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Thursday, October 23, 2014

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Nell Edgington: In the Trenches Raising Growth Capital: An Interview with Anna Land
Nell Edgington

December, 2010

Anna and her board are looking to expand Heart House to 5 Texas cities and increase the number of kids served by almost 20 times in the next 10 years. She is currently shopping her growth plan around to philanthropists. Anna has some interesting insights about raising nonprofit growth capital, particularly from philanthropists who have never heard of the concept.  Full disclosure: Social Velocity helped Anna put together her growth capital pitch to prospective funders last year.

You can read our past Social Velocity interviews here.

Nell: You started Heart House several years ago and had great success in Austin and Dallas, serving 500 children each year. What made you suddenly think about going statewide and growing the program to 9,000 children by 2020?

Anna: The leadership has been thinking about this since 2004 when we were at our 4 year mark and felt that we had some compelling, consistent data that indicated that we were on to something, and perhaps should begin working on replicating and scaling to serve more children.

In 2005 I was selected for the Community Sabbatical Research Leave Program, created and administered by the Humanities Institute at The University of Texas, which provided time, resources and faculty advisors in order to study effective growth strategies of successful nonprofits.  I was fortunate to be paired with the perfect mentor, Dr. Sarah Jane Rehnborg of the LBJ School of Public Affairs. We interviewed 10 regional and national organizations at both the headquarters and local levels to discover best practices and essential infrastructure elements.

Next, the staff of Heart House articulated our core values, our vision for the future, and a set of minimum quality standards.  We also began the ever-expanding work of codifying our model.  We plan to complete our “Heart House in a Box” in time for our 3 new centers scheduled to open in 2011.  We also created the Gateway database which allows us to track weekly data across multiple sites.  The Webber Family Foundation, the Michael and Susan Dell Foundation, and the KLE Foundation funded this early capacity work.

Next, in 2008, the KDK-Harman Foundation convened four organizations to develop their growth plans in a peer group environment.  It was fabulous to work alongside Maile Broccoli-Hickey from English at Work, Melanie Moore from Badgerdog Publishing, and Kathrin Brewer from Austin Partners in Education.

And that’s the point in time where I met you, Nell.  The KDK-Harman Foundation paired Heart House with Social Velocity, and you worked with me to turn our growth plan into a growth pitch.  My mentor, Gregg Burt, serial entrepreneur and CEO, agreed to chair the statewide expansion initiative.

Nell: You are currently out raising growth capital, which is a pretty foreign concept to most philanthropists. How are you faring? Is the concept gaining some traction?

Anna: It’s certainly true that growth capital is still a new concept in Central Texas but I’m hearing more and more these days about the need for this investment – that’s encouraging to me.  I think this evolution is thanks to influence from two sectors:  1)  emerging philanthropic funding models from the East and West coasts, and 2) the vibrant VC community in Austin.

In his Stanford Social Innovation Review article, “Money to Grow On,” William Foster suggests that grantmakers follow the approach of venture capitalists when making investments: high performing organizations with proven success should be rewarded with funds needed for ramp-up and to achieve long-term social change.  It may feel that Central Texas is slow to embrace this philosophy, but when I consider the relatively young age of Central Texas foundations, operating with little or no staff, we have some true thought leaders who are actually evolving rapidly in “foundation time.”

So, how are we faring?  Pretty good – we have 40% of the investment needed to get us to the point where the model no longer needs outside investment to support expansion efforts.   We believe we can fill the gap with a small group of investors.

Nell: What do you do to overcome discouragement when you meet with potential funders who don’t understand what you are trying to do? How do you motivate yourself to continue to go out there day after day to raise growth capital?

Anna: I believe that this growth is meant to be.  I believe there are plenty of funds available for Heart House to serve 18x+ more children.  I believe our expansion is a vision and a promise that God has put in our hearts.  And I believe that we can achieve what we can conceive.

The visualization I keep front of mind is that of walking across a vast ocean.  When I and my team walk forward with confidence, the stones rise up in front of us to form the next steps of the bridge.  When we stop walking due to fear, the stones stop rising.  Efforts to monkey around with the walk too far ahead of us also are unsuccessful.  We have a clear sense of direction and purpose, but we do not have to control every element and form the path takes because we know that it will all work out the way it is supposed to.

Doing our part is an important part of this philosophy.  We must remain abundance-minded, we must work hard every day to keep the trust of the donors and the families we serve, and we have to inspire and influence all that we come in contact with.

Naturally, as a human, I have days where I am discouraged, tired or fearful, but when I stay in abundance, finding this capital becomes a combination of a hunt and a matchmaking game.  When a donor says no, I mentally thank them for being one more no that puts me one step closer on the path to the perfect donor.  And when I feel particularly sorry for myself, I reread the biography of someone like Elizabeth I or John Adams.  What do I have to fear compared to the challenges they faced?   I am lucky to be able to do this fun and engaging work alongside such talented and inspiring cohorts.

Nell: What do you think holds other nonprofits with a great model back from undertaking dramatic growth?

Anna: Fear is the biggest growth inhibitor.  If it has been determined that growth is a sound strategy, but the leadership does not want to undertake that growth, I would say that that leadership believes that the risks of growth– real or perceived – outweigh the reward.  The larger your vision, the larger your exposure to failure – sometimes very public failure.  An organization has to be ready for grand success as well as some skinned knees.

Other growth inhibitors can be broadly categorized as lack of financial capital or human capital.  Specific to the Heart House model we have:

  • Lack of available space that meets our minimum clubhouse location standards
  • Lack of efficient and scalable infrastructure — To date, Heart House has put 85% of its policies, procedures, and practices into our “Heart House in a Box” implementation kit.  However, we still must refine and tighten the remaining infrastructure elements by end of 2011.
  • Lack of funding specifically for growth groundwork, quality control, and other central services, often thought of as “overhead” by philanthropic funders (but not business funders)

Nell: What does it take to prepare an organization for growth? What are the elements required to scale?

Anna:

  • Leadership with vision, accountability and integrity
  • Commitment to and resources devoted to maintaining the highest quality across the organization
  • Repeatable processes and procedures
  • Efficient and scalable infrastructure that supports dramatic growth
  • Broad, diverse and sustainable funds for growth
  • Recognizable and influential brand presence

Nell: How do you balance the day-to-day running of your nonprofit with your other full time job of planning, raising money for and executing growth?

Anna: I tried that for a while, and it was unmanageable.  We now have city leaders (known locally as executive directors) that report to me directly, and manage the day-to-day operations and fundraising, while I and a small staff plan, raise money for, and execute on the critical elements listed above.

Nell: What needs to change in the nonprofit sector and in the philanthropy that funds it in order for more growth of successful solutions to happen?

Anna: Putting in place the strategy, infrastructure, funding, and, above all else, the leadership required successfully scale organizations.  Why is the investment in growth seen as “overhead” for nonprofits, but a no-brainer for for-profit companies?   As Nancy Roob and Jeffrey Bradach point out in their article, “Scaling What Works”, the effect of this bias is “an organizational form of chronic fatigue syndrome that burns out nonprofit leaders and compromises their ability to address social problems…There is no more powerful way to address many of society’s most important challenges than to harness what we now know works and make sure those solutions reach those who need them.”

Visit Social Velocity at  http://www.socialvelocity.net



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