A Legacy of Leverage

This week the Blue Ridge Foundation New York—one of the city’s most innovative poverty-fighting organizations and one of the nation’s first social venture incubators—announced that it was joining forces with the Robin Hood Foundation to create Blue Ridge Labs @ Robin Hood, a new initiative to support technology-based ventures that advance opportunity and upward mobility for low-income Americans. This is welcome news for New York and marks an important evolution for Blue Ridge.

Over the last 15 years, few organizations have done more to shape the social innovation field. Founded in 1999 by investor John Griffin and social entrepreneur Matt Klein, Blue Ridge has launched 30 ventures that in 2015 alone will serve more than 500,000 people in poverty. Moreover Blue Ridge’s $20 million collective investment in these organizations has allowed it to raise an additional $250 million in follow-on investment from places like the Robin Hood, Rockefeller, and Gates Foundations; Google; the Omidyar Network; and the Social Innovation Fund. Blue Ridge’s entrepreneurs have become leaders in the social entrepreneurship world, and their ventures represent important models of social change. By continually refining its investment approach, forging strategic partnerships, and working to shape public policy, Blue Ridge has pushed the boundaries of scale and impact, incubating organizations with significant reach, and strengthening the broader ecosystem of innovation and entrepreneurship in New York City and beyond.

Incubating the Incubator

In 1999, Matt Klein presented a memo to John Griffin envisioning a new philanthropic approach: Adapt the private-sector incubator model to the social sector. If they could supply talented social entrepreneurs with seed funding, office space, and a community of like-minded colleagues to help grow their organizations, Klein contended that they could “transform high-potential ideas into institutions” that “demonstrate practical solutions for advancing opportunity and upward mobility.” Klein was a Yale-trained lawyer and veteran social entrepreneur, who had founded organizations like LEAP as an early Echoing Green Fellow. Griffin was the founder and president of the investment partnership Blue Ridge Capital and previously the president of Tiger Management. Together, they would design this new incubator to harness their shared vision and collective expertise, and invest in opportunity and social mobility.

Blue Ridge’s first venture, iMentor, began as a concept—use technology to strengthen bonds of mentorship—and Klein and Griffin recruited Rich Buery as executive director. Working initially out of the office of Blue Ridge Capital, the foundation moved in 2001 to downtown Brooklyn, where it would house iMentor and open its doors to applications from promising social entrepreneurs.

During Blue Ridge’s first decade, “incubation” meant substantial financial and in-kind human capital investments in its grantees. The foundation made grants of up to $500,000, which tapered over five years; the idea was to provide groups with enough to support their growth but to encourage them to diversify their funding sources. Blue Ridge also offered management assistance through formal and informal resources, including a “BluePrint” to help organizations and their leaders clarify outcomes, a resource bank to promote best practices, assistance in identifying board members and enhancing fundraising capacity, and experts-in-residence for advice on operational activities. Michael Weinstein, chief program office of Robin Hood, points to the power of the incubator model.  “By bringing entrepreneurs together into a supportive, tight-knit community, Blue Ridge enabled them to learn from each other and stimulate each other to build innovative, effectual organizations.”

Early on Klein realized, opportunistically, that Blue Ridge could enhance scale not just by jumpstarting new ideas but through replication. Around 2004 it expanded its portfolio to include ventures such as Taproot Foundation, Summer Search, College Summit, Citizen Schools, and Year Up, bringing their work for the first time to the New York City market. It also proved its own model: Today, by some estimates, there are nearly 40 incubators in the social sector, many fashioned on the Blue Ridge example. Eli Malinsky, executive director of the Center for Social Innovation, which opened in New York City’s Chelsea neighborhood in 2013 and is itself home to numerous social venture start-ups, says he looked to Klein and Blue Ridge for guidance. “Blue Ridge has been a bright light, an influencer, and [an] important anchor in a movement that has gained a lot of steam,” Malinsky notes. “Blue Ridge provided legitimacy for the incubator, space-sharing model. [It] pioneered a way for doing things that has been highly influential.”

The Power of Partnerships

The efficacy of the incubator strategy, particularly for an organization as lean as Blue Ridge, was built on partnerships. Klein knew from experience—and necessity—that collaboration would be critical to meaningfully addressing issues of poverty, opportunity, and social mobility. From its earliest days, Blue Ridge forged partnerships with organizations like Echoing Green, Vera Institute of Justice, universities, and government offices. Often this meant working with other funders to ready organizations for follow-on investment and significant financial leverage; Blue Ridge’s $20 million investment in the grantees in its portfolio allowed them to raise an additional $250 million in philanthropic support.

Partnerships also allowed Blue Ridge to influence public policy—essential for impact at scale. For example, its investment in Esperanza, an organization launched in collaboration with the Vera Institute of Justice, helped demonstrate that in-home and community-based probation programs for young people could be more effective at rehabilitation and more cost-effective than incarceration, and has shifted the way governments consider and fund juvenile justice programs. “If we really care about issues like mass incarceration and juvenile justice,” says Nick Turner, president of Vera, “we have to be willing to change the conversation. Blue Ridge has really helped to change policy through demonstration projects.”

Blue Ridge also worked extensively at the federal level, through participation in alliances such as America Forward to imagine and help create the White House Office of Social Innovation and its Social Innovation Fund, and more locally through initiatives with New York City government on how the city’s public sector uses data and digital technologies, and engages with the larger tech community.

Technology, Opportunity, and Recalibrated Risk

In 2011, as it entered its second decade, Blue Ridge began to think about reach and impact in different terms, turning its focus to the power of technology to dramatically increase social and economic mobility in the United States. Although Griffin and Klein had long believed that technology plays a role in transforming lives—recall Blue Ridge’s first investment was in iMentor—the organization began to shift to a fully tech portfolio, with investments in organizations like Crisis Text Line, Turbovote, and Code for America NYC.

Klein explains that this turn to tech allowed Blue Ridge to think more intentionally about “disruptive innovation.” Instead of asking, “How plausible is your idea or organization?” he began to assess the transformative potential of promising investments: “If this works, will the impact be really meaningful, at broad scale or deep impact?” According to Klein, this shift involved developing greater appetite for risk and a greater willingness to entertain failure.

It also meant that Blue Ridge’s investment thesis evolved to allow for more, smaller bets in organizations with a different cost structure—start-ups like Code Montage or Kinvolved that were developing early versions of digital products with small staff and lean operations. Instead of committing $500,000 up front and for a five-year period, Blue Ridge began to make $50,000 initial investments with the intention of contributing more over time, as these organizations demonstrated momentum.

With this shift in investment focus, Blue Ridge became increasingly agnostic about backing for-profit or nonprofit organizations as it examined the intersections between technology, poverty, and upward mobility. Fundamentally, Klein contends, Blue Ridge was asking the same questions it always had: Is the business model viable? In 2013, almost all of its investments were in for-profit, social-purpose tech ventures, putting Blue Ridge squarely in the “impact investing” field.

At the same time, Klein and Blue Ridge began to work more intentionally to strengthen the broader “tech-for-good” community in New York City, bringing together engineers, nonprofits, and city government through conferences, meet-ups and hackathons, and other cross-sector collaborations. In 2014, Blue Ridge launched Significance Labs to address what the team believed was today’s new digital divide—not a lack of access (80 percent of poor people in the United States have cell phones), but meaningful and significant products that can help improve mobility and opportunity for low-income Americans. Through fellowships, Significance Labs helps leading entrepreneurs, engineers, and designers to build “high-uptake” and “high-impact” tools for those underserved by technology. (The Blue Ridge Labs @ Robin Hood announcement Monday included a call for the next class of fellows.)

Of course central to Blue Ridge’s success, and the breadth and depth of its reach over the last 15 years, was Klein’s leadership—his commitment to the organization, its ventures, and the larger issues of poverty and equal opportunity. “Through Blue Ridge,” says Turner, “Matt Klein helped define social entrepreneurship before we used those words.” Last spring, with Bill de Blasio’s new administration focused on inequality, Klein saw an opportunity to continue to advance the Blue Ridge vision (“where someone starts out should not determine where they end up”) with the scale and resources of government. He now serves as executive director of New York City’s Center for Economic Opportunity and senior advisor for service innovation in the Mayor’s Office of Operations, where he focuses on antipoverty interventions, and the use of technology and data to enhance social service delivery. Klein’s departure marked a critical juncture for Blue Ridge and a natural moment for strategic reflection—one well resolved by incorporation into Robin Hood. “Blue Ridge has been inspired by Robin Hood from the start, and so it’s gratifying to see the foundations’ informal work together culminate in a joint venture. John Griffin takes real philanthropic risks and encourages constant evolution; I’m excited to see what comes out of this next phase.”

Read more stories by Georgia Levenson Keohane.