Review: Encouraging Social Innovation Through Capital

In Encouraging Social Innovation Through Capital: Using Technology to Address Barriers Kim Smith, Bryan Hassel, and Julie Petersen explore how technology can help “steer capital toward the organizations and approaches that have the greatest impact.” The paper is the fourth in a series on Innovation for the Public Good, sponsored by Rockefeller.

The authors suggest that “Technology has an extraordinary capacity to connect people and organizations, facilitate communication, capture and present rich data, and shape our behavior in response to these connections and insights,” But, “It has yet to achieve these goals in education giving and investing.” The authors make recommendations in three categories:

1. Strengthen Content. The authors believe what’s needed is “Clear, coherent, and accessible information about education investors and donors–both who’s out there and their basic characteristics, including areas of education interest, desired outcomes, risk profile, deal size, and current portfolio–as well as detailed information about the nonprofit and for-profit organizations in the field.”

2. Connecting online with face-to-face networks. The authors call for “A greater amount and precision of information about these ventures, combined with deeper and richer expert judgmentt and wider crowd ratings, could significantly improve the landscape.” That would be more beneficial than the study of “pyschographic and behavioral preferences” of angels and donors.

3. Streamline transactions. Like colleges, the authors think foundations should use a common application form. They also “Found no resources at all that document and share the ways that more complicated sequencing and layering financing packages have been developed.”

The list of ‘smart people working together’ recommendations are thoughtful and would be beneficial. The solutions would take more collaboration that is typical in philanthropy. Let me suggest three other things that will help.

1. Big data. When we can evaluate the value-add of units of instruction it will improve development, investment and the use of content and apps. The Common Core and common tagging schemes will help as well. More and better data will enable some of the solutions that the authors suggest. Even where it doesn’t boost collaboration, big data will improve investment efficiency.

2. Incentives. It remains difficult to sell into and work with public school districts. That’s true for nonprofit as well as for-profits, but the vitriol for private enterprise is palpable. Laws and policies are stacked against private investors and operators. Reduced barriers and improved incentives would bring a flood of innovation and investment. Some of the recommended information solutions would naturally emerge if the investing climate were less hostile. Private capital would be more likely to go to work on core problems rather than playing at the fringe (e.g., the five companies hosted by General Assembly and STARTL last week were all in the informal learning sector).

3. Responsive investing. Strategic philanthropy may be improving identified areas of impact but it has reduced responsive giving. If you’re not in the TOA (theory of action) you don’t get a grant. With big data and some standard measures, foundations (like venture funds) should devote more to the best ideas that come over the transom.

Perhaps taken together these efforts will “mobilize new capital into education, but in steering those dollars toward the innovations most likely to make a meaningful difference in the lives of our nation’s students, rewarding the courageous entrepreneurs who take on this enormous challenge, and propelling forward the cycle of innovation and its surrounding ecosystem.”