Innovative Models for Funding Social Enterprises
Published in
8 min readDec 8, 2020
By: Brady Press
This webinar on funding social enterprises in Atlanta spotlights First Step Staffing — an Atlanta-based nonprofit staffing agency — and the different forms of investment from various sources that have led the organization to a growth model.
Continue reading for information on funding social enterprises in Atlanta and beyond.
Key Takeaways
- For those thinking about starting a social enterprise, local support that plays a risk role is important — you need many different types of capital to support an investment. Diversifying your funding is key
- Social impact is a buzz word right now — investing dollars are opening up. Educate yourself and learn about all available funding streams so you can tap into these dollars
- COVID-19 has exposed the systemic and institutional racism in financial institutions. In order for CDFIs to adequately support the businesses they care about (women-led, BIPOC-led), they need to assess their practices and get our there and do the work, give the funding
- A lot of foundations have operated differently under the pandemic and have stepped up to address COVID-related needs, giving more in a matter of months than they typically do in a year
This post covers the second session from Changing Our World’s Atlanta Forging Forward Conference Series focused on idea sharing, innovative solutions and a path forward within the Atlanta community.
Webinar Recording
Speakers
- Thomas K. Glenn II, Trustee, The Wilbur and Hilda Glenn Family Foundation
- Amelia Nickerson, CEO, First Step Staffing
- Christina Szczepanski, Managing Director Southeast, Reinvestment Fund
- Deborah Ryan, Managing Director, Changing Our World
Session Notes
Christina Szczepanski, Managing Director Southeast, Reinvestment Fund
- Reinvestment Fund invests deeply in Atlanta, Baltimore and Philadelphia and is one of the largest CDFI’s in the country (there are over 1,000). We’ve invested $2.4 billion and supported more than 2 million people since 1985
Amelia Nickerson, CEO, First Step Staffing
- First Step Staffing is the largest nonprofit staffing agency in the country; we prioritize placement for groups typically faced with challenges obtaining jobs (ex: people experiencing homelessness)
Thomas K. Glenn II, Trustee, The Wilbur and Hilda Glenn Family Foundation
- Started in 1996, the Foundation focuses primarily on health, education, human services and in the last few years social justice
- We wanted to learn more about Program Related Investments (PRIs); learned from First Step Staffing Founder, Greg Block
- We were interested in sustainability from the perspective of homelessness — how do we not only get people off the street but keep them off the street?
- It became apparent to us that, for First Step Staffing, by converting our loan to a grant we would improve their cash flow and make them more appealing to lenders, enabling them to do more and operate better
Amelia Nickerson, CEO, First Step Staffing
- Greg’s idea was simple — housing takes income. He thought, how can we scale this organization and tap into a huge industry (staffing) as a small nonprofit? The first deal happened in 2015
- Debt finance through foundations and CDFIs have funded First Step to purchase staffing companies and convert them to nonprofits. Without those early investments we would not have been able to scale; now we employ 1,800 people per week
Christina Szczepanski, Managing Director Southeast, Reinvestment Fund
- Everything points back to Greg — he had put out a request in 2016 asking for financing for First Step Staffing. I saw this and called him. I wanted Reinvestment Fund to help
- Reinvestment Fund in Philadelphia partnered with First Step Staffing and had the support of the Mayor at the time who was working on an initiative to end homelessness in Philadelphia; we lent over $4.5 million in 2018
- From there, Reinvestment Fund helped First Step Staffing continue to grow and scale with the help of other partners. Local support that plays a risk role is important — you need many different types of capital to support an investment that doesn’t just look like building a building
Deborah Ryan (DR): Tom, would the Foundation consider funding another social enterprise? Any advice for social entrepreneurs?
Thomas K. Glenn II, Trustee, The Wilbur and Hilda Glenn Family Foundation
- The Cousins Foundation, William Joseph Foundation, the Reinvestment Fund, RSF in San Francisco, and a few more all contributed to financing First Step Staffing
- It’s unlikely we will get involved in direct PRIs in the near term, but there are intermediaries through which we can provide the same type of funding
DR: What have you learned?
Amelia Nickerson, CEO, First Step Staffing
- I’d never heard of social impact investing or a CDFI when I started working with First Step; this is the first organization I’ve worked with taking this to the next level
- For those thinking about starting a social enterprise, we’re always talking about diversifying our funding. Nonprofit is a tax status not a way to do business. There may be an opportunity to look at your finances a little differently
- If you don’t have a CFO, hire a consultant or talk to someone who really knows financing. Social impact is a buzz word right now — investing dollars are opening up. Educate yourself and learn about these funding streams so you can tap into these dollars
- A lot of foundations are doing this through a third party lender
DR: Christina, what criteria do you look at for what you want to invest in?
Christina Szczepanski, Managing Director Southeast, Reinvestment Fund
- I recommend to see what the local CDFIs are in your community and talk to them. So much of what we do just starts out as a conversation. We are a network — we partner and we will send you to the right place to make sure you’re talking to the right people to get your company or project invested in
- We invest in organizations and projects (for profit, nonprofit); you don’t have to check a specific box. We’re looking at sustainability in your idea. The money has to work and you need to convince us on how it will work
- Nothing says it has to have a certain value, debt coverage, etc. It might take you 3 years to get to profitability which is okay as long as you have a plan to get yourself there in the future
- We give loans of $25K to $15M, a big range. If you have a good idea and can point to why it will work — try it out. It may not work tomorrow; loans don’t happen overnight, but it is important to have these conversations now so you can get there
- We want you to be successful so we’re going to find the amount of debt and ‘package’ that makes the most sense for your project
DR: How has COVID impacted your investments?
Christina Szczepanski, Managing Director Southeast, Reinvestment Fund
- We’re as busy as ever. One of the things COVID brought to light is it exposed the systemic and institutional racism — particularly in financial institutions
- The people and organizations we care about were not first in line for PPP funding. In order to support the businesses we care about (women-led, BIPOC-led) we as CDFIs needed to give the funding and get out there and do the work. People who don’t even do lending helped roll out this program
- We did loans as low as $1,000 and as high as $50,000. We needed to reach the people the government wasn’t reaching
- The pandemic has changed the way in which we think about the people, the actual borrower and equity in that way. We can invest in individuals
- So much of our early childhood learning centers (70%) are businesses led by women and primarily women of color. We realized we should be investing in them and see how can we increase their wealth and help the children
- We changed the framework of the “who” and saw how we can more intentionally invest and create equity
DR: Tom, what can foundations role be with this?
Thomas K. Glenn II, Trustee, The Wilbur and Hilda Glenn Family Foundation
- A lot of foundations have operated differently under the pandemic and stepped up to address COVID-related needs (giving more in a matter of months than they typically do in a year)
- We’ve also invested in organizations outside of Atlanta, which was different for us
- There are several really good organizations in Atlanta that can help organizations meet their greatest needs (Georgia Grantmakers Alliance, Atlanta Women’s Fund, Community Foundation of Atlanta + United Way COVID Fund, etc.)
DR: Amelia, what has COVID brought to the table for First Step Staffing?
Amelia Nickerson, CEO, First Step Staffing
- Our partners really want us to succeed. This is a benefit of working with a CDFI. First Step Staffing has never closed during the pandemic and has even opened up in two more cities
- Before the pandemic, homelessness was still on the rise despite billions spent in housing because people experiencing homelessness don’t have jobs
- We staff essential businesses like janitorial, food production and logistics; it became a conversation about keeping them safe. Our lending partners worked with us allowing us to stay cash flow positive which was a huge help, as we did slow down in terms of revenue
- Because we took all the steps with PPP, etc. we are in a better financial position post COVID than we intended to be pre-COVID, but it took a lot of due diligence to get there
- Traditionally, in a recession, staffing is usually the first thing to go and the first thing to come back
- We’re really focused on people coming out of prisons to avoid recidivism
- At First Step, people are generally given a job within 24–48 hours of when they come into the office. We know they have basic needs. That said, we realized we needed more job coaching and transportation so we’ve had to forge partnerships to meet these (ex: we have partnerships with Uber and Enterprise to help people get to and from work)
DR: What are the things that you want to leave behind from your COVID-19 experience and what are the things you want to take forward?
Christina Szczepanski, Managing Director Southeast, Reinvestment Fund
- Leave behind — as an organization, the pandemic forced everyone to see how we work remotely and to use Teams, etc. We are arguably more productive working remotely. That said, some face to face is still important and I look forward to having some of that time back (but not 5 days/week)
- A “keep”/silver lining — being more inclusive in our decision-making and engaging more perspectives. It has changed the culture of our organization
Amelia Nickerson, CEO, First Step Staffing
- Leave behind — constantly being on alert for everyone’s health and safety. It’s stressful!
- A “keep”/silver lining— businesses have slowly tried to return to normal and wages for entry-level jobs are higher because we’ve seen how critical it is to have frontline workers delivering mail, working grocery stores, baking bread, etc.
Thomas K. Glenn II, Trustee, The Wilbur and Hilda Glenn Family Foundation
- Leave behind — masks!
- A “keep”/silver lining —along with COVID, there are all kinds of issues in our communities. I’m hoping we’re at an inflection point. COVID and social justice issues have pointed to the inequities in our society in an intense way
- The new normal became part of our vocabulary in the Great Recession; I’m hoping this is an inflection point and there is a silver lining here and we’re looking ahead. Hopefully we’ve learned something and have a better picture of who we are
Want to know more?
For more Starting Up Good content, visit our Medium page here.
Brady Press is an Associate Director at Changing Our World, where she specializes in building strategic corporate citizenship programs. She is a consultant to SDGCounting and StartingUpGood.
