Innovation to Impact: Obama’s Social Innovation Fund at Four

Nearly five years after President Obama announced the creation of the Social Innovation Fund (SIF) in a ceremony at the White House, the program has achieved amazing progress. Its portfolio includes more than a half billion dollars of cross-sector investments in effective community solutions. Many already show promising early results. Nonprofits are establishing new connections and building capacity that will benefit the entire social sector and the country. And the SIF is accomplishing this in a way that demonstrates the importance of combining innovation, evaluation, and scale to accelerate the pace of change.

The SIF team is delighted that Congress boosted the SIF’s budget to $70 million in fiscal 2014, a 40 percent boost from 2013. This increase is a strong signal in the importance of scaling solutions that work, and Congress’ and the President’s continued confidence in our unique approach and extraordinary network of grantees and partners.

This budget increase allows us to nearly double the funding for our 2014 competition and explore a $14 million Pay for Success pilot program that will keep the SIF at the cutting edge of innovative approaches to social change. At a time when nonprofits report that need is increasing and traditional sources of capital for the social sector are decreasing (or remaining flat, at best), models like the SIF that seek new solutions and attract new capital, are critical to filling this ever-growing gap.

Beyond the dollars, a great deal has transpired since we made our first grants in 2010. We’ve awarded $177 million in grants to grantmakers who match our grants 1:1 and serve as partners in selecting and supporting high-impact nonprofits implementing effective solutions. Together, we’ve funded 217 nonprofits and are testing 72 interventions. These grantees are on track to meet their scaling goals, having already reached more than 270,000 people. And we’ve raised more than $423 million in nonfederal match commitments, more than tripling the federal investment.

I am particularly proud of our portfolio. We have curated a collection of investments in some of the most impressive nonprofits in the country. The social entrepreneurs in our network might not boast IPOs or billion dollar acquisitions, but their results rival those of their counterparts in the business world because they will transform lives and strengthen communities.

No Progress without Pitfalls

SIF grantees are pioneers, working tirelessly to discover effective, innovative solutions that can displace what is not working, strengthen communities, and transform lives. They are collaborating with nonprofits and evaluation partners to develop thoughtful, multi-dimensional evaluation studies, while also helping them expand their programs to new populations and geographies. All the while they are meeting strict federal compliance standards for operations and freely sharing lessons and results along the way. As a result of this exhaustive and rigorous approach, grantmakers and nonprofits are increasing their capacity and developing a practical body of knowledge about what it takes to scale innovation and impact—the ups and downs.

Like any new effort, everything has not gone as expected, and there have been some bumps in the road along the way. Creating a new federal grant program that works through (and with) grantmakers has been challenging at times. Some grantees have had difficulty embracing federal compliance standards—whether that be prohibition on certain types of spending, stringent financial tracking and reporting, or mandatory background checks for a wide array of team members—and the SIF has had to negotiate a difficult balance between regulatory oversight and trusting our experienced philanthropic partners on the ground.

We’ve also struggled with the tension between innovation and evidence as we search for organizations with evidence of impact and those with potentially game-changing, fresh approaches. And while most of our grantees are on target to meet fundraising, scaling, and evaluation implementation goals, some have struggled with the rigor and incredibly high standards of raising a 3:1 match; rapidly expanding to new populations; or developing scientific, quasi-experimental or randomized control studies with grassroots organizations focused on serving clients in need.

In fact, one of the 20 intermediary grantmakers that we’ve funded recently informed us that it needed to withdraw, because after repeated attempts it could not meet expectations. Facing difficult economic times in its community, the grantmaker has been unable to find subgrantees with the wherewithal to raise a 1:1 match, and design and execute such complex evaluation plans. Three other grantmakers are not seeking additional funding beyond what SIF has already awarded, because raising matching funds and meeting demanding operations standards—especially in rural and otherwise economically distressed regions—has been simply too difficult.

The good news is that these three grantees will complete their planned scaling and evaluation plans, share the results, and continue to participate in our network. And in some cases, subgrantees have found significant new resources to further expand their efforts—resources that don’t come with the incredibly high bar of fundraising and evidence-building that is core to the SIF model. Moreover, all the organizations touched by SIF, whether they were grant recipients or just applicants, are stronger and part of a growing movement that’s replacing anecdotal outputs with demonstrable outcomes.

We've learned a great deal about funding through the grantees that are not seeking additional funding and through other experiences.

First and foremost, we know that SIF dollars are not easy dollars. SIF grantees have to meet some of the most-rigorous standards in federal and private funding streams. These standards—which are vital to sustaining long-term solutions with potential for replication—are especially difficult for organizations in philanthropically underserved communities.

It is clear, however, that in all cases, the SIF application, selection, and evaluation planning process has left these communities in a much better position, and most grantees plan to continue building programs through the support of broader coalitions and significant increases in other federal and non-federal funding streams—a direct result of the rigor and validation stemming from the SIF process. And as a result of these lessons, SIF plans to increase the focus on sustainability planning, allow more time upfront to develop program evaluation and scaling plans, default to three years of upfront funding, broaden eligibility standards for grantmakers, and explore methods (ranging from partnerships to partial waivers) to alleviate some of the match burden for grantees in the most distressed communities.

Failure Teaches. Learn From It.

Before I left the Case Foundation several months ago, I helped launch its Be Fearless campaign, which aims to create a conversation about the need for more innovation, experimentation, big bets, and urgency in the philanthropic sector. At the same time, we were also increasing our support of entrepreneurs. That work has infused and invigorated my thinking as I’ve taken the helm of the SIF.

We know that the most successful entrepreneurs (social or for-profit) are standing on top of a pile of failures that led to and influenced their huge success. We know that the most-effective and promising solutions or products came about only because someone was constantly experimenting and iterating. And we know that it’s a sense of urgency about the challenges we face and the opportunities we enjoy that drives innovators and entrepreneurs to accelerate the pace of change through obstacles, hurdles, and setbacks.

This mindset will be part and parcel of the SIF going forward and must become more common in the social sector if we are going to tackle the toughest challenges and solve the most intractable problems facing our country. And like our 401(k)s and investment accounts, we’ll all have a different risk tolerance as we seek the best returns.

The SIF, as a federal government portfolio, will be more-balanced, leaning into efforts on stable footing while saving some room for those big bets that could produce meteoric results.

We’re seeing terrific progress since we launched the SIF in 2009. And, we’ve also had our fair share of challenges, disappointments, and surprises. Like anything worth having, it takes both and we’re excited to mix all of these lessons together as we enter our next chapter to catalyze effective solutions, demand results, and transform lives.

Read more stories by Michael Smith.