Lucy Bernholz, Stephanie Linden Seale, Tony Wang

BLUEPRINT RESEARCH + DESIGN, INC.

Changing the Ecosystem of Change

2 0 0 9
This paper was published with the support of the John D. and Catherine T. MacArthur Foundation.

Blueprint Research + Design, Inc. helps grantmaking foundations, individual and family donors, and philanthropic net-
works achieve their missions. We offer services in strategy + program design, organizational learning, and
evaluation, and we think and write about the industry of philanthropy. Since 2004, Blueprint has provided the John D.
and Catherine T. MacArthur Foundation with research, advice, and documentation of the Digital Media and Learning
Initiative. That work includes the writing and distribution of five reports on field building, written for the public, as a
means of informing the field of philanthropy and as a way to strengthen the emerging field of Digital Media and
Learning.

The MacArthur Foundation’s Digital Media and Learning Initiative aims to determine how digital media are changing
the way young people learn, play, socialize, and participate in civic life. Answers are critical to education and other social
institutions that must meet the needs of this and future generations. Through November 2009, the foundation has
awarded 106 grants for a total of $61.5 million to organizations and individuals in support of digital media and learn-
ing. The grants have supported research, development of innovative technologies, and new learning environments for
youth — including a school based on game design principles.
Changing the Ecosystem of Change
INTRODUCTION
The nonprofit sector is responsible for many of
the social innovations and movements that bene-
fit communities across the globe. Many of our
most familiar institutions, products, and services
were first developed or expanded by nonprofit
institutions, individual researchers, and the foun-
dations that enabled them — from the 911
emergency system and public television to plant
biotechnology and reproductive contraception.1
In recent years, however, this ecosystem, which
has nurtured widespread social change, has trans-
formed and now includes other forms of enter-
prises, actors, and funding models. Among these
innovations is the rise of social entrepreneurship,
as well as innovative organizational forms and
emerging forms of financing.
An example of one of these new pathways to
change can be found in the “locavore” food rev-
olution pioneered by restaurateur Alice Waters,
which has achieved great national impact. Waters
and her peers have helped to change the way
Americans think about food, operating from her
platform as a commercial chef, restaurant owner,
cookbook author, and public speaker. Her reach
extends to schools, families, farmers’ markets, and
the entire food and beverage industry, and yet she
instigated change not from the traditional non-
profit model but by acting as the owner of a for-
profit restaurant, changing the message she sent to
her customers and revamping the supply chain on
which her business relied.
While Waters’ began her pioneering work
thirty years ago, these days an increasing number
of businesses aspire to create social change in
addition to generating revenue. The rise of the
social entrepreneur has expanded the profile of
changemakers on the social front. Change is now
driven by a variety of sources, using a mix of
unlikely tools and approaches.
Just as important as business models with a
social agenda are whole new organizational forms
for generating social good. These organizations,
from deliberately temporary citizens’ groups to
virtual networks of engineers and activists, tend
to be problem-focused,
not institutionally driven. The rise of the social entrepreneur
They draw from the power has expanded the profile of
of open-source creation changemakers on the social front.
models. Their life cycle is
somewhat like that of a
Hollywood production unit, in which a group is
formed to produce a movie, the film is made,
distribution deals are struck, and the group
then disbands. The easy access to low-cost
network-building technologies has accelerated
the rise of these temporary, issue-specific entities
for social change.
Blueprint Research + Design, Inc. 1
 Large-scale institutional financing for social
good has not always kept pace with these changes
in organizational structure for public benefit. One
of the problems is that it is difficult for founda-
tions to fund unincorporated groups or commercial
enterprises. Nevertheless, many foundations have
been creative in finding ways to do so, using pro-
gram-related investments (PRIs) or re-granting
partners to allow greater flexibility.
These ecosystems of change, and the roles
available for foundation funding, are constantly
evolving. In the case of the locavore movement,
for instance, early pioneers such as Alice Waters
and Judy Wicks of Philadelphia’s White Dog Cafe
have diversified their own
Reaching out beyond the tradi- systems for change while
tional nonprofit and public agency also seeking nonprofit
partners and the tried-and-true partners, public advocates,
grantmaking tools will have
and legislative or regula-
an important implication for
foundations in coming years.
tory allies. In recent years
both Waters and Wicks
have expanded their own
ecosystems to include farmers and farmers’ advo-
cacy groups (the Ecological Farming Association,
for one), the media (both speak publicly and
write regularly, and Waters has frequently collab-
orated with sustainable food journalist Michael
Pollan), academia (including New York
University nutrition professor Marion Nestle) and
advocacy groups (opponents of factory farming
and farm subsidies have joined their camp). They
have shown that moving an issue requires the
involvement of many different kinds of actors;
these new networks encompass foundations, non-
profits, social enterprises, innovators, writers, and
academics. Such a diversity of players — each of
2 Changing the Ecosystem of Change
them integral to the issue — begs the question: if
foundations have traditionally focused on only
one part of this network of change agents, what
are they missing?
This organizational flexibility and diversifica-
tion in foundation funding mechanisms will be
key as the organizational ecosystem continues to
shift. Reaching out beyond the traditional non-
profit and public agency partners and the tried-
and-true grantmaking tools will have important
implications for foundations in coming years.
They will only be able to see the horizon and
watch for new opportunities if they are open to
the many places from which change may come.
Being able to interact with commercial enterprises,
social enterprises, and networks of actors —
while maintaining their relationships with non-
profits and public agencies — is the best way for
foundations to open themselves to the widest
range of opportunities.
Where Does Change Come From?
In this brief, we examine the new organizational
and strategic options available to foundations and
other actors making social change. Innovation, we
find, is coming from a variety of unexpected
sources, and through this often experimental
work, a new and broader world of individuals,
organizational structures, and project models has
emerged. A number of variations on traditional
nonprofits are providing successful alternatives to
the typical “fund a 501c3” approach.They include
new legal structures, like B Corporations and
L3Cs (low-profit limited liability companies), and
new strategies, such as individual initiatives, social
enterprises, and network funding strategies. Our
intention here is to provide information and
models that will help foundations learn how to
recognize opportunity and encourage greater
collaboration and joint strategy-setting as the
ecosystem grows and changes.
OPPORTUNITIES FOR INNOVATION
As the world around institutions has changed,
institutions have needed to reinvent themselves.
The traditional one-size-fits-all funding model is
no longer the only choice. As foundations are
struggling to be more nimble and to respond to
the challenges and opportunities around them,
they are also building their philanthropic tool kits
to go beyond the usual roles of grant making and
convening. In some cases, they are venturing well
into new policy arenas, financing methods, and
partnership possibilities, and some are even con-
sidering wholesale changes in market mechanisms.
The global recession has provided a rare
opportunity for the social sector to redefine its
relationships with public- and private-sector
groups. The declines in the economy and the rise
in unemployment have made the need for inno-
vative solutions to problems in health care, home
ownership, and education all the more pressing. In
a twist on the old adage, necessity really is the
mother of social innovation.2 While one response
to the downturn would
be to spend less and hun- The traditional one-size-fits-all
ker down, foundations are funding model is no longer the
actually in a unique posi- only choice.
tion to experiment and
evolve. It may well be that
incremental innovation spurred by these
challenges, rather than bold and expensive
program or product launches, will lead to radical
change in the philanthropy field.3 In general,
foundations have been slow to embrace technolo-
gy or explore the ways in which it might influence
their organizational structure.There are remarkable
similarities between today’s foundations and the
operating structures of one hundred years ago.
The same board-run structure persists, along with
endowments, grant departments, finance
functionaries, proprietary software, offices, and
various levels of management,4 even though
foundations are seeking to address different social
needs and vary in size, location, and history.
As a field, foundations often seek to inform
and improve their practices by organizing confer-
ences, affinity groups, and learning opportunities.
However, the most significant changes may come
instead from experiments at the core level of
grantmaking. In addition, since much of today’s
Blueprint Research + Design, Inc. 3
 most meaningful technology reformulates con-
cepts with which we’re already familiar (like
“online” communities, social networking, or
“smart” phones), the foundations that aim to
move issues and incite significant social change
have a host of accessible tools at their disposal.
Leaders in the field of evolutionary economics
have observed two types of innovation that
advance social systems: advances in physical and
social technologies.5 The former include
environmental and technological developments,
while the latter include new models of organiza-
tion. The twenty-first
Social entrepreneurs … are century has brought
eschewing nonprofit organizational wide-ranging physical
structures in favor of traditional, change in the form of
yet social-minded, businesses … technological advances,
and now may well be a
perfect opportunity to
consider new organizational models that can lead
to advancements in social innovation as well.
Different Sources for Innovation and Change
Alice Waters and Judy Wicks’ pioneering contri-
butions to the locavore movement were catalyzed
by their status as chefs and business owners first;
their activism emerged later. Increasingly, the
business community has been producing many
such social-minded innovators who are interested
in maintaining one foot in the commercial sector
while working toward social change. Another
example is former eBay head Jeff Skoll, who, in
addition to launching his own grantmaking foun-
dation, also runs a for-profit film production
company. Skoll bet that instead of funding
environmental organizations as his sole strategy to
4 Changing the Ecosystem of Change
mitigate the effects of global warming, producing
a well-received film like An Inconvenient Truth
would complement and even augment the impact
and reach of the groups he supports. His bet paid
off on both the financial and social level and
helped to change the debate on global warming.
In order to achieve widespread impact, social
entrepreneurs like Skoll are eschewing nonprofit
organizational structures in favor of traditional,
yet social-minded, businesses in order to solve
community and environmental problems nimbly
and even profitably. Returned Peace Corps
volunteer Sam Goldman founded D.light to
replace kerosene lamps with safer and cheaper
solar lamps throughout West Africa. Goldman
considered starting a nonprofit organization but
ultimately decided that the venture could only
spread across the developing world by operating
as a for-profit enterprise. “We could have done it
as a nonprofit over a hundred years, but if we
wanted to do it in five or ten years, then we
believed it needed to be fueled by profit,” he told
the New York Times. “That’s the way to grow.”6
Different Funding Styles
More often than not, in order to fuel change and
growth, funders need to consider not just their
grantees’ work but their own internal organiza-
tional culture. Consider the recipients of the 2009
Scrivner Award for Creative Grantmaking given
by the Council on Foundations to Geri Mannion
of the Carnegie Corporation and Taryn Higashi,
formerly of the Ford Foundation. The two grant-
makers co-founded the Four Freedoms Fund in
2003 to support integration and civic participation
efforts for immigrants, building an infrastructure
that links unconnected immigrant rights groups
across the United States. The Four Freedoms
Fund is a collaborative, funded by but independ-
ent from each founder’s home foundation, and it
benefits from contributions by both large and
small grantmakers. It also allows members to cir-
cumvent the strategic or administrative con-
straints of their institutions and to let prospective
grantees apply to one entity rather than to a
dozen funders. While a funding collaborative isn’t
innovative or creative per se, the Scrivner recogni-
tion stems from the co-founders’ work in build-
ing and sustaining a national network of grass-
roots, regional, and state organizations.7 In its
press release, the council suggests that networking
of grantees allows for more strategic and inclusive
grantmaking, and the co-recipients note that the
key to success is actually in the network of net-
works, which links funders, staffs, and the benefi-
ciaries themselves.8 This comprehensive network
model not only drives change and provides
opportunities for grassroots action alongside the
work of the Carnegie Corporation but also
allows for institutional memory to persist across
the complex web of relationships, creating more
opportunities for transfer of experience and
insights.
Another nontraditional practice is the spend-
ing down of endowments, which is more com-
mon among family foundations than among their
private or corporate counterparts. Grantmakers
who adopt this practice have structured their phi-
lanthropy as time-limited in order to maximize its
impact. A few of these spend-down leaders have
sought to share what they have learned with the
community, most notably the French American
Charitable Trust (FACT), a family foundation
created in 1989 and based in San Francisco and
Paris. The foundation awards approximately $3.5
million in annual grants
to community organizing “I would love to see more founda-
groups in both France and tions incented by making the bold-
the United States, aiming est change and biggest leap forward
for long-term systemic they can in a short period of time…”
- Philanthropy journalist Cheryl Dahle
change at the grassroots
level.9 Working with
organizations seeking to
prevent social injustice, FACT also provides pro
bono consulting to select grantees through its
Management Assistance Program. Even with the
relative success seen through this holistic
approach to grantmaking, FACT President Diane
Feeney has been candid about the foundation’s
intention to spend down its $40 million endow-
ment by 2020. In 2008, FACT worked with
Northern California Grantmakers and the New
York Regional Association of Grantmakers
to produce a report on the handful of foundations
that have opted to completely distribute their assets,
as opposed to following the government-mandated
five percent minimum payout requirement.10
Philanthropy journalist Cheryl Dahle has
spoken out in favor of this hastened spending
process, saying, “I would love to see more foun-
dations incented by making the boldest change
and biggest leap forward they can in a short peri-
od of time (rather) than a fleet of organizations
motivated to stay in business by playing small.”11
These kinds of changes in the standard payout
formula could have a broad impact, as noted in
“Beyond Five Percent: The New Foundation
Payout Menu,”12 affecting both foundations’
Blueprint Research + Design, Inc. 5
 grantmaking strategies and the government poli-
cies that dictate their parameters. In April 2009,
the Foundation Center released the results of a
new survey of more than a thousand family foun-
dations in the United States, indicating that 12
percent plan to spend down and close at some
as-yet-undetermined time and that 25 percent
were uncertain about their tenure.
Another family foundation that has spent
down its endowment is the Beldon Fund, which
was founded by John Hunting, heir to the
Steelcase furniture fortune. The Beldon Fund
began operations in 1982 but only really ramped
up its grantmaking activities once it had decided
to spend down the endowment. A longtime envi-
ronmentalist, Hunting sold the bulk of his stock
in 1998, when Steelcase went public, and
endowed the foundation with $100 million,
adding the stipulation that the funds be depleted
within ten years. True to
New avenues for philanthropy are his promise, by spring
being developed alongside 2009 the Beldon Fund
commercial enterprises. had disbursed $120 million
to environmental organi-
zations in a few key states
and shut its doors. Hunting has placed an article
called “Giving While Living: The Beldon Fund
Spend-Out Story”13 on the foundation’s website
in order to spur others to give as aggressively as
he did. Anita Nager, the foundation’s executive
director, said that if the foundation had been set
up to last in perpetuity, it would have been able
to give no more than $4 million annually
in grants. Instead, it awarded $10 million to $15
million per year.14 By restricting its activity to a
ten-year period, the foundation was able to spend
6 Changing the Ecosystem of Change
more on grants than a comparably sized founda-
tion. It also took greater risks with its grantmaking
— but fewer with its investing, since a short-term
payout would only allow for more conservative
investments of the endowment. Hunting and
Nager agree that their initial strategy spread the
foundation’s resources too thin, but spending out
allowed them to focus on policy change, fueling
solid victories in fewer locations, which they
believe helped build momentum for national pol-
icy reform.15
The heterogeneity of the new social change
landscape is another positive sign. New avenues
for philanthropy are being developed alongside
commercial enterprises in places like Silicon
Valley, where the most “successful entrepre-
neurs…often start charitable foundations and
other ventures to support innovators (nonprofit
and for-profit alike) working to address the
world’s hardest social and environmental chal-
lenges.”16 The “outside” perspective of for-profit
business leaders on philanthropic and social
change work ensures more than a steady supply of
funding; the varied and diverse opinions also
allow for that disruptive and iterative innovation
process that has produced the most widespread
and transformative impact. The Skolls, Omidyars,
Brins, and Pages of the world have sought to
establish a new environment in which social
innovation is as sought after as commercial
innovation. Google, in fact, has eschewed the tra-
ditional private foundation model by starting up
Google.org with about $1 billion in Google stock
and establishing the enterprise as a for-profit,
which allows it to lobby, fund start-ups, and partner
in business ventures. While the foundation has
undergone a number of transformations since its
founding in 2006, its tax status continues to sup-
port the Google founders’ assumption that being
a for-profit organization “will greatly increase
their philanthropy’s range and flexibility.”17

Not all of Silicon Valley’s new philanthropy

follows the same model, however. Jeff Skoll, for-
mer president of eBay, is now well known for his
Skoll Foundation, which invests in and celebrates
the accomplishments of social entrepreneurs
worldwide. Skoll’s approach has been less corpo-
rate than Google’s but no less holistic; the foun-
dation has taken on a multitude of activities in
addition to its flagship funding program. In 2003,
Skoll launched the Skoll Centre for Social support innovative high-impact initiatives”19 in
Entrepreneurship at the University of Oxford’s order to combat pressing problems around the
Saïd Business School to nurture academic study world. What Skoll seems to be building is a net-
and scholarship on the field of social entrepre- work of financing vehicles — from grantmaking
neurship. The following year saw the launch of foundations to media outlets — each of which
Participant Media, a film and television produc- can focus on a core set of issues and deploy the
tion company with the goal of creating socially right mix of money and expertise.
relevant films that inspire audiences to take action.
In its first five years in business, Participant films The different funding styles of each of these
received eleven Academy Award nominations, and institutions demonstrate that there is no one
it partnered with more than eighty nonprofit standard approach. Rather, any of a number of
organizations to see through its mission of creating factors — the founder, executive director, endow-
“entertainment that inspires and compels social ment size, board of directors, or issue area — may
change.”18 lead a funder to a particular strategy or format.

Responding to the needs brought on by Different Platforms

pandemics, climate change, and nuclear prolifera-
tion, Skoll announced a new organization in
April 2009 to complement his other philanthropic
and social change activities. Led by former
Google.org head Dr. Larry Brilliant, the Skoll
Urgent Threats Fund intends to “identify and
While growth on an institutional scale is difficult
for one person to achieve, the digital environment
is enabling individuals to function much as entire
firms did a generation ago. We have seen early
examples of creative project-based models, not
unlike those that Hollywood pioneered in the

Blueprint Research + Design, Inc. 7

 1960s when the large studio model, in which one
institution housed all of the producers, directors,
writers, and actors under one roof, gave way to a
more flexible model, with short-term contracts
and assignments for each film. This à la carte,
project-centric model allowed for greater creativity
and more interaction among parties who other-
wise might not have worked together, but it also
meant that the studios were likely to have less
control over the production.20
More than forty years later, the independent,
ad hoc model has been renewed and vastly
expanded through the communication tools of the
Internet. The Web enables individuals to collabo-
rate quickly beyond organizational or even
national boundaries. People at different firms and
in different countries can
Some of the best examples of use online forums, wikis,
social innovation are also the blogs, and social network-
result of small teams innovating ing applications like
on a large scale.
Twitter to team up with
others who have similar
interests, challenges, and
priorities, enabling greater opportunities for collab-
oration. As online distribution channels have also
increased, processes like product design and devel-
opment have shifted from firms to individuals and
small teams; the 75,000 applications now available
from Apple’s app store for the iPhone have largely
been produced by small firms or lone coders.
Venture capitalists investing in an iPhone develop-
ment fund call this “the kickoff to a tectonic shift,”
noting that it marks a move away from “an industry
structure based on structural and size advantages
to an industry structure driven by innovation,
consumer choice and software developers.”21
8 Changing the Ecosystem of Change
Some of the best examples of social innovation
are also the result of small teams innovating on a
large scale. Take for example Ushahidi, a website
launched by Kenyan citizen journalists to cover
the aftermath of the country’s 2008 election.
Realizing the site could work as a platform for
collecting and visualizing any information, the
organization expanded to a handful of interna-
tional activists, each with his or her own career
and independent affiliations, and focused its
efforts on crisis reporting, aggregating reports
from the Web, email, and mobile phone texts and
presenting them in an open source format.
Ushahidi, whose globally scattered core staff
recently met in person for the first time in
California, won a $200,000 grant from the
MacArthur Foundation in May 2009 to develop
and expand upon the tool. What’s notable is that
the Ushahidi platform itself is essentially the
grantee and is funded with project-based support
rather than a general operating grant.
Similarly, FrontlineSMS:Medic is a free, open-
source software program that expands rural
health-care networks with mobile phones. The
founders of the initiative see themselves as having
created a model of implementation that can be
used throughout the developing world — but not
as creators of a nonprofit organization.
FrontlineSMS:Medic envisions local health
workers as the implementers of and evangelists
for the tool. Again, the distinction is in the per-
spective; FrontlineSMS as a tool is the center-
piece of their system, as opposed to an institution
with solutions or programs at its disposal.22
Although our examples here are taken from
the world of technology, idea funding need not
focus on technical work or the creation of tech-
nical tools to be used by a particular group of
individuals. In fact, similar kinds of discrete devel-
opment can also be used to fund activities,
including content creation, that achieve more tra-
ditional funding priorities, such as advocacy and
education. One example is “The Story of Stuff,” a
video supported by the Tides Foundation that has
been viewed more than six million times since its
December 2007 launch. A brief documentary
about the perils of consumerism, the video has
been screened in schools across the nation and has
been integrated into countless lesson plans. The
hosted website also contains links to a number of
nonprofit organizations, educational resources,
and volunteer opportunities, and click-throughs
have no doubt been recorded and noted by the
site developers and funders. While one school
board has banned the video, many other educa-
tors laud it for raising sensitive issues and offering
a segue into difficult conversations.23 “The Story
of Stuff ” offers a creative repackaging, if not an
entirely new idea — an approach at odds with the
traditional foundation funding model but still
successful by most measures.
Different Corporate and Tax Structures
Traditionally, it has been advantageous — not to
mention easier — for funders to make their
donations to nonprofit organizations. In the
United States, this has meant that funders usually
contribute to organizations that have adopted the
501c3 tax-exempt status normally conferred
upon charitable, religious, and educational groups.
Although other nonprofit organizations also
enjoy tax exemption, their status as lobbying or
membership-based associations means that
private foundations are unable to make grants to
them; public foundations are allowed to donate
only a fraction of their grantmaking budget to
these nontraditional grantees. The regulatory
structure therefore creates incentives for grant-
makers to fund, almost
exclusively, the 501c3 The for-profit social enterprise
organization model. While sector is increasingly gaining
the law permits grants attention from philanthropic
funders for its ability to achieve
made to individuals,24
scalable, sustainable impact and
private foundations have its potential for generating some
tended to fund individuals return on investment.
only in the form of schol-
arships or to make contri-
butions via fiscal sponsors, which are 501c3
entities willing to vouch (for a fee) for the
individual’s permanence or acumen or to lessen
the administrative burden and cost of disbursing
small grants to multiple individuals. 25
However, today, a number of options — from
funding of individuals to a number of other alter-
natives to the 501c3 regulatory model — exist for
the social sector. These alternatives enable foun-
dations to consider and utilize a much wider array
of options in their quest for impact.
One alternative to the traditional 501c3 is the
for-profit social enterprise — what Bill Gates
calls “creative capitalism” and Muhammad Yunus
calls “social business.” The for-profit social enter-
prise sector is increasingly gaining attention from
philanthropic funders for its ability to achieve
scalable, sustainable impact and its potential for
generating some return on investment. As the
sector continues to develop, vehicles to help both
Blueprint Research + Design, Inc. 9
 philanthropists and investors to provide capital for
these organizations are starting to emerge.
One such entity is the B Corporation, a label
applied to companies and firms seeking to harness
the reach of business to solve social and
environmental problems.26 Adhering to the
“triple bottom line” guidelines of profitability
and environmental and social sustainability (or
people, planet, profit, for short), B Corporations
are a unique corporate structure. Numbering
more than 160 across thirty industries, B Corp
organizations must demonstrate profit as well as
minimum levels of community, environmental,
and employee excellence
As individuals are increasingly able to maintain certification
to function in ways that entire through B Lab, itself a
institutions would, we are seeing 501c3 organization. (In
the potential for a sea change in full disclosure, Blueprint
the nonprofit world.
Research + Design, Inc.,
the author of this brief, is
a founding B Corp.)
White Dog Cafe, one of the examples we men-
tioned earlier in this paper, also is a B Corp; it
became one in order to serve its community in
addition to its customer base, while hoping to
institutionalize its values and be a model to other
companies.
Another for-profit vehicle specifically created
with the philanthropic funder in mind is the
low-profit limited liability corporation, also
known as the L3C. Unlike traditional for-profit
corporations, L3Cs have an explicit charitable
mission that takes precedence over concerns of
profitability. Spearheaded by Robert Lang, the
CEO of the Mary Elizabeth & Gordon B.
10 Changing the Ecosystem of Change
Mannweiler Foundation, the L3C was designed
to streamline the ability of foundations to make
PRIs (program-related investments), enabling
these “for-benefit” companies to attract both pri-
vate and philanthropic investors as funding
sources. This structure enables the organization to
allocate risks to allow for a higher rate of return
to private investors while responding to grants as
a traditional nonprofit would, a format that makes
L3Cs attractive to a range of funders.27 As of this
writing, L3Cs are not recognized nationally,
but an organization formed in one of the states
recognizing this legal corporate structure can
operate in any state.
One of the first operating L3Cs, CoolPass, is a
business that enables individuals to reduce their
carbon footprint by purchasing credits on the
Chicago Climate Exchange (CCX). Through its
two-pronged approach — generating revenue
from the retirement of carbon offsets while reduc-
ing environmental impact — CoolPass presents
itself as unique and appealing to different types of
stakeholders. CoolPass notes that it provides one
of the first opportunities to “put traditional capi-
talists, non-profit organizations, and government
agencies around the same table,”28 recognizing
common values (if somewhat different missions
and goals) among all parties.
Some traditional nonprofit organizations have
found that despite their work’s admirable social
mission, growth is difficult because of the con-
straints of philanthropic capital. A few have even
transformed themselves into standard for-profit
entities, not substantially altering their profile but
increasing their ability to attract investment capital.
RealBenefits, a software development firm, is one
such nonprofit. Providing assistance to would-be
government benefits recipients who find the
bureaucracy too difficult to navigate, RealBenefits
developed a web-based tool to reach the millions
of people who might otherwise give up on
enrolling for welfare and Medicare benefits. In
2006, the organization even received the
MacArthur Foundation Award for Creative and
Effective Institutions, in recognition of technology’s
power to assist poor and disenfranchised commu-
nities. Yet with increased difficulty reaching
donors — most of whom had no interest in
giving money to a software firm — RealBenefits
converted into a commercial firm with a sliding-
scale subscription model. In 2008, it was
purchased by TriHealix, a health-care information
technology company eager to let RealBenefits
continue its social mission and even expand.
TriHealix CEO Enrique Balaguer argues that
beyond merely enabling growth, profitability is
integral to the three core goals of maximizing
benefits to families, effecting policy change, and
creating additional capacity.29
As individuals are increasingly able to function
in ways that entire institutions would, we are see-
ing the potential for a sea change in the nonprofit
world. For starters, organizations and individuals
no longer need to conform to the traditional
model of a nonprofit in order to collaborate with
and be funded by foundations and others. While
the L3Cs and B Corps of today are still an anomaly
amid the landscape of 501c3 organizations, as
these administrative innovators prove their mettle,
they will achieve more clout on matters of policy.
Ultimately these alternatives to the nonprofit may
be commonplace, with funders and policymakers
alike recognizing that social innovation may
emerge from a variety of unexpected sources.
Different Approaches to Scaling Social
Change
Foundations, like most nonprofit organizations,
aim to keep their overhead expenses low. They
also recognize that, despite what may appear to be
a tremendous amount of money, most endow-
ments are actually relatively small compared to
government and private sector activity in similar
fields. This has led foundations to develop creative
ways to achieve impact with limited dollars.
The Ewing Marion Kauffman Foundation of
Kansas City, which is among the thirty largest
Blueprint Research + Design, Inc. 11
 private foundations in the country, makes grants
related to education and entrepreneurship and
spends about $90 million per year on program-
related expenses, relying on assets of just over
$2 billion. Yet the Kauffman Foundation still sees
itself as a “small” funder and aims to engage in
“humble leadership,” providing ideas, encourage-
ment, and strategic grants as opposed to long-
term, ongoing support. So what does it fund?
Kauffman staff have claimed the “idea” role and
hope to catalyze innovative and important activity
that holds promise. As
While some activists act locally but President and CEO Carl
envision change more broadly, Schramm has written,
others deliberately work in the “We…(make) idea gener-
other direction.
ation itself an interactive,
iterative process.…Our
efforts to advance innova-
tion have burgeoned dramatically, with the
Kauffman Foundation providing lots of idea and
leadership, but very little by way of funding.”30
Most notably, the foundation has learned that
there is no “silver bullet” that could improve edu-
cation across the board and has sought instead to
enable “an entire region committing itself to a
focus on excellence…with many concerted
efforts on many fronts at once.”31 That is, the
Kauffman Foundation uses Kansas City — the
schools and business community — as an incuba-
tor for its educational and entrepreneurial
research and funding. While many foundations
limit their activity to a local community, the
Kauffman Foundation’s envisions its “small” work
in Kansas City as a model for the entire country
and expects other changemakers to build upon its
work in order to achieve national impact.
12 Changing the Ecosystem of Change
While some activists act locally but envision
change more broadly, others deliberately work in
the other direction. Ellen Schneider, executive
director of the media activism organization Active
Voice, notes that the ecosystem of change is
“inherently collaborative”32 and must involve
different leaders, organizers, policymakers, funders,
and researchers, in part because the results of each
of their efforts may not be measurable on its own.
Schneider herself, through Active Voice, employs
new and traditional media to engage funders,
advocates, and industry leaders in conversation on
hot-button issues. The campaign for the film The
Visitor, for example, combined the efforts of
immigration rights groups, a corporate law firm,
a Hollywood film production studio, and the
Open Society Institute to lead discussions and
raise awareness about immigrant detention issues
and provide training for pro bono legal assistance
for detainees. By working with a creative inter-
mediary like Active Voice, the funder (Open
Society Institute) reached a number of audiences
it might not have through traditional grants.
Whole media efforts like Active Voice’s have
helped to sway public opinion: As of April 2009,
61 percent of Americans polled favored amnesty
for undocumented immigrants, up from 52
percent just two years before.33
One unlikely source of change is the federal
government: the Office of Social Innovation was
launched in early 2009 to administer the Social
Innovation Fund, an outgrowth of the Edward M.
Kennedy Serve America Act. With the stated
intention of investing in ideas that improve out-
comes and promote effective and innovative
programs,34 the Social Innovation Fund plans to
“identify the most promising, results-oriented
non-profit programs and expand their reach
throughout the country.”35 With this fund, the
U.S. government is taking the unusual step of
investing in collaborative measures, along with
the private and nonprofit sectors, to nurture civic
engagement and alleviate social problems. In
addition to increasing the number and quality of
volunteer opportunities, the Office of Social
Innovation also intends to promote social-mind-
ed for-profits and devise national standards in that
nascent sector.While the collapse of the economy
has resulted in more focus on regulatory involve-
ment in the private sector, there has been near-
universal agreement that greater policy focus on
the new hybrid social-benefit sphere is a good
thing.
Competitions and Requests for the
Unconventional
In addition to the $2 million Digital Media and
Learning Competition, which was developed to
supplement the MacArthur initiative’s grant port-
folio by recognizing the most novel uses of new
media in support of learning, a number of foun-
dations have launched competitions to increase
their own scope and audience and reward action
and innovation. The Healthcare X PRIZE was
announced in April 2009 by the X PRIZE
Foundation, WellPoint, Inc., and the WellPoint
Foundation to catalyze high-impact activity in
health care in the United States. The X PRIZE
Foundation’s sole mandate is to “drive innovation
through large incentive competitions,” essentially
seeking to hasten the solutions to tough social
problems by attracting money and talent.With the
$10 million Healthcare X PRIZE, it intends to
“revolutionize the U.S. health-care system.”36 By
collaborating with WellPoint, the nation’s largest
private health-care provider, X PRIZE’s organizers
will have the ability to try the winners’ proposi-
tions in 10,000-person test groups, creating value
at the community level with the goal of developing
a new globally accepted health metric.
The Robert Wood Johnson Foundation, a
leader in health-care funding, launched the
Pioneer Portfolio in order to support high-risk,
high-reward opportuni-
ties with the potential for A number of foundations have
“long-term returns amidst launched competitions to increase
great uncertainty.” Unlike
37
their own scope and audience
the rest of RWJF’s grant- and reward action and innovation.
making portfolio, which
addresses infrastructure
and access to health services, Pioneer focuses
exclusively on innovation and unconventional
ideas that may be in earlier stages of develop-
ment.38 While many of these ideas will merit
later-stage funding, the foundation acknowledges
that most will not.
And what of the organizations or ideas with
great initial promise that subsequently disappoint?
On occasion, a foundation will write off a failed
grant as a lesson learned, but at other times, foun-
dations will accept an early period of experimen-
tation and failure. The nonprofit sector rumor
mill was abuzz in February 2009 after the publi-
cation of an article in the New Yorker profiling
Green Jobs for All founder Van Jones. After a flip-
pant remark about “wasting” two grants from the
Nathan Cummings Foundation in support of his
organization’s approach to poverty reduction and
Blueprint Research + Design, Inc. 13
 environmental sustainability, Jones wrote in with
a mea culpa. He apologized for joking about early
failures in developing the green jobs sector in
Oakland and said he worried that his organiza-
tion had squandered the grants and worked in
vain. The Nathan
In addition to funding individuals, Cummings Foundation,
collaboratives, or nontraditional however, saw Green Jobs
organizations, foundations are for All as an innovative
also funding ideas.
component (both innova-
tive and component being
operative terms) of its
environmental portfolio and stuck by the organi-
zation. One year down the road, the work “blos-
somed” and the Cummings Foundation support-
ed additional organizations across the nation, all
contributing to the infrastructure for the green
jobs movement. As Jones wrote, “(The founda-
tion’s) philanthropy has had a transformative
impact in a very short period of time.”39
POLICY IMPLICATIONS
As philanthropic opportunities and sources of
change multiply, the underlying rules that govern
philanthropic activity may need to change as well.
For example, if the trend toward ad hoc project-
based funding outside of traditional organizational
structures continues, IRS restrictions on grant-
making to individuals may require serious revision.
Similarly, if endowments increasingly seek out
socially responsible for-profit avenues for invest-
ment, there may be calls for greater clarity in and
possible revision of the IRS’ jeopardizing invest-
ments rule.40 And although L3C policy efforts
have already won key victories and official recog-
14 Changing the Ecosystem of Change
nition in six states, reform will likely be necessary
to facilitate the use of foundation PRIs as a viable
source of funding.41 For program officers seeking
to broaden the types of activities they can fund, it
will be important to watch policy changes, and
the debates around them, as they shape the range
of options.
CONCLUSION
In addition to funding individuals, collaboratives,
or nontraditional organizations, foundations are
also funding ideas. To some degree, such project-
based funding seems to have fallen out of favor as
foundations strive to provide sustainable, long-
term organizational support. But the concurrent
rise in prize competitions hints that what may
have happened is a shift in how and where ideas
are supported — from within organizations to
out on their own. These competition-oriented
funding efforts (including the MacArthur
Foundation’s $2 million Digital Media and
Learning Competition and the $5 million Knight
News Challenge), encourage organizations and
individuals to present creative and experimental
ideas without the need to offer up an entire insti-
tution for funding consideration. The Digital
Media and Learning Competition, while funded
by the MacArthur Foundation, is administered by
the Humanities, Arts, Science, and Technology
Advanced Collaboratory (HASTAC), a network
of learning networks. For two years this open
competition has allowed submissions from
non-MacArthur grantees, demonstrating that
“pioneering work often takes place at the edges
and sometimes between the most unlikely of
collaborators,”42 including groups and individuals
with innovative ideas that might otherwise not
have found an outlet or funding opportunity.
Other recent notable prize competitions include
the work of the X PRIZE Foundation and the
many competitions funded by foundations and
administered by Ashoka’s Changemakers plat-
form.43
Ultimately, we need to remember that social
innovation is not just about innovation for its
own sake. What’s critical is change and impact,
and to a lesser degree scale and transformation.
Social change can be achieved through any
means, provided that those involved are passion-
ate about the difference they are making. What is
key is for a funder and a grantee (or a client and
an individual, or a group of organizations) to con-
sider the different models and options available
that may engender the change they hope to see.
The basic foundation 501c3 funding model may
indeed work in certain scenarios, but as this brief
has shown, many other potentially more creative
or effective alternatives now exist.
ADDITIONAL RESOURCES ON FUNDING
STRATEGIES
Individuals
Grantcraft, “Grants to Individuals,”
http://www.grantcraft.org/dl_pdf/guide_gti.pdf.
Foundation Center,
“Foundation Grants to Social change can be achieved
Individuals,”http://foundation- through any means, provided that
center.org/marketplace/cata- those involved are passionate about
log/product_directory.jhtml
?id=prod10019.
the difference they are making.
L3Cs
Community Wealth Ventures,
“The L3C: The Low-Profit Limited Liability Company,”
http://www.cof.org/files/Documents/Conferences/Legislat
iveandRegulatory01.pdf.
Nonprofit Law Blog, “L3C — Developments & Resources,”
http://www.nonprofitlawblog.com/home/2009/03/l3c-
developments-resources.html.
Mission Investing
Blueprint Research + Design, Inc., “Equity Advancing
Equity,” http://www.blueprintrd.com/wp-content/
uploads/2009/09/equity-advancing-equity-full-report.pdf
FSG Social Impact Advisors, “Compounding Impact:
Mission Investing by US Foundations,” http://www.fsg-
impact.org/ideas/pdf/Compounding%20Impact(5).pdf.
Monitor Institute, “Investing for Social & Environmental
Impact,” http://www.monitorinstitute.com/impactinvest-
ing/documents/InvestingforSocialandEnvImpact_FullReport
_004.pdf.
Networks
Barr Foundation, “Networks and Philanthropy,”http://
www.barrfoundation.org/usr_doc/Networks_and_Philanthr
opy_- Marion_Kane_-_Funders_for_Smart_Grow.pdf.
Monitor Institute, “Working Wikily 2.0: Social Change with
a Network Mindset,” http://www.monitorinstitute.com
Blueprint Research + Design, Inc. 15
/documents/WorkingWikily2.0hires.pdf.
Valdis Krebs and June Holley, “Building Smart
Communities through Network Weaving,”
http://www.orgnet.com/BuildingNetworks.pdf.
Prizes and Competitions
Grantcraft, “Using Competitions & RFPs,”
http://www.grantcraft.org/dl_pdf/competitions.pdf.
McKinsey & Company, “And the Winner is…,”
http://www.mckinsey.com/clientservice/socialsector/And_
the_winner_is.pdf.
Social Enterprise
Blueprint Research + Design, Inc., “Community
Foundations and Social Enterprise,” http://communityphil-
anthropy.org/downloads/CF_FutureMatters_Winter08.pdf.
REDF, “If the Shoe Fits: Nonprofit or For-Profit? The
Choice Matters,” http://www.redf.org/learn-from-redf
/publications/123.
Robert A. Wexler, “Effective Social Enterprise – A Menu of
Legal Structures,” The Exempt Organization Tax Review
63:6 (June 2009): 565, http://www.se-alliance.org
/resources_wexler09.pdf.
Social Enterprise Alliance, “Funding Them to Fish: Final
Report,” http://www.se-alliance.org/sundance
_final_report.pdf.
NOTES
1 Spend-Out Story,” March 2009, http://www.beldon.org
Joel Fleishman, The Foundation (New York: Public Affairs,
2007).
2 Eric Frazier, “Every Dollar Spent,” The Chronicle of
Lucy Bernholz, “Necessity is the Mother of Social
Innovation,” December 5, 2008, http://philanthropy.
blogspot.com/2008/12/necessity-is-mother-of-social.html.
3 Beldon Fund press release, May 15, 2009, http://www.
Thierry Rayna and Ludmila Striukova, “The curse of the
first-mover: when incremental innovation leads to radical
change,” International Journal of Collaborative Enterprise, Vol. 1,
No. 1, 2009.
4 /learning/perspectives/corner/0609_nurturing-the-nation-
Lucy Bernholz, “Institutional Isomorphism,” May 7, 2009,
16 Changing the Ecosystem of Change
http://philanthropy.blogspot.com/2009/05/institutional-
isomorphism.html.
5
Marjorie Kelly, “Not Just for Profit,” strategy + business 54
(Spring 2009): 51.
6
Marci Alboher, “A Social Solution, Without Going the
Nonprofit Route” New York Times, March 4, 2009,
http://www.nytimes.com/2009/03/05/business/small
business/05sbiz.html.
7
Council on Foundations Press Release, “The Council on
Foundations Celebrates Philanthropic Leaders, Announces
Annual Award Recipients,” April 7, 2009.
8
Taryn Higashi and Geri Mannion, “To Our Four
Freedoms Fund Colleagues, with Gratitude and Deepest
Respect,” http://www.publicinterestprojects.org/
files/imce/With_Gratitude_and_Deepest_Respect__2_.pdf.
9
“About FACT,” http://factservices.org/about.html.
10
The Tax Reform Act of 1969 established a six percent
minimum payout rate for foundation investment assets; in
1976 the rate was reduced to five percent.
11
Quoted by Sean Stannard-Stockton, Philanthropy
Advisors website, “Are Foundations Inept, Boring & Scared
to Fail?” September 19, 2007, http://tacticalphilanthropy.com
/2007/09/are-foundations-inept-boring-scared-to-fail.
12
Heidi Waleson, “Beyond Five Percent: The New
Foundation Payout Menu,” http://factservices.org
/DLs/Beyond5_Report.pdf.
13
John Hunting, “Giving While Living: The Beldon Fund
/files/beldon/BeldonFund_1.pdf
14
Philanthropy, May 21, 2009, http://www.beldon.org
/files/beldon/ChronicleofPhilanthropy.pdf.
15
beldon.org/files/beldon/beldonpressreleasemay1509.pdf.
16
Mario Morino, “Chairman’s Corner: Nurturing the
National Reef,” June 2009, http://www.vppartners.org
al-reef.html.

17
Katie Hafner, “Philanthropy the Google way: Doing good
while making money,” International Herald Tribune, September
14, 2006, http://www.nytimes.com/2006/09/14/business
/worldbusiness/14iht-web.0914google.2805857.html.
18
“Our Mission,” Participant Media website,
http://www.participantmedia.com/company/about_us.php.
19 Skoll Foundation press release, “Dr. Larry Brilliant Joins
Jeff Skoll to Combat Global Challenges,” April 14, 2009,
http://skoll.org/media/press_releases/internal/041409.asp.
20
Paul Monaco, The Sixties, 1960–1969, (Berkeley:
University of California Press, 2003), 25.
21
Cyriac Roeding, “The Next Steps to Accelerate the
Tectonic Shift in Mobile, Part 1,” on iFundVC website,
http://ifundvc.com/2008/10/29/the-next-steps-to-acceler-
ate-the-tectonic-shift-in-mobile-part-1.
22
“A suite of modules for FrontlineSMS,” FrontlineSMS:
Medic webpage, http://medic.frontlinesms.com
/product-tour/.
23
Leslie Kaufman, “A Cautionary Video About America’s
‘Stuff ’ ” New York Times, May 10, 2009,
http://www.nytimes.com/2009/05/11/education/
11stuff.html.
24
GrantCraft’s “Grants to Individuals: Investing in People
and Their Communities” informs us that under U.S. tax
code Section 4945, Regulation 53.4945-4, private
foundations are allowed to make three types of grants to
individuals: scholarships or fellowships, specific-objective or
product grants, and prizes/awards with no strings attached,
http://www.grantcraft.org/index.cfm?pageId=1020.
25
The majority of foundation funding is awarded to organ-
izations, creating a competitive environment among the
individuals seeking foundation funds. The Foundation
Center estimates that while 300,000 individuals received
funding in the form of grants or scholarships in 2006, the
amount represents only 9.8 percent of total dollars disbursed
in foundation giving for that year. Most grantmakers place
very specific limitations on their giving to individuals, since
provisions for grants to individuals require advance approval
of the program by the IRS. For this reason, grantmakers
usually cannot make exceptions to their program guide-
lines, even if presented with a compelling case to do so.
26
“Introducing the B Corporation,” B Lab, 2009,
http://www.bcorporation.net/resources/bcorp/documents
/2009%20B%20Corp_Intro_Package1.pdf.
27
Tim Morral, “L3C Business Structures,” Gaebler.com,
http://www.gaebler.com/L3C-Business-Structures.htm.
28
“Our Mission,” CoolPass website,
http://www.coolpass.com/c/mission/Our+Mission.html.
29
Kathleen Kingsbury, “Selling Out to Growth” Time
Magazine, March 9, 2009, http://www.time.com/time/
specials/packages/article/0,28804,1877020_1877030_
1883902,00.html.
30
On Being Small,” Ewing Marion Kauffman Foundation
website, http://www.kauffman.org/about-foundation/
schramm-on-being-small.aspx.
31
Ibid.
32
Ellen Schneider, quoted at Beyond Broadcast 2009, June 4,
2009. Cited in USC Annenberg News, http://annenberg.
usc.edu/AboutUs/News/090604Panel1.aspx.
33
“Changing Views on Social Issues: Allemande Left.
Allemande Right,” press release, ABC News/Washington
Post Poll: Hot-Button Issues (April 30, 2009), http://
abcnews.go.com/images/PollingUnit/1089a6HotButtonIssu
es.pdf.
34
“Service: Progress,” White House website,
http://www.whitehouse.gov/issues/service/.
35
Ibid.
36
“Healthcare X PRIZE Initial Prize Design,” X PRIZE
website,http://www.xprize.org/files/downloads/health/HX
P_Initial%20Prize%20Design_v1.pdf.
37
“What We Fund: Pioneer,” Robert Woods Johnson
Foundation website, http://www.rwjf.org/pioneer
/approach.jsp.
38
Ibid.
39
Van Jones, Letter to the Editor, New Yorker, February 9,
2009, http://www.newyorker.com/magazine /letters/2009
/02/09/090209mama_mail2.
Blueprint Research + Design, Inc. 17
40
“Jeopardizing investments defined,” IRS website,
http://www.irs.gov/charities/foundations/article/0,,id=
160678,00.html.

41
“IRS Cautions Against Low-Profit Limited Liability
Investments,” http://www.cof.org/whoweserve/templates
/311.cfm?ItemNumber=16653&navItemNumber=14860.

42
“About the Digital Media and Learning Competitions,”
HASTAC webpage, http://www.hastac.org/about-digital-
media-learning-competitions.

43
McKinsey and Company, “And the winner is…,” 2009.,
http://www.mckinsey.com/clientservice/socialsector/And_
the_winner_is.pdf.

18 Changing the Ecosystem of Change