Submitted by Jean Butzen on November 14, 2011 - 09:21

Changing the Way Nonprofits do Business by Funding Collaboration

Recently, I wrote a piece about an exciting new funding source for nonprofit strategic restructuring called the Sea Change-Lodestar Fund, which has a national geographic focus. One of my readers informed me about another funding source called the Catalyst Fund, administered by the Nonprofit Finance Fund. The Catalyst Fund also finances nonprofit collaborations, and although it restricts its giving to the Boston area  the founders believe it could be a national model for funding nonprofit collaborations by creating a replicable resource infrastructure to support nonprofit collaborations.
I recently spoke with the Catalyst Fund's Manager Peter Kramer and asked him to explain their goal. "Ultimately, we want to see nonprofits meaningfully change the way they do business in order to further their missions." Peter said that the Catalyst Fund began in September 2010, with a five-year commitment to invest a total of $1.725M by four key investors: the Boston Foundation, Boston Local Initiatives Support Corporation, The Hyams Foundation, and United Way of Massachusetts Bay and Merrimack Valley. The choice of a five-year horizon, he said, was because "This is a new approach. We are taking an active role in providing resources for collaborations and mergers through a central vehicle and in a unified way. If this doesn't end up working how we anticipate it will, then we want the flexibility to be able to try something else."
Peter explained the Fund's unified proces this way. They have a simplified intake and application process, much like a venture philanthropy that is an interative diligence process, with lots of conversations with the applicants to hone their thinking around their venture. "We try to get a good feel for where they are trying to go," said Peter. In these early conversations, the Fund is looking for signs of "seriousness of intent" by the applicants, by which Peter meant, "Have the boards passed some type of resolution for the initiative?" Uninvolved boards are a sign to Peter that there isn't a meaningful change in business occurring and therefore may not fit with the Catalyst Fund.
The Fund also has a pool of pre-qualified technical assistance consultants. "We wanted to be able to pre-qualify consultants so we know that consultants aren't cutting their teeth on the Fund; also we wanted to assure a level of quality going into the engagements." The consultant pool includes various kinds of expertise including facilitation, finance, legal, and governance.
But how do they measure success? "We want to know," explained Peter, "Has the actual technical assistance engagement led to real improvement, expansion, or preservation of participating nonprofits' programs or services? And, we want to know if the nonprofits have made a meaningful change in their business model. But at the end of the five years of the Fund, we want to be sure that more people know about collaboration strategies, and that collaboration is a more accessible and positive tool to nonprofit leaders, whether in good economic times or bad."
During the past year, the Catalyst Fund has made its first round of investments in nine collaborations, totaling $280,000. It's a diverse pool of mergers, alliances, and partnerships from a variety of nonprofits. The Catalyst Fund is underway, and we look forward to learning from its model and if it can meaningfully change the way nonprofits do business by funding collaboration.
Is there a fund to underwrite nonprofit mergers and collaborations in your community? If so, please write a note to this posting and I will try to write about it in the future.