Will We Be Builders and Not Just Buyers?

by Sarah Kass

Today’s eJewish Philanthropy reports JDub is closing up shop despite a 9 year history of innovation and success.

The reason? Financial pressures.

The article notes that “among the reasons stated for closing are [an] ‘aging out of the cohort of Jewish “start-ups,”’ and rightly suggests this is a “troubling thought to those of us familiar with the exciting and expanding world of Jewish innovation.”

JDub – an incubator for Jewish artists, a platform (through Jewcy) for young Jewish creativity, and an important connector of mainstream Jewish portals to new audiences – was apparently served well in its early stages. According to the article, both Joshua Venture and Bikkurim helped JDub get off the ground. But where was philanthropy once JDub grew beyond the start-up phase? Not so interested.

The challenge of scaling and sustaining innovation is not unique to JDub or even the Jewish community. But it is a challenge that can and should be anticipated by and addressed by philanthropists interested in the Jewish future. As remarkable platforms like ROI and PresenTense draw creative young Jews into imagining new Jewish projects, there needs to be the commitment to helping the best of these efforts go beyond the initial spark of creativity to become the transformative projects and institutions they could become.

George Overholser and Craig Reigel of the Non-Profit Finance Fund, diagnose the problem very clearly. In their 2010 Portfolio Performance Report they usefully distinguish between two kinds of social investment, buying and building. It is worth quoting their clear definitions in their entirety. Here is what they say:

Buyers purchase program execution, often on behalf of others. Buyers buy tickets for museum admission, provide scholarship grants that pay for individual tutoring sessions, give annual grants to help pay the cost of mounting human rights campaigns or pay for foster care services on behalf of government, to name four straightforward examples. Without buyers, programs don’t happen: even an all-volunteer program requires that people give their time, “buying” the program operations by, in essence, paying for labor. Buying doesn’t pay for growth, trial and error, shifts in strategy, or changing what an organization is capable of doing. It’s about asking the organization to continue to do what it already does, year in and year out. Buyers choose to buy for many reasons: performance vs. the competition, personal experience (or self-interest), price, convenience, loyalty, sentimentality—all familiar to buyers in any sector. Satisfied buyers continue to purchase products and services they like. All the flavors of “buy” money—including everything from earned revenue to annual grants to endowment income and more—are what sustains a healthy nonprofit by reliably covering the full cost of operations as long as there is demand for services.

What if a nonprofit needs to change what it can offer to the public? What if it needs to modify its operations, or strengthen its reputation, or improve its efficiency? What if it is bursting at the seams and satisfied buyers are urging it to expand? This is where builders come in. They provide philanthropic equity. The equity can be used for any purpose, and a builder pays for deficits incurred ahead of a rebuilt business model. The equity provider’s aim is to build an improved mission factory that is not only better at executing mission-focused programs, but also attracts even more reliable buyers for the foreseeable future. Building requires time, close stewardship, and a patient process of trial and error. It has a high risk of failure and often requires major shifts in strategic direction and personnel. Importantly, it is an episodic process – once an enterprise is built, the builders can exit. Indeed, it is by dismantling their growth capital “scaffolding” that builders can be sure the growth capital has been successful, and prove they have built an enterprise that can stand on its own.

They go on to say that when non-profits and funders do not distinguish between building and buying, “bad things happen to good causes.”

As the Jewish community seeks to entice creative young Jews like Aaron Bisman and Ben Hesse to imagine new ideas for the Jewish future, how will we prepare ourselves to be builders and not just buyers? I suspect if we won’t build, new creative ideas will die unrealized, our future will be diminished, and our best and brightest will take their creativity elsewhere.

Sarah Kass is Director of Strategy and Evaluation for AVI CHAI.

Here are additional responses to JDub Closing Up Shop.