How did you originally get involved with New Profit?
I initially got involved even before there was a New Profit. As a first year student at Harvard Business School, I joined a group called the Volunteer Consulting Organization. I was randomly paired up with [New Profit Co-Founders] Kelly [Fitzsimmons] and Vanessa [Kirsch] to talk about an idea: How do you scale nonprofits? And we came back with another question: Why don’t nonprofits scale the way for-profits do?
There was no preconceived notion as to what the answer was. It wasn’t even 100 percent clear that nonprofits needed to scale. And so we started even further back with another question: What would be the benefits of scale? Is scaling [for nonprofits] a good thing?
Did you talk about unrestricted funding?
We brought in some social entrepreneurs and [learned] that there were really three forms of capital that entrepreneurs and their organizations needed. They certainly needed unrestricted financial capital, but they also needed experiential capital to leverage the experience base of partners and employees and investors. And third, they needed relationship or social capital.
We also brought in venture capitalists and private equity players who talked about how they thought about funding on a for-profit basis, and about how they made investment decisions. And we brought in philanthropy as well—high net worth individuals and family offices—to talk about the history of philanthropy, why the systems work the way they do today, and to start the conversation of where there may be some opportunity and some interest to do something different. Vanessa’s and Kelly’s courage, confidence, and creativity were contagious for the whole group.
Part of New Profit lore is the “Napkin Sketch”—the story that New Profit was literally sketched out on a napkin at those sessions. Do you remember that?
[laughs] It was that same contagious creativity that led to the napkin. I come from a private equity background. I do my social sector work kind of on the side on nights and weekends, when I take off my investor hat and put on my social sector hat and think differently. What drove towards the napkin was the freedom to be creative—to say, “These don’t have to be completely separate worlds. The for-profit and nonprofit sectors can overlap, and not only can overlap, should overlap.”
What started to evolve was the idea of a new sector. It really was a hybrid between the nonprofit and the for-profit sector—which we all made it clear is not a panacea; for-profit doesn’t have the answer to everything. But it did have some interesting tools, frameworks, operating standards, and traditions that could be borrowed and leveraged in the social sector. So what led to that sketch was that I could start from scratch unbeholden to the way either sector really worked and start to think about this new sector—this “new profit.” And that’s where the napkin came from.
What did you find most challenging in those early days?
There were two big questions or challenges. One, how to get the organizations themselves to think about a path to sustainability, so that they weren’t forever out fundraising from large philanthropies. As you launch your new social enterprise, the [new] expectation was not that you were going to be perpetually funded, but that you thought about where there were revenue-generating opportunities inside of the social organization that you were starting.
The other challenge was to change the investor’s mindset that they weren’t just there to be there at the launch. They were going to think about this as a long-term investment. And that meant we had to go back and do a lot of work in thinking about measurement and metrics differently, so we could build the case for second- and third-round and additional growth capital funding.
How did your involvement with New Profit evolve?
Once you’re in the New Profit ecosystem, you never want to get out. There’s what I think of as an ‘Opportunity Tree’ that grows out of New Profit. I describe it as a broader partnership that was the catalyst for a lot of my work in social impact. Whether it’s officially labeled as New Profit work, it certainly is a byproduct of the work that was started at New Profit.
And I’d certainly want to celebrate my personal connection and relationship with Vanessa. We still do our Sunday morning calls. About every other month at 7:00 AM on a Sunday morning, before our families are up, we make time to talk about either the issue of the day, the challenge of the day, or the opportunity of the day. We coach each other. That Sunday morning time keeps the connection tight, and it’s very special to me.