Caught in the Under-Cap Trap
 

A friend asked recently if I could help a small nonprofit group he liked that was facing a dire shortage of operating funds and approaching the perilous stage just prior to complete flame-out.  The group’s energetic young founder and only employee, it seems, had been wearing all the organizational hats – program delivery, fundraising, board development, the works.  Able to draw occasional compensation from the sporadic contributions she managed to raise, the young woman was literally crying out for relief from the exhaustion and frustration of doing everything.  She felt she was incredibly effective at reaching young people, but also felt continually thwarted in ever looking – let alone having the resources to plan – much beyond the next several weeks or a few months at best.  And she never raised enough money to act at the scale of her ideas. 

Hers is a familiar story among nonprofit sector start-up ventures.  The narrative goes something like this.  A very well-intentioned and laser-focused individual sees a glaring gap harming people in a community she cares about.  She leads with her idea, invests the huge capital of her passion, time and skill – either voluntarily or for a pittance – and races ahead to roll out a service.  What comes back quite often is a welcoming and satisfied response from those she hopes to benefit.  Buoyed by the bright eyes of grateful and well-rewarded program participants, she soldiers on.  Encouraged, perhaps, by family and friends, maybe propelled by a few cash or in-kind gifts from individuals and businesses, she takes the story of the people she’s serving to a friendly local news reporter.  The resulting visibility increases demand for what she’s doing.  Maybe her city or a sympathetic property owner offers a no- or low-rent storefront.  Above the door, she hoists a proud sign announcing the organization’s name.  More people in need show up.  Perhaps a few volunteers offer themselves and she throws herself into training them.  Maintaining volunteer enthusiasm becomes almost a second job.  Now the hours are getting long.  Already relying on little more than the capital of her own time and labor, she hustles to keep up.  In one hand, she clutches a flattering news article.  In the other, she stares at a growing set of community expectations.  She’s nothing if not a responsible and honorable person.  She knows if she disappoints her clients and the ones who keep coming, she could damage her credibility, not to mention risk harming people she now knows by name.  She must keep up.  But the resource question – now that she’s exceeded her own personal investment of time and energy and badly needs to staff beyond her small cadre of volunteers – looms large.  

From what sources will emerge the resources – the essential dollars and cents operating capital – needed to propel this organization to scale, let alone provide present running room and flexibility?

Realistically, the entire enterprise has long been in a deep hole of the founder’s making.  She’s allowed what could have been reined in from the start as a limited-scope and short-duration demonstration, or “proof of concept,” project to billow into a runaway, woefully under-capitalized civic fact on the ground.  Entrepreneurs do more harm than good when they over-estimate their personal capabilities and credit themselves in advance with boundless capacities for work.  By unleashing their compassionate ambitions before securing enough of all the capital needed for a durable response to the expectations they stir up, social entrepreneurs fuel cynicism, seed long-term disappointment, and trigger flurries of social chaos.  They hurt other people and hurt themselves.

Even the most responsible new civic venture comes with warts and flaws.  But the under-cap trap – the one that eventually killed the project my friend asked me about – need not snap shut on good intentions if social entrepreneurs first temper their ambitions with sound, predictive economic sense. 

Paul Vandeventer, President & CEO, Community Partners

January 2008