the Northern Virginia
Technology Council Foundation -- is going to be felt throughout
the region. And for that, I congratulate and thank the leadership
of NVTC and you for making it possible. But I also want to
suggest that NVTC and its members are in a special position
to impact philanthropy in Northern Virginia and the National
Capital region.
As you know all too well, the Internet and
the New Economy are changing every aspect of our society.
Philanthropy is no exception. Today, I want to share a few
thoughts about how we can expand our approach to philanthropy
to include the promise, prosperity and best practices of the
New Economy and why NVTC's action is so important.
I hope to convey two points. First, change
is coming to the nonprofit world, and I'll outline my beliefs
about why and how. Second, I'll suggest a new philanthropic
model that can help facilitate this change -- a model built
on the idea that by helping many nonprofits to build stronger
organizations, we can help them empower themselves to serve
people in need more effectively. And a model that NVTC and
some of its members have in various ways already demonstrated.
Before I get started, I'd like to say a word
about how I've arrived at this point -- from software developer
to engaged philanthropist.
My own story may not be too different from
many of yours. For more than 30 years, I was in the software
industry and built a company from the ground up -- like many
of you here today. I retired from business in 1992 and shortly
after established the Morino Institute through which I could
direct my energies and experiences to helping others, particularly
young people.
I had been blessed with good fortune and wealth
beyond my wildest dreams. And I wanted to use this blessing
to benefit others in some way. But as I quickly learned, a
desire to help and the ability to make an impact are very
different things. I didn't know how I could make an impact.
I spent a year traveling the country seeking
the advice and counsel of more than 700 people -- clergy,
political leaders, educators, business executives, foundation
executives and others.
And it was here that I first learned and was
pleasantly surprised by the many NVTC players and alumni that
had been already doing so much to make a difference in the
lives of others -- and quietly so -- in their philanthropic
efforts:
Ed and Marilyn Bersoff with NV Community College;
Earle Williams and Wolftrap;
Mike Daniels and the Boy Scouts;
Dan Bannister and Easter Seals;
Don Beyer and ARC;
Russ Ramsey and Boys & Girls Clubs;
Kathy Clark and the partnership that her firm had established
with Edison High School;
And these are a few of what are dozens of such examples I
came across.
These actions here in Northern Virginia and
the National Capital Region are the beginning of a new wave
of philanthropy in America. And, we're seeing a growing interest
and engagement in what some have called "high impact"
philanthropy in Silicon Valley, Seattle, Austin, Boston, and
New York -- and the most vibrant may be here right in our
own region.
Why philanthropy? It's a logical extension
of you, your values and your success. Be it faith based, from
the values of your family, or cause driven by an event in
your life, many of you will become involved in philanthropy
-- and many of you already are. With your know how, your caring
and your resources, you can make a difference in the lives
of others that only seek their own opportunity to improve
their lives. And, you can do so at one of those "interesting"
times where opportunity and need intersect.
The approaching change in philanthropy is a
product of the extraordinary times in which we live. A thriving
New Economy, globalization and a new global medium -- the
Internet -- are combining forces to make for a smaller, more
connected world. But amidst this stunning prosperity, we are
also seeing a stunning paradox. As our world grows closer
together, our economic and social divides are widening. A
recent report by the United Nations found that one of six
children in the world's 29 wealthiest nations lives in poverty,
including 13 million in the United States. We are moving dangerously
close to cementing a permanent underclass in our country.
And this paradox deepens. Even though the
New Economy is booming, government investment in the social
services has been reduced. And even as this public sector
investment shrinks, we ask -- and expect -- nonprofits to
shoulder a growing responsibility to address our most vexing
social problems.
As it faces this exceptional challenge, the
nonprofit sector and the philanthropy that supports it will
undergo extensive, if not radical, change. Change will come
for many of the same reasons it has already wracked our economy.
A flood of new wealth and new expectations is one. The influence
of information technology is another. So are new trends in
business, like disintermediation and disaggregation -- the
splitting apart or stitching together of organizations to
produce better results. New trends in financial services introduce
the emerging field of philanthropic fund management. And,
with forces like privatization and new models for wealth creation
for nonprofits, the changing roles of for-profits and nonprofits
blur.
These changes add up to an inevitable and
dramatic transformation in philanthropy. And that adds up
to a dramatic opportunity -- an opportunity to rethink philanthropy
in America. One of the biggest leveraging points in helping
nonprofits deliver social services more effectively lies in
changing the funding system itself. Let me explain why I think
that's true.
Strong organizations are the backbone of effective
services. Strong organizations can make long -- term plans.
Their managers are better able to focus on mission. They invest
in management, staff development and infrastructure that allow
them to better define goals, measure progress and be accountable
for outcomes, while supporting program improvement and growing
the organization to scale.
But the way we fund nonprofits prevents them
from doing these things well, or, too often, at all. Executives
must focus too much on fundraising, not management. Their
horizon is often the next grant cycle, not the next performance
goal. The standards they are forced to follow deal with programs
and process, more than outcomes. Perversely, their funders
--rather than the people they really seek to serve -- can
end up becoming their primary clients. The assessments to
which they are subjected are often a one -- way judgment rather
than constructive interaction that helps them to learn and
improve.
We ask those in the nonprofit sector to take
on our most formidable social problems. But we nearly ensure
they can't fully succeed. Because givers often insist on low
overhead, nonprofits are limited in their capacity to build
strong organizations. They cannot invest enough in the management,
technology and other tools they need that are the keys to
delivering effective services. For the most part, nonprofits
rely on a single financial instrument -- the charitable donation.
And after receiving two -- three years of support, they often
find their funders moving on to newer program initiatives
rather than helping to build further what had been started
so well. As a result, their ability to provide quality services
and grow is constrained. They are forced into a relentless
race for resources rather than results. Nonprofits can even
be driven to alter or veer from their missions in search of
programmatic funds.
Is what I present a dramatization? Perhaps
to some, but not based on my observations in seven years at
the Morino Institute. In fact, many of the problems I am discussing
today we learned from social entrepreneurs and activists themselves
-- the people most actively involved in their own communities,
trying to make the nonprofit sector work. The growing base
of foundations, academics, think tanks and community organizations
grappling with how to make the nonprofit sector more effective
is itself evidence that we have a fundamental problem.
Like all problems, to solve this one, we must
move away from the fringes and attack the cause. And I strongly
believe the most important challenge -- and, therefore, the
most powerful lever for change -- is the funding system itself.
If we want nonprofits to deliver effective social services,
we need to change the funding mechanism to help them build
stronger organizations, ones that are highly effective, sustainable
and accountable for outcomes. And, once again, where our efforts,
the leadership of the New Ecomony can be so relevant.
Here is where the exciting times in which we
live become so relevant and where NVTC's foundation becomes
so important. We can apply the best practices of the New Economy
to help create a New Philanthropy whose focus is strong, highly
effective organizations with the power to sustain themselves.
The approach has been called "venture
philanthropy." It is a relatively new field that has
no single accepted approach or commonly agreed upon definition.
We define venture philanthropy as the process of adapting
strategic investment management practices to the nonprofit
sector to build organizations able to generate high social
rates of return on their investments. Strategic management
assistance is provided to leverage and augment the financial
investment made. This approach is modeled after the high end
of venture capital investors -- the relatively few who work
to build great organizations instead of just providing capital.
In the commercial world, the most successful
investors are true strategic partners to the enterprises they
fund. Their work starts with the funding instead of ending
there. They develop relationships and build trust with the
people of the organizations in which they invest. Instead
of intruding and directing, they support and consult. Instead
of controlling, they become vested partners that share risk.
They provide management advice. They help managers deploy
technology that helps them achieve their missions. They make
long-term commitments that enable businesses to invest in
capacity for the long haul rather than simply surviving to
the next quarter. More than anything else, they help build
great organizations that, in turn, create great value.
Our experience at the Morino Institute suggests
that many nonprofits could benefit from a similar approach
of strategic investment management. Under this model, rather
than a charitable foundation writing a one-time check for
two or three years to finance a specified program and then
moving on, investors would make a substantial, long-term commitment
focused exclusively on building capacity. This commitment
would last four to six years and total several million dollars.
They would seek nonprofit organizations with both great potential
and the commitment to tap that potential to significantly
improve the services they provide and expand the number of
people who receive them. They would insist that focus be placed
on a clear mission and on accountable results that demonstrate
a social rate of return on their investment. In addition to
gifts of equity -- the investment -- these givers would also
share their managerial and technological expertise. They would
leverage their network of contacts. They would help organizations
empower themselves to achieve their missions instead of trying
to redefine them.
In short, a core goal of this model -- as in any investment
partnership -- would be to build strong, highly effective
organizations that achieve strategic objectives and become
financially sustainable.
Financial sustainability is critical if nonprofits are to
be free from the constant demands of fundraising. And that
means the New Philanthropy, like the New Economy, must think
of new, more effective means for fund development and explore
ways to help nonprofits create economic value rather than
simply redistributing existing wealth.
The Morino Institute has already tried this model of strategic
investment partnership on a somewhat smaller scale. It was
the basis of the Youth Development Collaborative (YDC) Pilot
we led in partnership with four community-based organizations
in the District of Columbia. The Pilot helped these organizations
integrate the Internet into their work to increase their capacity
to offer quality services for youth and improve their overall
operations. When successfully completed at the end of this
year, we will have invested over $2.5M, the bulk of which
has been focused on the people who make these organizations
run, not on hardware and software. We deployed a team with
expertise in the area of education and technology to work
full-time with our partners. We invested heavily in staff
development to enhance the capacity of these organizations.
And as word of what we've learned and our partners have accomplished
is disseminated, the effort is increasingly being viewed as
highly successful and leading edge.
Now we're exploring the strategic investment management model
on a larger scale. The Morino Institute, in partnership with
the Community Foundation for the National Capital Region and
Community Wealth Ventures, has helped establish Venture Philanthropy
Partners. Led by Raul Fernandez of Proxicom, Mark Warner of
Columbia Capital and myself, a group of business leaders --
many involved with NVTC -- came together to launch this exciting
experiment in venture philanthropy. It's mission is to increase
the effectiveness of philanthropy in the National Capital
region by demonstrating that building high performing nonprofit
organizations results in significantly greater social impact.
What are the benefits of this model?
For donors, it offers the potential for a better -- and
accountable -- return on their charitable investments. It
accommodates their desire for more direct involvement, their
hunger to contribute beyond just writing a check and their
thirst for knowledge about how to give more effectively.
For nonprofits, this model offers the chance to reach their
potential and realize their dreams. They'll have partners.
They'll have the support they need to move toward sustainability.
They'll have the opportunity to obtain the tools for success.
Their leaders will be able to focus more on results rather
than securing grants. With increased capacity, they will be
more effective in their delivery of services. And they'll
be able to use those results -- and this support -- as an
engine for continuous internal improvement. Collectively,
the results of this approach will also bring new givers into
the philanthropic space -- and at younger ages.
For the nonprofit sector -- and others, like government or
education -- I believe this approach has the potential to
demonstrate a more effective mechanism for funding social
programs. I believe it will demonstrate the importance of
building strong organizations. And the more funders see demonstrable
outcomes, the more they will expect similar results of other
efforts in which they are involved. And, I am convinced they
will then invest more.
But, ultimately, the most important beneficiaries will be
the children and families who depend on the strength of the
nonprofit sector. The organizations that serve them will be
able to make long-term plans and be agents of long-term hope.
When leaders focus more on results rather than grants, children
will have more effective resources -- resources like a mentor
or an afterschool program. For these children, we seek not
just better managed organizations, but better managed lives.
The strategic investment model does not fit the needs of
all nonprofits. Nor does it replace existing philanthropy.
And that is one of the reasons I was so very pleased when
NVTC initiated its work to create the NVTC Foundation. Your
Foundation will be an important voice and have an important
role in the Northern Virginia community. Your example will
help encourage others in the region to become more involved
in our community -- and your example will help them understand
that it is important to go beyond making a charitable contribution.
Your own actions will demonstrate the importance of being
engaged in one's community and illustrate the distinctive
contribution that those of us of the New Economy can make
to have a difference in the lives of others.
This is a new model for philanthropy. But it should not
-- it cannot -- be an isolated one. For this venture philanthropy
to succeed, it must work together with today's nonprofit and
philanthropic sectors. I believe the New Economy has many
insights to offer the nonprofit sector. But my years in working
with nonprofits have also demonstrated how much we have to
learn from -- and how much we have to admire about -- what
they already do. We very much need to work together.
Change will come to philanthropy, as it has come to our economy
and as it will come to other sectors of our society. Today,
we discussed one model for change -- a model that applies
only to some corners of the nonprofit world. But in those
corners are children whose lives will be saved or squandered
based on how effectively they are served by nonprofit organizations.
Today, those organizations are replacing or supporting family
and social structures that have eroded. And I know how important
those structures are. They were the reason I was able to succeed
after growing up in a neighborhood that was not, to say the
least, the richest one in Cleveland. Where I was raised, we
were short of material things, but we were never without hope.
My family and the neighborhood in which we lived gave it to
us wrapped in gifts called love, confidence and the encouragement
to learn.
In 30 years in the software industry, I participated in
the transformation of the economy. I saw theories of value
-- and approaches to management --evolve. I -- like many of
you here today -- saw business models that thrived, and others
that failed.
So I know -- from a childhood in Cleveland and a career
in technology --that boosting the capacity of nonprofit organizations
means the difference between social services that save lives
or waste them.
Today, I represent many people like me -- individuals who
have enjoyed the financial benefits of the New Economy --
many of you are here this morning. Collectively and individually,
we are at a juncture in our lives at which we are seeking
a significance beyond financial success. We are a growing
force seeking to accelerate change in philanthropy. For us,
writing a check is not enough. We need to know that there
are positive results -- outcomes to our giving. We need to
know that the system will be changed for the better. Anything
less is irrelevant.
This sense of engaged philanthropy is what no doubt led NVTC
to create its own Foundation.
We believe we can help to rethink and improve one systemic
factor limiting success in the delivery of social services
-- the mechanism of philanthropic funding. Venture philanthropy
is one way to demonstrate this potential.
The NVTC Foundation will incorporate many elements of venture
philanthropy, building on the example and culture of NVTC
and its members. It will never merely give money to a program
without first studying the capacity of the organization and,
secondly, without a commitment of personal involvement in
the management of the project.
NVTC's greatest community effort has been the Gum Springs
Computer Clubhouse -- which is a great example of what NVTC
can do and how the new Foundation can benefit from NVTC, its
members and relationships. NVTC was the catalyst to raise
$250,000 in funding and in--kind support, encourage the direct
contributions of NVTC members of time and resources, and leverage
NVTC and member relationships to direct key support to Gum
Springs.
NVTC has demonstrated an engaged philanthropy in establishing
the Dan Bannister Scholarship Fund that involves so much more
than a just being a source for tuition fees, providing orientation,
a mentor, and introducing them to NVTC and its network.
NVTC members care about their communities. And, you are
part of a vibrant, but surprisingly quiet new base of philanthropy
emerging here in the region. Collectively the efforts of the
NVTC Foundation, Venture Philanthropy Partners, and the growing
number of new private and corporate foundations like the recently
announced webMethods Foundation, represent the core of this
new base of philanthropy that offers great promise for Northern
Virginia and the National Capital region. And NVTC and the
NVTC Foundation will provide a demonstrated leadership that,
in turn, will increase the philanthropic engagement of its
members and their employee bases.
I hope I've convinced you here this morning that the concept
of venture philanthropy -- which mirrors much of what we've
all done in growing our own businesses -- has significant
merit for philanthropy in Northern Virginia and the National
Capital region. The NVTC Foundation can and must be a vital
part and voice in the region's evolving philanthropy, just
as NVTC has been a leader in the evolution of the region's
technology sector. And the NVTC Foundation needs your support
-- financially and personally.
Because of NVTC, its member firms and other New Economy
successes,the National Capital region is riding a tsunami
into the 21st Century. It is ground zero to the New Economies
of the Internet in Northern Virginia and bioscience in adjacent
suburban Maryland. This region is home to the White House
and Capitol Hill, a world center for global organizations,
embassies and foreign missions. What better place in the world
to demonstrate that the wealth cycle -- from innovation to
financial success to life significance and giving -- can be
completed? Where better to show that our society -- divided
at the start of the 21st Century -- can heal itself?
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