Three Things Every Growing Nonprofit Needs to Scale

What does it take to grow an organization from an idea to $2 million in revenue and beyond? This is the question that we set out to answer last year when we launched the first-ever comprehensive survey of high-performing social entrepreneurs across the United States. It turns out that the answer might not be what you would think.

Over the past several decades, society has created an almost mythical depiction of the social entrepreneur—a lone visionary, armed with personal charisma and piercing insight about how to address a pressing social problem. But one person can’t possibly be responsible for the success of an entire organization. We wanted to tease out the truth behind this stereotype to figure out how nonprofits led by social entrepreneurs really grow.

Our survey of more than 200 social entrepreneurs from 11 top social entrepreneurship funding portfolios—including Echoing Green, SV2, Draper Richards Kaplan, and Skoll Foundation—revealed that an organization’s early-stage success usually relies on three things: teamwork, metrics, and access to capital.

Organizational Leadership: Success is a Team Effort

Despite prevailing stereotypes, our research found that the success of an organization does not hinge on a single social entrepreneur. In fact, the lack of a high-functioning team can pose significant risks to an organization.

Hiring senior leaders early is especially critical to an organization’s ability to scale. We found that the most critical leadership hires to support scale are colleagues who can manage the day-to-day work, thereby freeing up the executive director to focus more on strategy and fundraising. The senior leadership team is also an important source of strategy advice, with 73 percent of respondents saying they rely on their senior leaders for strategic input.

Another important factor is having a strong board of directors, which also provides critical strategic input for leaders across organizations of all sizes. Respondents largely agree that their board has given them the authority they need to run their organization and cite strong working relationships with their board chairs. At the same time, there is a strong disconnect between what executive directors want from their boards and what their boards actually do. For example, 66 percent wish their board helped more with fundraising.

Good hiring decisions were another critical input to scale. Leaders spoke openly about making bad hiring decisions and the risk it posed to their organizations. As one respondent said, “I made bad hires, I wasn’t good at managing, and I was losing members of my team, who were burned out.” These types of hiring failures can be costly, stunting an organization’s growth.

Pursuing Impact: Outcomes Matter

One of the most illuminating findings from our survey is that organizations that report tracking outcomes from the start appear to reach a $2 million budget faster than the typical organization in our dataset. These organizations are also more likely to reach the $2 million milestone because of a catalyzing grant, and they are more likely be in two or more of our 11 social entrepreneurship grant portfolios.

These findings reveal that having an impact-oriented mindset pays off. We suspect this is because it allows organizations to use data to improve their programs as they grow, as well as to talk about their impact in a data-driven way that is attractive to funders. This positions them well to raise the money they need to scale.

Scaling Impact: Capital Is Key

Fundraising challenges are a recurring theme in our survey. In fact, access to capital was the number-one challenge related to scaling impact, even for more established organizations.

One of the main fundraising struggles our respondents face is getting attention from new individual and institutional funders. More than 71 percent of respondents report difficulty getting their foot in the door with large foundations. At the same time, they overwhelmingly cited getting a large grant as the major catalyst to grow beyond $2 million.

With philanthropic funding so pivotal in determining the fate of an organization, it begs the inevitable question about who has access to capital and who does not. While our survey gathered some anecdotal evidence suggesting racial and gender bias in philanthropy, this is an area where we believe more research is required to shed light on the need for more inclusive access to funding. Encouraging work includes that of the D5 Coalition, a group of prominent foundations that have come together to try to advance diversity, equity, and inclusion in philanthropy.

We hope this survey research is a starting point to understand how some of the earliest stage social entrepreneurs have scaled their organizations, and we hope struggling organizations (and their supporters) can use these lessons to help them grow. There are already some promising practices in place to build on. Below are some examples of how funders can support team-building and impact measurement, and open up access for their grantees. They can:

• Fund executive coaches to help nonprofit leaders build team management skills. Emerson Collective, founded by Laurene Powell Jobs to help remove barriers to opportunity and strengthen the social justice sector, has focused on building the management expertise of its grantees by providing individual coaches to dozens of leaders. Silicon Valley Social Ventures (SV2) helps its grantees grow their teams by partnering them with skilled volunteers from the tech sector who have successfully built teams in their own work.
• Help nonprofits develop key performance indicators. Arbor Brothers, which funds and provides in-depth consulting for social entrepreneurs, helps its grantees measure impact by working with them to develop measureable outcomes and tracking systems, along with a dashboard to follow progress. Tipping Point Community has an entire department dedicated to helping its grantees collect impact data.
• Provide introductions to other foundations. More and more foundations are prioritizing connecting their grantees to other foundations to help them get more funding. For example, as part of its mission to support exceptional leaders, Draper Richards Kaplan Foundation takes a board seat with the organizations it funds, enabling them to open up their networks and get additional funding for those entrepreneurs.

More philanthropic partners must take the lead to help organizations build capacity in the areas our survey report identifies as critical to scale. Indeed, it is only by supporting nonprofit organizations to become sustainable that we can maximize their potential to solve the urgent social problems we face.

Read more stories by Kathleen Kelly Janus & Valerie Threlfall.