A Big Idea for 2016: Support Non-Profits in Taking Risks

By Daniel Lurie

7 out of 10 people born in poverty will remain in poverty their whole lives. For the last 10 years as CEO and founder of Tipping Point Community, I’ve been focused on changing those odds. And from what I’ve seen over the last decade, getting space to test new ideas in philanthropy is rarely an option. Yet, it’s a proven method to uncovering big ideas.

In 2016, I’d like to see a bigger push to fully integrate risk capital into mainstream philanthropic practice.

Over the last decade at Tipping Point, we’ve invested in tried and true solutions in the fight against poverty, but a couple years ago we decided to integrate a new approach into our strategy. In many industries, trying and failing, iterating before scaling is a proven method of success. The leaders in our grantee portfolio rarely get an opportunity to take this approach because they don’t have access to dollars for innovation, but we have the ability to change that — and we are.

Here are a few ways you can most effectively apply those dollars:

1. Invest in leaders with game changing ideas. Make significant investments in leaders working on new and unproven solutions. Take The Reset Foundation. Millions of Americans are caught in a “cradle to prison pipeline,” funneled from low-performing schools in to a cycle of joblessness and poverty. The Reset Foundation plans to repurpose existing government dollars to educate rather than incarcerate young people. Over the past two years we have invested $1.1 million to get them started. If successful, Reset estimates that its alternative model will save taxpayers nearly $20 million with its first class of graduates alone.

2. Bring R&D in house. Give yourself the room to deepen your understanding of a particular issue and begin to test and learn new solutions at a very small scale. This was why we established T Lab, Tipping Point’s own R&D engine to explore how we might tackle some of the toughest challenges in the fight against poverty such as early childhood education and supporting formerly incarcerated people.

3. Put risk capital in the hands of experts. It’s also important that established organizations like Teach For America and Year Up have access to risk capital. These programs have proven they can get results; they’ve amassed critical expertise and trust in serving high-need communities, and they have the infrastructure needed to unleash game-changing ideas on the ground.

Investing in R&D is new terrain and there are still a lot of unknowns. It will require the philanthropic sector to shift our mindset from “investing in known outcomes” to “investing to learn” for us to succeed in providing risk capital.

I would love to see this story change a year from now. More investment in early stage, more out-of-the-box thinking around longstanding social problems, more unrestricted dollars for organizations already operating effectively at a large-scale. What better place for this to take root than the Bay Area, the geographic center of innovation. With discussions of housing and affordability in our community reaching a boiling point, there’s no time like the present.

This article was originally posted on LinkedIn last week as part of their #BigIdeas2016 series.