I was at the recent Innovation Funders Summit Meeting in San Francisco where a number of participants got together to discuss projects that spawned social entrepreneurship. The questions was, which models worked, which did not and what could be further replicated and scaled?

Participants discussed the Grameen village phone initiative, Drishtee and Nlogue telecenters in India, Soros spawned ISPs, school computing centers developed by the Shuttleworth foundation, the IDRC managed Telecentre.org initiative and Techsoup and its international partnership expansion. All these initiatives are different, and have distinct outcomes. Their connecting trait is that they all used technology as a core mechanism for achieving a social mission objective.

What became clear in the first couple of hours of discussion [and what surprised the meeting participants] were that all had a similar structural model that contributed significantly to their success: Successful initiatives with wide geographic reach typically supported local entities that provided products and services to their constituencies — these entities were serviced by a hub providing backend administrative/technical support. How these hubs related to the local entities, what services they provided, how authority and responsibilities were divided between the local entities and hubs and the financing mechanism to support the hubs differed between projects. However, the basic structure of local entity supported by a hub was the common denominator.

This structure may very well explain why there are so few scaleable social venture initiatives. Most initiatives that meet both social mission and sustainable objectives require startup underwriting. Philanthropic funders, (versus VC’s, banks or corporations) are often the early underwriters of such efforts because they understand social mission objectives. They are typically far less successful at scaling projects [once social missions are met] to the next level of revenue generation and sustainability – VC’s, banks and corporations are far more likely to provide this successful, second phase, support.

Here is the problem.

Underwriting large scale projects with structures that create local entities on the ground supported by a backend hub — whether national, regional or global, are often eschewed by the very funding agencies more likely to provide initial “angel support”. Funders typically focus on developing local entities (for example telecenters) but not on separate “overhead” entities that provide administrative / facilitative / coordinating support for these entities. Separate administrative support entities often don’t fit neatly in funder issue portfolios or in their geographic focus. The irony is that in these large scale projects, the local entities funders do support suffer from the same lack of administrative capacity that individual NGO’s supported by funders often do.

When you think about it, the Erider movement, Compumentor, Npower, etc… all follow a similar premise… because the requisite operational expertise does not exist within the individual NGO’s supported by funders, it has naturally evolved outside the NGO in the form of support entities providing capacity expertise to the local organizations they service. In the case of both funder-supported NGO’s and funder projects which create multiple local entities the is issue is often that the local entities lack internal capacity — so capacity support ends up being provided in aggregate by a separate service hub.

The global telecentre movement is an excellent example of this phenomenon. Tens of millions were poured into local centers globally in the late 90’s with no thought to how they would operate as a network in support of each other. Consequently, they fell out of funding fashion and many withered and died. Now the IDRC, Microsoft and the Swiss Development Agency are funding an effort to develop the telecenter movement into a more networked ecosystem, with the appropriate back end capacity to support the local Telecenter initiatives.

My concern is that the reason there are so few workable, scaleable and sustainable models is because “angel” funder agency support is actually skewed toward less workable models in the first place. It it possible that initiatives just don’t fail, but rather that the standard pattern of funding support sets them up for failure almost from the start by not providing the appropriate capacity. In each of the successful examples discussed, the funding agency initially recognized that capacity support was vital to the success of the local entities they set up – and in each case supported project infrastructure in the form of a “hub” entity providing that service.

Posted by Jonathan Peizer on Thursday, February 9th, 2006 at 7:56 am.