At the end of last year, we launched the NMV Innovation Fund — a designated fund exclusively for nonprofit technology efforts. Our goal was to create a fund focused on truly early stage nonprofit organizations. Earlier this year, we granted $25,000 each to 9 startup nonprofits to help them get off the ground.
The process was fun, challenging and taught us a ton. Here is a bit of what we learned.
3 things we learned about progressive startups:
- Entrepreneurs are organizing new communities in new ways.
- We’ve been impressed with the ways that entrepreneurs are thinking differently about how to engage people. Organizations like Berim, Groundswell, Faithful America, and Hollaback are seeking out new starting points for organizing– a common faith, a common country, or a common experience– reaching and mobilizing communities that may not have been previously engaged.
- The applicant pool was different than we expected.
- For years, we’ve heard two things: that 501(c)4 capital is hard to come by, and that funding at the earliest stages is the most difficult to raise. So, we were excited that we had both 501(c)3 and 501(c)4 funds to grant, and we focused our efforts specifically at the early stages. Yet we were surprised by the applicant pool — only 10% of applicants were seeking 501(c)4 capital, and only 10% identified themselves in the “concept” stage. Almost half the applicants came from relatively mature organizations, including several applicants from organizations with budgets over $5 million.
- Fundraising is challenging– for everyone.
- Even the best of the best in the progressive tech world struggle with fundraising. During the interviews, we heard time and time again from some of the most respected and admired leaders in the sector that fundraising — not mobilizing millions of people or building cutting edge technology– was their biggest challenge. This was confronting– as funders, we’ve got to do better for these leaders.
3 things we learned about funding innovation:
- Cohorts work.
- For the NMV Innovation Fund, we identified and funded a group of nine organizations at once. Not only was the process more efficient, but we have been thrilled to hear how these entrepreneurs are already getting to know one another and offering to help one another– after all, they are facing very similar organizational questions. This is exactly the kind of community we work to create at New Media Ventures, and funding in a cohort helps make that community happen naturally.
- Early stage… it’s complicated!
- We had a hard time defining what we meant by “early stage,” as there is often a blurry line between a startup and a mature organization. Some identify by budget, some by time in existence. We’ve seen very new organizations with huge budgets, and organizations that have been around for 5 years that are still characterized as tech startups. As this was our first open call, we wanted to be as open as possible to how organizations self identify. Given how many applicants really fell into the later-stage category, being more specific around stage is an area in which we can do better in the future.
- “Funding lean” is a process, and it’s harder than we thought.
- When we started this process, we wanted to do it right– to ask the right questions, to create a relatively efficient and transparent process, to truly incentivize risk taking.
- We launched the fund with a very tight timeline– challenging ourselves to rapidly allocate capital– so we had a short application window. In the future, we will have a longer application period– we feel confident that we can keep our internal decision making process tight, while giving ourselves more time to reach a broader community of entrepreneurs.
- In the interest of efficiency, we initially used our existing application software for the Innovation Fund. We quickly realized that it wouldn’t serve nonprofit applicants (too many questions about pre-money valuations and investment rounds), and ended up building a new application specifically for the Innovation Fund. We are committed to supporting both nonprofit and for profit entrepreneurs. We need to be clear-eyed about where there may be differences in order to support both effectively.
- We aim to be as transparent as possible, and know that feedback from funders can be helpful for new organizations. Having just two people and 60 applicants makes it hard to give individual feedback to everyone, but we’re hoping that posts like this open up the process a bit– look out for my next post about what makes an awesome application.
In the end, it was a worthwhile and inspiring process. We met and funded some unbelievably amazing entrepreneurs who are making big things happen, and learned a ton. We also identified things we can do a lot better next time, so look out for our next Innovation Fund! Stay tuned…