MPA COMPREHENSIVE EXAMAugust 27, 2004

1. The selection of an organizational model and governance options for the shared SVPorganization is a critical decision.

A. State the case for the SVPs creating a shared organization. What organizationalmodel should they choose? Explain your choice and evaluate the strengths andweaknesses of the model.

B. What are some of the reasons why SVP should not create any type of formalshared-organization connection?

C. Assess the governance options outlined by the McKinsey consultants in terms oftheir strengths and weaknesses.

(40%)

2. The McKinsey consultants identified several options for the consortium of SVPs to considerregarding the funding of an umbrella organization. The suggested options included a flat fee perSVP organization, a flat fee per Partner, and fees for services.

A. How would the objectives of the national organization and the structure of itscosts affect its choice of a fee?

B. What option would you select? Why

(20%)

3. One of the guiding principles of SVP Seattle’s staff and partners is a commitment to usingoutomes measurement and evaluation to provide the most effective programs possible. Prepare afirst-cut research proposal for outcomes evaluation for the national consortium.

A. Identify major goals of the organization and describe at least three operationalmeasures for evaluating progress toward these goals.

B. What data collection method(s) do you propose? Discuss your choice ofmethod(s) in terms of the practical tradeoffs inherent in applied research.

C. Identify and discuss at least three potential sources of error that must beanticipated and should be minimized or controlled for in the design.

(40%)

SOCIAL VENTURE PARTNERS’ REPLICATION

I was both excited and full of uncertainty. I really didn’t know how things wouldgo . . . we didn't all know each other and this was essentially ‘make or break’time in terms of creating something more explicit that linked us all. I was – or atleast I think I was – going to be okay with whatever happened . . . .

Paul Shoemaker, Executive DirectorSocial Venture Partners Seattle

Paul Shoemaker was preparing to welcome a group of more than 65 leaders of both establishedand embryonic Social Venture Partner (SVP) organizations from across the United States andCanada. These leaders – executive directors, Partners, and board members – were to gather inSeattle to share ideas and best practices, and more significantly, to determine the future of thisgroup of currently independent SVP organizations.

Within two years of its founding, SVP Seattle’s initial success had prompted inquiries fromgroups interested in starting similar organizations in other cities. New SVPs had formed, withincreasing assistance from Seattle, and in the spring of 2000, those in operation had informallyagreed to a set of shared principles. As replication proceeded, it became clear that a morestructured national consortium needed exploration in depth. Now, in June 2001, it was time toconfront the myriad related questions, and to sort out SVP Seattle’s leadership role.

SVP SeattleThe Beginnings

At age 49, Paul Brainerd, the inventor of Pagemaker software and former owner and Presidentof the Aldus Corporation, launched into his third career and became a philanthropist. With $40million – a third of the proceeds from the sale of his company to Adobe – he endowed TheBrainerd Foundation to fund environmental activism in the Pacific Northwest, his childhoodhome. After establishing the foundation in 1996, he began inviting people to share ideas anddiscuss other areas where he might personally be able to assist. Brainerd recalls,

About six or seven lunches later, I sensed that there was a lot of interest amongmy generation in giving back to the community, but people were looking for away to do it. I realized that for a lot of people in our community, just setting up acheck-writing private foundation was not really what they wanted to do. Like-wise, for a new generation of people in their 30s, 40s, and 50s, like myself, the

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traditional approach of writing a check to a charitable organization or serving ona board did not seem fulfilling enough. There was a desire to be more engaged inthe process of giving back.

Utilizing experience from his first career as a newspaper reporter, Brainerd and his assistantBonni Alpert spent nearly a year traveling and researching various giving models that had beenimplemented throughout the United States during the previous several decades. Also, he under-stood that the booming high-tech industries were creating wealth among a group of peopleyounger and more active than many traditional philanthropists, who tend to give during the lateryears of their lives. Reflecting back, Brainerd says, “My goal was to put together a model thatcombined traditional philanthropic approaches as well as more innovative approaches to giving.I was looking for a model of philanthropy that would appeal to a new generation of people.”

Brainerd and Alpert became increasingly aware of an emerging trend in philanthropy: theapplication of venture capital investment practices to the funding of nonprofit organizations.A current Harvard Business Review article written by three leading academics from the nonprofitsector was particularly influential.1 The article’s authors contended that the relationship ofventure capitalists to entrepreneurs could be adopted as a model for certain kinds of foundationsin their support of nonprofit organizations. Concurrently, there was growing interest among somenonprofits in establishing deeper relationships with funders, increasing access to business skills,and focusing a greater amount of energy on building organizational infrastructure.

“Once I had some ideas together,” recalls Brainerd, “I then enlisted some co-conspirators –people in the community who had already demonstrated an interest in giving back in variousareas.” Included in this group were Doug Walker, CEO of the software firm WRQ; Bill Neukom,chief legal counsel for Microsoft; and two former Microsoft vice presidents, Ida Cole and ScottOki. “We combined our Rolodexes, and we planned an event,” says Brainerd. By all accounts,the well-orchestrated inaugural event was a huge success. “We didn’t know if anyone wouldcome, but, as it turns out, we had standing room only. One-hundred-thirty-six people came toour event that evening . . . and SVP was formed.”

Turning Ideas Into Action

The mission developed for SVP Seattle – which remained unchanged – read “to develop phil-anthropy and volunteerism to achieve positive social change in the Puget Sound region. Usingthe venture capital approach as a model, SVP Partners are committed to giving time, money, andexpertise to create partnerships with not-for-profit organizations.” SVP Seattle sought to be adual mission organization, to be both an ‘engaged grant-maker’ and a catalyst for individualgiving.

By the end of summer 1997, nearly 40 individuals or couples had signed on as Partners(contributing members, including couples joining together), agreeing to donate $5,000 each yearand actively participate in the activities of the organization for at least two years. At the time,Brainerd and Alpert were coordinating the activities of the organization, working a combinedtotal of approximately 30 hours per week. The additional time and energy required to manage theinflux of cash and stock from Partners could have been a nightmare for a fledgling independentfoundation, so the co-founders decided that the organization should become a ‘donor-advisedfund’ (later modified to a ‘supporting organization’) of the well-established Seattle Foundation.

1 Grossman, A., Letts, C. W., and Ryan, W. (March-April 1997). “Virtuous Capital: What FoundationsCan Learn from Venture Capitalists.” Harvard Business Review. p. 2-7.

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In exchange for one percent of the outstanding SVP fund balance each year, the SeattleFoundation assumed on-going responsibility for such things as managing fund investments,processing donations, disbursing grant checks to investees, and administering payroll. SVPSeattle also benefited from the Seattle Foundation’s 501(c)(3) status without having to file theannual paperwork on their own.

While Brainerd’s other philanthropic endeavors dealt primarily with environmental issues, thefocus of SVP Seattle was to be determined by the Partners. Brainerd and the other four initial co-sponsors surveyed the Partnership. The results showed a clear interest in both children and K-12education, and thus the initial focus of the organization was born. Two grant-making committeesof ten Partners each were established and began their work on Labor Day 1997.

The beginning of the first grant cycle meant it was time for the organization to begin applying theventure capital investment model in a social context. The first concept of the model was that SVPSeattle would invest not in organizations, but in people and their ideas. Brainerd comments,

If you ask a venture capitalist about what criteria they use to decide on whichcompanies to invest in, they will say, ‘it’s people, people, people, and market.’At SVP, what we look for are great people with good ideas who can make animpact on the social problems in our community . . . there are many great peopleout there in our community with incredible ideas, and few have had all thetraining and support they need in order to be really successful.

The second concept the organization adopted was a risk-taking approach to managing a portfolioof investments in the local community. Brainerd explains,

If a venture capitalist has ten investments, it is likely that a third of them will goout of business before they get any money back; one third will probably returnwhat they put into it; and, if they’re really good, one third of the companies willactually make money. If you apply a similar investment strategy to a socialcontext, you can build a portfolio of investments in the local community, some ofwhich are high risk but have potential for significant social payoff. Where othergroups might be reluctant to fund some of these high-risk ideas, a group like ourscan invest. But, we also invest in some blue chips in the community . . . solid,reputable organizations that have been in the community for years, but who mayhave new ideas or programs that they are hoping to launch. We look for a mix ofinvestments: some smaller, riskier ideas, coupled with organizations that have aproven track record of success.

SVP was committed to taking a long-term approach to funding, another concept of the venturecapital model. They were interested in building relationships that would last four, five, or evensix years. “In SVP,” observes Brainerd, “we felt that most of the issues in our community werelong-term issues that were not going to be solved today or in the next few years.” The plan forthe organization was to provide initial funding for one year, with the goal of establishing a long-term partnership. Throughout the partnership, measuring outcomes would be a high priority.“Perhaps the goal of measuring outcomes comes from a bias we have given our background in thebusiness world,” says Brainerd. “Nonetheless, we think that focusing on outcomes not onlybenefits us as investors, it also benefits the nonprofits.”

SVP Seattle did not take the concept of ‘partnership’ lightly. In keeping with the venture capitalmodel, the organization sought to develop deeper, more engaged relationships than many

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nonprofits were accustomed to having with other funders. Particular attention would be paid tohelping people develop organizational capacity. “You have to pay attention to the organizationalcapacity of the groups you are investing in . . . the training people get, their management skills,their ability to have up-to-date computer systems and databases to manage their work . . . ,”explains Brainerd. “Many nonprofits do not have the resources to go out and get these things andwe thought that perhaps we could help.”

The Organization Evolves

By November 1997, the Partnership had grown to include 54 Partners, and continued growthseemed likely. The Board of the organization – composed of individuals from the initial group ofPartners – decided that it was time to hire a half-time Executive Director, and Paul Shoemakerbecame the sole staff member in December. Shoemaker had been involved with SVP Seattlesince the beginning, signing on as a Partner soon after the launch event and serving on the Boardof Directors. Although then a group manager for Microsoft’s online services, he was no strangerto nonprofit work. He had recently served on the Board of the Children’s Alliance and on a taskforce at the Human Services Policy Center at the University of Washington that was charged withinvestigating alternatives for financing early childhood care. “I knew that at some point in mylife I definitely wanted to devote myself to nonprofit work,” Shoemaker said. When he shared hisinterest in working for SVP Seattle with Brainerd during the fall of 1997, Shoemaker assumed itwould be many months or even years before the organization was ready to hire its own paid staff.It was only weeks later that he left the high-tech sector for a new career in philanthropy. (It wasat this time that Brainerd initiated his deliberate withdrawal from management of theorganization, although he continued to serve on the board.)

By the end of its first year of operation, SVP Seattle had grown to more than 100 Partners;completed its first grant cycle, awarding $300,000 to seven different nonprofit organizationsinvolved with education and children’s issues; and assembled teams of Partners to assist thegrantees. The next three years were equally impressive. Growth required the addition of twofull-time staff members. Erin Hemmings, a recent graduate student in public affairs and nonprofitmanagement, joined SVP Seattle in May of 1998. Initially, Hemmings shared her time with bothSVP and Brainerd, but by the end of 1998 she was working with Shoemaker full time. By the fallof 2000 it had become clear that the organization needed additional staff, and soon after, AaronJacobs was hired to provide administrative, grant-making, and technical support.

As envisioned, Partner involvement became one of the hallmarks of the organization. Partnersserved on grant committees, where they took complete responsibility for selecting investees;volunteer teams (teams of three to five Partners assigned to each grantee); and task-specificworking groups. Many Partners also attended philanthropic workshops and seminars. The goalof Partner involvement was not to give advice to nonprofits on how they should do their corework (e.g., helping kids or building better schools). “They have more expertise than we will everhave within SVP, and we respect that knowledge and expertise,” asserts Brainerd. Instead,Partners shared their professional skills in an effort to assist with organizational capacity buildingand the development of high-performance organizations. SVP Seattle could bring severalcategories of expertise – management, finance, marketing, computing, and fundraising – to anygiven investee to help them build capacity. Says Brainerd,

If a nonprofit we work with can respect the skills and connections that SVPbrings to the relationship, and we can respect the nonprofit’s ability to do thework they do in the community, then together we form a much stronger team.This is what is exciting about the [venture capital investment] model: it is the

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leverage in financial and social terms that you can get out of creating realpartnerships with nonprofit organizations.

As the interests of the Partnership evolved, so did the organization’s focus areas. Grant-makingcame to focus on four areas: early childhood development and parenting programs; K-12education programs that help students to succeed in school and fully realize their academicpotential; out-of-school time programs for youth ages five to eighteen that promote quality timewith caring adults, and programs that focus on safe places, constructive activities, and opportu-nities to contribute to the community; and environmental programs that promote a healthy futurefor all life in the Puget Sound region by fostering environmental stewardship that is ecologicallybased and economically sound.

Implementing other aspects of the venture capital approach proved to be more challenging thanengaging the Partners, but doing so nonetheless remained a vanguard issue in the minds of SVPSeattle’s staff and Partners. The organization created a series of guiding principles that served toremind both grant committee members and those applying for funding of SVP Seattle’sdifference from many other foundations:

SVP Seattle supports organizations that are seeking to launch, expand, orreplicate an innovative program; are in need of and committed to incorporatingSVP volunteer support to build and strengthen their organization's internalcapacity to deliver programs; are committed to using outcomes measurement andevaluation to provide the most effective programs possible; and have a long-termperspective on their impact on the client population.

In its first four years, SVP Seattle had accomplished a great deal. Nearly $3.5 million had beeninvested in education and children’s organizations. (See Exhibit 1: Partial Listing of SVPSeattle’s Grant Portfolio.) SVP Seattle’s 25 investees had reached more than 3,000 youngpeople. Partners – through grant committees, volunteer team leadership opportunities, strategicprojects, and working groups – had contributed more than 10,000 strategic-level volunteer hourseach year. Partners and investees working collectively had completed approximately 100capacity and infrastructure projects each year. An in-depth philanthropy education curriculumhad been developed and delivered, including more than 20 workshops for 600 attendees each yearfor the most recent two years. This had all been accomplished with a relatively small operatingbudget; beginning in its second year of operation, the organization put a limit on administrativespending at 14% of the amount of Partner contributions for the year. (See Exhibit 2: SVP Seattle2000 Annual Budget.)

While Partners were only required to make a commitment to contribute for two years, Partner re-commitment rates remained high for those who had already fulfilled the two-year commitment.The year two-to-three Partner renewal rate was 82 percent, and the year three-to-four and four-to-five rates were both 92 percent. There were 290 Partners, and the organization expected to have350 Partners by the end of 2004. In addition, working relationships had been developed anddeepened with several local organizations including the Seattle Foundation, United Way of KingCounty, Washington Women’s Foundation, Active Angels, and the City of Seattle. Despite adownturn in the high tech sector and the overall economy, SVP Seattle was poised to continuemaking a significant impact on the Puget Sound region.

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Furthermore, SVP Seattle had come to realize that its impact might go beyond its stated mission.Shoemaker contends, in fact, that

. . . the network of individual, engaged philanthropists that SVP is now creatingand catalyzing may prove to be the greatest long-term outcome of the SVPmodel. The connections and sense of community among Partners not onlyenables learning and fosters collaboration, but also provides a nexus ofphilanthropic energy around which new ideas can be incubated and actualized.

Beyond The Emerald City

Given the early and rapid growth of SVP Seattle, it did not take long for the idea of replicatingthe model to gain momentum. In addition to SVP Seattle Partners’ sharing the SVP model withfriends and colleagues across the country, coverage in the national press fueled the SVP fever.(See Exhibit 3: United Airlines’ Hemispheres Magazine Article.) The first serious inquiriescame toward the end of 1998 – less than two years from the date the organization was founded –when groups from Phoenix and Austin approached Shoemaker and Hemmings with an interest inestablishing SVP organizations in their own cities.

Phase One: The Idea Spreads

Despite their achievements, SVP Seattle had given little thought to the idea of replicating themodel. “We never envisioned this would happen,” recalls Shoemaker. The initial inquiries fromPhoenix and Austin, followed soon after by expressions of interest from groups in Denver andDallas, became what Shoemaker later described as ‘phase one’ of SVP’s three-phase growthbeyond Seattle. Shoemaker did not wait long before seeking counsel from the Board about therole that SVP Seattle should play in the replication process. Board members were excited aboutthe idea of SVP organizations getting started in other cities, but were clear about the need for staffto balance their support of these endeavors with the work of SVP Seattle.

These initial replications happened organically and without a great amount of energy exerted bySVP Seattle staff. Shoemaker and Hemmings demonstrated that they were more than willing toassist new SVP organizations but did not proactively cultivate such relationships; they waited forinterested and committed persons to come forward. Once approached, they freely providedmaterials and technical assistance (e.g., digital files of grant-making brochures, customizeddatabase programs, etc.), shared insights and lessons learned, and made site visits to those groupswho requested them. (Expenses related to site visits were paid by the interested groups, not SVPSeattle.) “It would have been totally inconsistent with the SVP ethos if we had been unwilling toprovide this support,” says Hemmings. “Clearly we leaned on Seattle . . . no doubt about it,”recalls one of the co-founders from the Dallas group, “We could never have gotten up to speed soquickly without them.”

Phase Two: Reaching Critical Mass

Numerous additional inquiries followed throughout 1999, many of which ultimately resulted innew SVP organizations in cities such as Dallas, Denver, Boulder, Calgary, Kansas City, and SanFrancisco. SVP Seattle felt that a critical mass had been reached, and Shoemaker found himselfin front of the Board again, requesting to devote five percent of SVP Seattle’s staff resources to

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assisting groups interested in replicating the SVP model. After some discussion, the Boardagreed, stressing that he allocate no more than five percent of staff resources.

“Phase two happened late in 1999 when we realized that there were enough people doing this thatwe should get together to talk about it . . . to share ideas and learn from one another,” recallsShoemaker. At the behest of Karen Baxter Rodman, co-founder and Executive Director of DallasSocial Venture Partners (DSVP), leaders from each of the SVP organizations in operation at thetime gathered for a day-and-a-half-long meeting in Dallas in April 2000. In addition to buildingrelationships and sharing insights, they took the first step in establishing what it meant to be anSVP organization. Together they created and informally agreed to share a set of Core Principles,which were in part based on SVP Seattle’s Core Values. (See Exhibit 4: Core Values of SVPSeattle, and Exhibit 5: Shared Core Principles of SVP Organizations.) It was a fruitful gathering,and one that would set the tone for future discussions among the numerous SVP organizations.

Phase Three: Focusing on the Future

While the inquiries continued at a steady pace, the staff at SVP Seattle spent the next severalmonths primarily focused on their work in Seattle. Then in September 2000, Azania Andrewscame to SVP Seattle through the John Gardner Fellowship Program, a program designed to attractoutstanding recent graduates from Stanford University to the world of public service. Andrewsbegan working on a variety of issues, and provided the staff at SVP Seattle with the breathingroom they needed to gain some perspective on the issues related to expansion and replication.

“We should have realized back in April that we needed to get a better handle on how to do thiseffectively,” observes Shoemaker, “but we simply didn’t have the bandwidth here to deal with it.”By the end of 2000, the volume of new requests coupled with the amount of time required tosupport the many new SVP organizations had begun to put a strain on the staff at SVP Seattle.The anticipated slowdown in SVP replication activity due to the economic climate at the timenever materialized. “In spite of a significant downturn in the market, groups kept coming,”recalls Shoemaker, “and more importantly, we were less and less able to effectively help them.”

Before long, Andrews’ time was dedicated almost exclusively to issues of expansion andreplication. It had become clear that there was a great deal of unexploited value among theconsortium of SVP organizations. More energy needed to be directed toward the support of anational platform or network for SVP organizations and the determination of whether or not anexplicit linkage between the various SVPs made sense.

By the middle of January 2001, the staff at SVP Seattle had created a document that outlined aplan to explore options for moving the consortium of SVP organizations forward. The documentwas shared with both the Board at SVP Seattle – who agreed to the idea of SVP Seattle staffspending a greater amount of time on these issues for the next five months – and the leaders ofthe other SVPs. In his letter introducing the document to the other SVP organizations,Shoemaker wrote,

. . . It has become very clear to us in Seattle that this SVP thing is catching on,and we can see that we are really not doing all that’s needed to support each ofyou and enable each of us to support each other. . . . We need to move beyondthe ad hoc, ‘bits and pieces’ approach to connecting SVP efforts. The attacheddocument is the first draft of a plan designed to create two things: 1) a moreeffective set of tools and resources to enable SVP organizations to get establishedand up to speed more effectively, and 2) an infrastructure that better

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enables a stronger and more connected learning community among SVPorganizations. . . . Please understand that this is not the beginning of Seattlebecoming more controlling, prescriptive, or top-down in its approach to workingwith other SVP organizations. The open, entrepreneurial relationships to dateamongst the SVP organizations are the heart and soul and genuine pleasure ofwhat has happened so far. That style, strategy, and organizational value must notchange. While this draft document is from Seattle, any significant plan mustcome from all of us.

The plan outlined several short-term priorities including the completion of an in-depth needsassessment involving all current SVP organizations; the review, revision, and expansion of theShared Core Principles established in Dallas; the exploration of various organizational models onwhich SVP might base its consortium; and research into copyright and intellectual propertyprotection options. The staff at SVP Seattle began its research immediately, and hoped to makesignificant progress in time for the gathering of SVP organizations in Seattle in June 2001.

In the meantime, a new effort was being spearheaded by one of the SVP Seattle Partners. SVP ina Box was envisioned and created as a handbook that would outline – in a non-prescriptivefashion – the critical steps for establishing and operating an SVP organization. Topics included:an overview of SVP Seattle; launching an SVP; making investments; working with investees;managing the portfolio; and Partner education. While this document remained in the formativestages and would require regular revision, it already served to guide emerging SVP organizationsand provide realistic expectations for other interested groups.

Looking to Others for Guidance

In an effort to gain insight into the key issues and challenges of expansion, replication, and themanagement of multiple-affiliate organizations, staff members from SVP Seattle interviewedexperienced leaders from several other organizations including CityCares, City Year Seattle,Community Technology Institute, Great Harvest Bread Company, Hands On Portland, REALEnterprises, Replication and Program Strategies, Inc., and United Way. (See Exhibit 6:Organizations Interviewed by SVP Seattle.)

Throughout February 2001, the staff at SVP Seattle kept busy with research and organizationalinterviews. They first explored the various organizational models in use. They found that, whileorganizations such as United Way and City Year had very strong and recognizable brands, it wascostlier to run these types of highly centralized organizations, and they did not provide the levelof autonomy to which the current SVP organizations had become accustomed. CityCares andCommunity Technology Institute organized their member organizations around a set of coreprinciples but allowed a large degree of flexibility in how the programs actually operated.

They then discovered that in approximately half of the models researched, the nationalorganization had formed after multiple sites were up and running. One of the difficulties theseorganizations encountered was demonstrating to established sites that they would be better offworking within a formal network. Benefits of working within a network often took the form oftraining and support services, or the facilitation of communication and learning between affiliates(e.g., CityCares maintained a portion of its website for ‘members only’ that contained a resourcelibrary of best practices documents created by the national organization and other affiliates).

With the exception of Great Harvest, a for-profit organization, none of the organizations studiedby SVP Seattle were funded solely with fees from affiliates. All of the national organizations

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charged fees but supplemented these fees with grants and/or revenue generating activities. Incases where the fees were substantial, membership was tied to accessing a licensed curriculum orproduct or utilizing a brand name such as REAL Enterprises or United Way that was critical forfundraising. Other reasons for applying a fee included covering initial expenses incurred by thecentral organization in their efforts to support the incubation of new affiliates, and demonstratingto national funders that its services were valuable to affiliates.

Everyone dealing with replication initially wrestled with determining how much and what type oftraining would best enable new sites to thrive. Based on insight from others, SVP Seattle learnedthat documentation alone – such as SVP in a Box – was insufficient. Some type of face-to-facetraining, such as new affiliates visiting an established organization, was necessary. Furthermore,all of the organizations researched had a national organization that was separate – in terms oflegal designation, staff, and budget – from its affiliate organizations. Replication and ProgramStrategies, Inc.’s David Racine’s view was that “at some point it becomes necessary to bifurcatelocal operations from national operations.” Separating national from local appeared to help easethe perception that one affiliate had more influence or control over the network.

Finally, SVP Seattle discovered that all of the organizations they studied required new affiliatesto formally apply to join their network. The process for some was more rigorous than for others,but in general the application process required that each new affiliate demonstrate that it had buy-in from appropriate stakeholders, could secure both start-up and long-term funding, and wascommitted to the mission and core principles of the national organization. New affiliates wereapproved by national boards or in some cases national staff and/or board sub-committees.Several of the organizations used a two-phase process for membership, where new affiliates werereferred to as apprentice, provisional, or emerging members. New affiliates received access tomaterials, logos, training, and technical support, and were encouraged or required to develop along-term funding strategy. If necessary, the governing body identified the needs of theorganization and provided support that would lead to the transition of the organization to fullmembership.

After much of SVP Seattle’s research was completed, Shoemaker sent another letter to the leadersof the various SVP organizations in early March 2001. He provided them with an update onresearch to date, introduced his plan to solicit foundation support for SVP’s expansion andreplication efforts, and shared with the group some of his thoughts on the previous two months.

My own thinking has evolved significantly in the last 60 days. I’ve had to thinkmuch more deeply about our collective efforts and the relationships or lackthereof amongst all of us. I’ve thought of many issues that I hadn’t before . . .What do we want this thing to look like in 10 to 20 years, after all of us are longgone? Do we collectively care who forms a new SVP organization? Is there anycircumstance in which you would want to ‘kick out’ an SVP organization (e.g.,what if an organization did something illegal, or only had three Partners in fouryears)? . . . This work has also made us [in Seattle] realize a fundamental fact:the name ‘SVP’ ties us together – whether we meant to or not, we have up to thispoint linked ourselves. We have to take a long-term view and then ask ourselves,do we want to be linked at all, and if so, in what ways?

McKinsey and Company Enters the Picture

Over the previous few years, Shoemaker had developed relationships with key players from avariety of foundations. As SVP expansion and replication efforts progressed, he was in contact

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with leaders from the Hewlett, Surdna, and W.K. Kellogg foundations. These foundationsultimately provided a total of $415,000 to establish the infrastructure that would support “thedevelopment of a model of philanthropy that engages and educates a network of philanthropists.”Shoemaker immediately set out to hire a consulting company to assist with this endeavor. Hecontacted individuals from the Bridgespan Group, a 501(c)(3) nonprofit organization affiliatedwith Bain & Company consultants; Replication and Program Strategies, Inc., an organizationdevoted to supporting the wider adoption of effective social programs; and McKinsey andCompany, a highly respected consulting firm with an increasing presence in the nonprofit sector.

After much consideration and on behalf of all the SVP organizations, Shoemaker and Andrewshired McKinsey and Company to significantly expand the research initiated by SVP Seattle andto develop various alternatives for the composition of the SVP consortium. In preparation for theJune 2001 meeting in Seattle, McKinsey would devote – at a significantly discounted rate – theequivalent of three full-time consultants to the task. They conducted extensive research on nearly20 different multiple-affiliate organizations; visited and interviewed leaders and Partners fromeach of the established and emerging SVP organizations; explored key success factors for SVPorganizations at the local level; and collected thoughts on the multitude of options they weredeveloping for the consortium of SVP organizations.

Among other things, consultants from McKinsey developed a series of organizational models forthe consortium of SVPs to consider when deciding whether to create an umbrella organization.(See Exhibit 7: Sample of Potential Organizational Models for Central SVP Organization.) Foreach model, they outlined details related to membership, branding, and the role of the centralorganization. (See Exhibit 8: Characteristics of Organizational Models.) They then identifiedseveral options for funding an umbrella organization. The first option involved charging a flat feeper SVP organization, and the second, a flat fee per Partner. The next option was a hybrid of thefirst two. The final funding option would generate funds for the organization primarily throughfees for services.

Finally, McKinsey consultants explored options for governance. The first option was a 12-personboard elected by the full Partnership. The second option created a board that included onemember – Partner or executive director – from each established SVP organization. The thirdoption was a board that included one locally-elected Partner from each SVP and the chair of theexecutive director council; the council would consist of the executive directors (or their equiva-lents) from all SVPs. With each of the models, the board would be responsible for strategicdirection and decisions related to new affiliates, and the full Partnership would be responsiblefor changes in by-laws and other similar matters. With the third option, the executive directorcouncil would serve in an advisory capacity to the board. Opinions from SVP leaders on thegovernance options varied widely across the spectrum, as they did on all topics into whichMcKinsey delved.

Varying Strategies

While all of the SVP organizations had embraced the mission as conceived by SVP Seattle, somehad implemented different strategies to it. A group from Dallas launched the fourth SVP inJanuary 2000. Co-founder Karen Baxter Rodman discovered the SVP model through an article inthe New York Times. Working for a local foundation at the time, Rodman became enthralledwith the idea of working with nonprofits to build capacity while simultaneously engaging peoplefrom the business and technology sectors in philanthropic pursuits.

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To stimulate interest, DSVP enlisted the support and endorsement of two highly recognized andrespected names in the technology industry, C. Vincent Prothro, then CEO of Dallas Semicon-ductor, and Lekha Singh, CEO of i2 Technology Foundation. A letter signed by Prothro andSingh went out to people in the local investment community, inviting them to DSVP’s inauguralevent, and sixty people attended the gathering. By the end of the first quarter of 2000, 30 peoplehad joined as Partners. Bob Wright, CEO of taxReclaims and Chad Coben, a Senior VicePresident at Novo Networks, joined as the first two founding Partners. The Dallas Foundation –established as a community foundation in 1929 – financed the group’s initial exploration and firstyear of operations, and DSVP continued operation as an advised fund of this foundation.

In an effort to get initial grants out swiftly, DSVP made a conscious decision to implement theSVP Seattle model without modification. Soon after, DSVP completed an exhaustive strategicplan to decide how to best amend the model for application in the Dallas community. It soonbecame evident that DSVP would need to make adjustments, given the composition of itsPartnership. The prevalence of young, financially secure people from the technology sector inSVP Seattle would not be as much a part of the DSVP equation. “The composition of our groupis different,” notes Rodman, “Our Partners come from a variety of different industries . . . and theage span of our Partnership is very broad.” Furthermore, DSVP Partners were “more accustomedto consulting, strategic planning, and decision-making, not setting up servers and infrastructure.”So DSVP decided to utilize Partners more at the strategic or oversight level, and less at theimplementation level, and to pay contract vendors to implement the strategy on the ground level(under the direction of both the Executive Director of the nonprofit and a lead Partner). Rodmanbelieves that this approach not only worked for the Partnership, but also provided enhancedconsistency for the purpose of measuring outcomes across investees.

Lily Kanter, a former executive at Microsoft and well-known philanthropist, was the initialcatalyst for the Social Venture Partners Bay Area organization, based in San Francisco. Afterhearing about the SVP approach, she contacted Shoemaker, who put her in touch with DeniseShephard, another former Microsoft employee in the Bay Area, and two former SVP SeattlePartners who had recently relocated there. Kanter hosted several small dinners at her home totalk about the model and to stimulate and measure interest. Soon after, in January 2001, SVPBay Area launched with 55 Partners and immediately hired Lindsey Ford to serve as its ProgramDirector (working 80%-time). In addition to the insight provided by the former SVP SeattlePartners, Ford relied on the staff in Seattle for guidance. “I was in contact with them once ortwice a month,” recalls Ford, “requesting [for example] things such as Seattle’s [Partnereducation] curriculum calendar, which I then showed to our Partners who were working onPartner education events.”

At the time of their launch, SVP Bay Area Partners had already decided to focus grant-making onchildren and education. Two ‘investment teams’ comprised of ten Partners each assembled tolearn more about the needs of children in the Bay Area, explore gaps in services and funding, andgather ideas for how to best leverage SVP Bay Area’s resources. Over the next few months, theteams hosted bi-weekly dinner meetings at Partners’ homes and invited experienced leaders andstaff members from various nonprofit organizations and foundations to share their perspectives onthese issues. Several people spoke convincingly about the need to strengthen families andcommunities in order to have a meaningful impact on youth. Around the same time thesegatherings were taking place, several of SVP Bay Area board members attended the SocratesSociety conference at the Aspen Institute in Colorado, where they reviewed a case study of theLawndale Neighborhood Initiative in Chicago.

12

When the two teams reconvened, it did not take them long to agree that, rather than follow the‘traditional’ SVP approach to funding, SVP Bay Area would partner with other organizations toimplement a Comprehensive Community Initiative (CCI). Organizations involved with CCIs –also known as place-based or neighborhood initiatives – take a geographically-centered, holisticapproach to improving conditions. They provide funds, leadership development, advocacy, andother support services to a range of projects in a community. Partners liked the idea of poolingtheir energy, expertise, and resources with other organizations in an effort to make a significantdifference in a specific neighborhood.

State of the Union

By June 2001, 16 separate SVP organizations had launched their operations, two were planning tolaunch in the immediate future, and six more were in the initial exploratory stages. (See Exhibit 9:Growth of SVP Organizations.) A few of the organizations had looked to individual donors forinitial fiscal underwriting, but most had relied on grants, support from a community foundation,or contributions from a group of founding members to get up and running. Most of the organi-zations had developed some type of partnership with a community foundation, the most commonbeing that the organization operated as a donor-advised fund of the foundation. With an averageof 57 Partners each, of whom more than 60 percent were actively engaged, the consortium ofSVP organizations was clearly burgeoning. (See Exhibit 10: Overview of SVP Organizations.)

In 2001 alone, a total of 16 grant cycles would be completed, and nearly $3 million would bedistributed to more than 60 different nonprofit organizations across the United States and Canada.(See Exhibit 11: Grant-Making & Partner Education in 2001.) Eighty percent of these investmentfunds came from Partners, with the remainder coming primarily from foundation grants. Thetotal number of Partner education events was now close to 100 annually, and the impact of theseevents on the philanthropic tendencies of the Partners, while still unmeasured, was likely to besignificant. Operating expenses remained relatively low for most of the organizations. Onaverage, 41 percent of these expenses were paid from Partner contributions, with the remainingamount coming from in-kind donations and support from foundations.(See Exhibit 12: Operating Budgets for 2001.)

The background of the Partners was as varied as their cities. While Partners from the technologyand business sectors predominantly comprised SVP Seattle, other SVP organizations had drawntheir Partner base from a diverse array of sectors including energy, real estate, and financialservices. (See Exhibit 13: Distribution of Partners by Industry in Selected Organizations). Notcounting an unknown number of new SVP organizations, estimates from current SVP leadersprojected cumulative growth to reach more than 1500 Partners by the end of 2002, 2000 Partnersby the end of 2003, and 2500 Partners by the end of 2004. (See Exhibit 14: Projected Growth asEstimated by Each Organization.)

‘Make or Break’ Time

Days before the June meeting in Seattle, Shoemaker sent one final email to the SVP leaders.“Just a few days left to go!” he wrote. “ . . . I’m not sure how many of you have ever done the‘team building’ exercise where members of a team take turns standing firm, closing their eyes,and falling freely backwards, trusting that the other team members will be there to catch thembefore they come crashing to the ground . . . well, I’m currently in mid-fall . . . .”

When the morning of June 10 finally arrived, Shoemaker knew that they would need to grapplewith many significant questions, as well as a host of others not anticipated, during the next two

13

days. How did supporting expansion and replication fit into the SVP mission? Was there any-thing they had failed to identify in relation to the fundamental elements and principles of an SVPorganization, and how would they go about ensuring that all SVP organizations truly understoodand mutually embraced these fundamental elements? Should a shared organization be created atall?

Furthermore, if a shared organization were formed, what organizational model and governancestructure would be the most efficient and effective? How would such an organization be funded?More immediate was the question of how SVP should spend the remainder of the grant money –just over $350,000 – that it had received to explore the expansion and replication of SVPorganizations. Confident in the collective energy, intelligence, and dedication of the group,Shoemaker looked forward to a spirited discussion and the progress that would be made towardaddressing these questions and setting the future course for Social Venture Partners.

14

Exhibit 1: Partial Listing of SVP Seattle’s Grant Portfolio

Investee Name GrantYear

AmountAwarded

Purpose of Grant

2000 $60,000 Purchase equipment for the computer lab and technical supportCleveland High School

2001 $90,000 Provide salary for an Advanced Information Technology Teacher (.67 fte)($38,874); Provide partial salary for a Tech Support Coordinator ($51,126)

2000 $45,000 Support general operationsCourage to Teach

2001 $50,000 Hire a part-time director for the Washington State Courage to Teachprogram ($25,000); Provide scholarships for teachers and administrators($25,000)

1999 $27,500 Support the Poetry Leadership Workshops at Meany Middle School

2000 $62,000 Support the Poetry Leadership Workshops at Madison Middle School andthe development of programs for advanced youth

Institute forCommunityLeadership

2001 $48,600 Support the Leadership Poetry Workshops and nonviolence programmingat Madison Middle School ($27,000); Provide six-months salary for theOperations Manager ($21,600)

2000 $40,000 Partially fund admin. assistant (50%); Expand services to include a ParentSupport Program (35%); Maintain and repair existing vehicles (15%)

Our Place Daycare

2001 $40,000 Partially fund an admin. assistant who will create and maintain databasesfor Outcomes, Volunteers, and Donations Other than Money (50%);Expand services to include a Parent Support Program (30%); Maintain andrepair existing vans which transport the infants and children to and fromthe center (10%); Support general operations (10%)

1998 $69,000 Expand Powerful Writers, a program that sends professional writers intothe classroom

1999 $70,000 Support general operations and provide assistance to launch a new trainingcenter for new school coalitions

2000 $70,000 Support general operations including funds to hire a Director ofDevelopment

Powerful Schools

2001 $60,000 Provide salary and benefits for a fund development staff person ($55,000);Provide partial salary and benefits for the Executive Director ($5,000)

Program for EarlyParent Support

2001 $50,000 Support the expansion of the Spanish-speaking PEPS groups in South KingCounty

1998 $65,000 Support general operations, and fund staff at the Juanita site1999 $70,000 Support general operations and the development of a replication model for

Project LOOK2000 $109,000 Support general operations including funds to hire a business manager and

fund development staff

Project Look

2001 $89,000 Hire a Director of Development ($59,000); Launch a Beta Replication Site($30,000)

Seattle Youth GardenWorks

2001 $56,500 Support general operations for Seattle Youth Garden Works ($31,500);Support program expansion ($25,000)

Seattle/South KingCounty Reading Corps

2001 $50,000 Hire a Family Involvement Specialist; Cover a portion of the salary for theReading Corps Coordinator; Provide supplies and outreach materials forfamily literacy and community outreach activities; Provide administrativesupport fees to Fremont Public Association (12%)

15

2000 $50,000 Support general operations for TechStartTechnology AccessFoundation

2001 $78,000 Provide salary and benefits for the TechStart Program manager ($40,000);Develop Individual Student Plans, through contract staff ($24,000);Develop initial assessment tool, through contract staff ($8000); Analyzeinitial assessments, through contract staff ($4000); Purchase equipmentand supplies ($2000)

1998 $25,000 Support general operations for the Making Connections program

1999 $60,000 Expand Making Connections to include junior and senior years and supportfull-time project coordinator

2000 $65,000 Support general operations for Making Connections

University ofWashington Women'sCenter

2001 $50,000 Support one full-time Program Manager for the Making Connectionsprogram

Washington ToxicsCoalition

2001 $50,000 Support the Clean Water for Salmon and Health and the Creating a ToxicFree Legacy campaigns

1998 $40,000 Support general operations for Day Care Link for the SUCCESS youthmentoring program including funds to hire a part-time volunteercoordinator

1999 $60,000 Hire program evaluation and research staff and a parent volunteercoordinator, and network the YES agency

2000 $70,000 Hire fund development staff, continue to strengthen YES' technologyinfrastructure, and support program evaluation and research staff

Youth EastsideServices

2001 $58,000 Hire fund development staff ($50,000); Finish the Outcomes Databaseproject ($8000)

Exhibit 2: SVP Seattle 2000 Annual Budget

Salaries (2.575 FTE) $132,128Benefits $25,889Computing Services $1,000Database & Web Services $3,120Insurance $2,330Semi-annual Partner Meetings (sponsored by Partners) $14,000Partner Education $1,800Postage $5,210Printing $9,850Professional Services (Legal, Accounting, & Graphic Design) $4,080Office Equipment, Office Supplies, & Telephone $8,100Professional Associations & Professional Development $4,410Total $211,917

16

Exhibit 3: United Airlines’ Hemispheres Magazine Article (November 1999)

PHILANTHROPY MADE MODERN

Blending the social consciousness of the '60s with the venture capitalbusiness model of the '90s, Paul Brainerd is championing an entrepreneurial philanthropy

that aspires to more than just writing a check.

by Jonathan Lerner & Elvis Swift

At 52, Paul Brainerd is into histhird career. The first began when hewas a student in the tumultuous,idealistic years around 1970. Heedited campus newspapers at theUniversity of Oregon and the Universityof Minnesota. Then he worked as areporter for a daily newspaper.

His second career was onesmall step from the newsroom butone giant leap for communications.Brainerd invented the softwarePageMaker and with it a concept—desktop publishing—that not onlytransformed how publications are puttogether, but also made anybody witha computer a potential publisher.

In 1994, Brainerd sold hiscompany and stepped into his thirdcareer. With one-third of theproceeds—$40 million—he endoweda foundation to fund environmentalactivism in the Pacific Northwest,where he grew up. Then he hit theroad for three months to interviewactivists, researchers, journalists, andpoliticians throughout the region. Thenew Brainerd Foundation may havebeen amply funded, he says, "but westill needed to focus our energies. Iused my reporting instincts todiscover what our philosophy shouldbe."

In the past, wealthy peopletended to "give back”—as Brainerdterms philanthropy—toward the endsof their lives. Careers over, kidslaunched, sated with goodies, theirattention would turn to the matter of alegacy. Now there is a class of muchyounger people, in their 40s, 30s,even 20s, who have made fast bucksin high-tech industries. In the Seattlearea alone, a major node of theinformation economy, there are morethan 55,000 households with a networth of over $1 million.

Some new high-tech millionaireswere just in the right place at the righttime, performing mid-Ievel jobs forstock options that paid off big. Thenthere are those whose initiative andvision created the information age weall now inhabit. "These are smartpeople," says Brainerd. "They're

accustomed to making things happenin the world." To them, the old modelof giving—dashing off annual checksto charities—was uninvolving andunappealing.

So with a social consciousnesshe retained from the '60s revolutionand an outside-the-box approach tobusiness that made him a leader ofthe cyber revolution, Brainerd set outto invent a form of philanthropycustom-tailored for the United States'new young rich.

In 1997 he founded a secondorganization, Social Venture Partners(SVP), a funding group based on aventure capital model. ThePartners—there are now over 130 inthe Seattle area, nearly all of whomare veterans of high tech—pledge atleast $5,000 annually. They meetseveral times a year to agree onstrategy, having voted early in theprocess to concentrate on childrenand education. And they donatemore than money. Using the skillsthat served them in business, theyresearch which groups should receivegrants, then work hands-on with therecipients. Unlike a traditionalfoundation—and much more likeventure capitalists—SVP looks forsignificant results only in five years orso. The Partners commit for theduration not only with money but alsowith expertise—which can be in anyfield from marketing and design tofinance and law.

Paul Brainerd and his wife,Debbi, live in an apartmentoverlooking Seattle’s harbor-frontPike Place Market. They recentlyjoined the Community LeadershipCouncil for the Northwest GivingProject, an organization dedicated tomotivating and educating potentialphilanthropists, whatever theirpassions may be.

Q: What inspired you to learnhow be an effective philanthropist?

A: I grew up in southernOregon. My family had a cabin in theCascade Mountains that we went toduring the summer to hike and camp.I just loved being there and

connecting with the outdoors. When Iknew I'd have some resources to giveback and was getting ready to makea transition, I focused on what I coulddo that might improve theenvironment of the Pacific Northwestfor future generations.

Q: You established TheBrainerd Foundation with thatpurpose. But why take yourphilanthropy further and inventsomething like Social VenturePartners?

A: There were a lot of people—in the Puget Sound community, atleast—who wanted to give back. Butthey wanted to be engaged in theprocess and to adopt new concepts—a greater degree of accountability, forexample. I researched philanthropicmodels of the past and developedone that I thought would appeal to thenew generation of givers. Theconcept of venture capital has beenused very successfully in business,and it's something that these youngpeople experienced firsthand. Five ofus pooled our Rolodexes, if you will,for the initial kickoff. Lo and behold!We had 130 people show up, and 35liked the idea enough to sign up. Sowe were off and running.

Q: As a college journalist, youwere an observer of the radical '60s.Is your philanthropy sparked by thesocial consciousness of those rimes?

A: There are core values fromthe ‘60s that are part of my being.That one person can engage with theworld and make a difference givesme hope and optimism. But it's morecomplicated than that. I bring withme many years of successfulbusiness operation, and I am awareof the need to have a strategy andobjectives and to measure theeffectiveness of our grantmaking. Itwould be easy to give money away.It’s very hard to give it away wisely.

Q: Are people in high-techindustries in some way especiallyopen to this new model ofphilanthropy?

A: No, its more than agenerational thing. And this new

17

wealth is coming at a time when thenonprofit community is feeling theneed to change. So much of thegiving in the past has been to work onthe problems but not necessarilysupport the organizations’ ability toachieve. We realize that you have todo both to be successful. And beingyounger, we have the energy toconfront those problems directly,using our brainpower in addition toour checkbooks.

We take a longer perspective.We invest more than just money; wecommit our time and expertise,building organizational capacity aswell as programs. There arebusiness skills we can bring to aproject that many nonprofits don’thave. We’re adding more value tothis equation than just writing acheck. We are working side-by-side,within each of the organizationswe’ve funded, on a week-to-weekbasis. So we can tell firsthand howour investment is working. Of if it’snot working, we can make changes inthe same way that a venture capitalistwould.

Q: What are some examples ofwhere SVP is involved?

A: One grantee is an after-school program for children at risk inone of the low-income areas ofSeattle. Typically these kids are fromsingle-parent households; afterschool, there’s no one home. We’vesupported a program, which we thinkis applicable to the rest of the city andperhaps to other cities, to providesafe places for kids after schoolwhere they can get positivereinforcement and mentoring andtutoring. We’ve helped develop theprogram, resolve accounting issues,renegotiate the lease with thelandlord, and now we’re helping thewoman who started the program towrite down what she’s learned so wecan perhaps replicate it.

We’re also working with a gradeschool that has low-income, high-riskstudents—60 percent or so qualify fora free-lunch program. We’ve helpedthem develop a “model society”program. The students have agovernment, a bank, volunteeropportunities to help out in thecommunity, and a media componentwhere they do their own TV show.

So far, we've invested in 13organizations. The jury is still out onwhat impact we're having. But we'reonly two years into this. We set goalseach year with the people we'veinvested in. At the end of the year,we sit down together to see if we'vemet those goals. If not, we ask whynot and what we can do better in the

coming year. At some point, just likea venture capitalist, we'll have aninvestment that fails. Bur our hope isthat we'll have several that excel andprove that we can make a biggerdifference with this model than withtraditional approaches tophilanthropy.

Q: Why is Social VenturePartners so closely focused on theSeattle area?

A: For our Partners to volunteertheir time and expertise, they need tobe within driving distance. The vastmajority are still putting in 60-hourweeks in the high-tech industry. Butthere are groups forming elsewhere.There's one in Phoenix that hasabout 50 Partners. They'recompletely different—people out ofthe real estate industry and from across section of the businesscommunity. Austin has a group of 30or 40, and we are in discussion withpeople from other cities. It takes acritical mass of people who want todo this and somebody who’s willing toshepherd it. A lot of communitiesmay not have enough people in aposition to make this level ofcontribution.

Q: Still, many of the new rich arenot yet committed to philanthropy.Even Bill Gates was accused, and notthat long ago, of failing to havephilanthropy on his agenda—although at recent count he had givenmore than $17 billion for good works.How do you awaken the sense ofresponsibility and teach people togive?

A: For a lot of these people, thewealth is still in stock options, so itdoesn't yet seem real. But that's thesecond half of our mission: toencourage a new generation of giversto be more strategic and effective.We've set up a series of speeches bypeople who are doing innovativethings in social entrepreneurship.The real motivation is that when theyget to the point in their lives wherethey see a responsibility to give back,they want to do it in a smart way.They question just handing outmoney to charities. How do theyknow that their money is having thegreatest possible impact or going tothe right organization?

Q: What's been most inspiring toyou in all this?

A: Not only the work that we'redoing to help these specificnonprofits, but also creating this newmodel of philanthropy that hopefullywill have an impact way beyond themoney that SVP is investing in thiscommunity. I'd never give up mybackground in business, but the workI do now is on a totally different plane

in terms of satisfaction—the feeling ofconnection with real people who needhelp. It's the difference between ahandshake and a big bear hug.People have come up to me andliterally put their arms around me andsaid, "Thank you for the work you'redoing in our community." That's atremendously satisfying and fulfillingthing.

Q: Is there a fourth careerahead for Paul Brainerd?

A: I seem to go in decades.There may be, but this one couldprove challenging enough to hold mefor a long while.

Jonathan Lerner is a freelance writerfrom Atlanta, Georgia.

Article reprinted with courtesy fromHemispheres, the magazine of UnitedAirlines.

18

Exhibit 4: Core Values of SVP Seattle

• There is power in our collective efforts. By combining our ideas, knowledge, andresources we can have a larger impact on the issues facing the community. Ourgreatest strengths are in the collective "smarts" of the Partnership and the individualcommitment of Partners to actively volunteer time and expertise.

• We are a Partner-driven organization. Partners do the work of the organization.They learn first-hand the needs of the community and how we can be most effectivein meeting those needs. The staff helps coordinate and facilitate the work of thePartners in the organization.

• We respect the work and expertise of our community partners. We do not pretend tohave the answers to addressing community and social issues. We respect theknowledge and experience that others have in our community to effectively addressthose problems. Our goal is to engage in an honest dialogue on how to best combineour business skills with the needs of the non-profits in which we invest.

• We are a risk taking, self-learning organization. We are willing to take on risksknowing we can learn from our experiences and improve the way we do our work.We acknowledge that honest feedback can be difficult to attain as a "funder." As aresult, we measure and evaluate all of our processes, programs, and investments andshare the knowledge gained. We are accountable to our Partners, the nonprofits withwhich we work, and the community.

• We embrace an open organizational operating style. SVP trusts the interests andleadership of its Partners to set the direction for its work. We provide an environmentwhere one person's (or small team's) ideas can grow to engage a larger group ofPartners. The organization is open to all and dominated by none. Every Partner hasan equal voice. Decision-making is delegated to those closest to the work.

• We believe in the strategic strength and moral necessity of diversity in the SVPPartnership. We are an organization that believes that the whole can be greater thanthe sum of the parts, but only if we are an organization that is truly an environment inwhich people of all kinds want to participate.

• It is all about people and leadership. We look for community leaders who are readyand capable of making a difference. We invest in those people.

• We know that this isn't easy. This is challenging work that takes time and patience.We believe that over time we can make a positive impact on our community throughour individual and collective efforts.

19

Exhibit 5: Shared Core Principles of SVP Organizations(created April 2000 and revised March 2001)

• SVP is a dual mission organization, involved in engaged grant making (contributingboth financial and human resources) and the stimulation of individual philanthropy ofPartners.

• An SVP organization is a community of people (a network that collaborates with andsupports each other). It is organic/bottom-up/grassroots and grows from within thecommunity.

• SVP believes in a Partner-driven approach. Partners do much of the work, and driveits future course. The role of staff is to facilitate and support.

• Leadership comes from the business and entrepreneurial sector.

• Criteria for membership includes:o Individuals, not corporations, become Partners. Although corporations may

contribute, they must appoint an individual to act as a Partner;o No political agenda or age limits exist;o The minimum contribution is $5,000 or more per year for at least two years;

ando Spousal involvement is supported ($5,000 includes couple’s membership, and

if both spouses are engaged, each has a vote on a grant committee).

• SVP espouses a long-term approach (three to seven years) to grant-making, in termsof financial and time commitments to nonprofits.

• The focus of volunteer work with investees is on capacity building and sustainabilityof the nonprofit, not on shifting or impacting their mission. Grants are focused onoperating and infrastructure needs.

• Investment is approached as a relationship. SVP forms close, working relationshipswith investees where SVP mutually invests in their success.

• SVP supports organizations that are committed to using outcomes-based metrics todemonstrate the success of their programs.

• SVP works with investees to create a vision for the relationship that will lead to anappropriate exit strategy.

• All other issues—such as areas for grant making, target population of grants, formulafor portfolios, board governance, time commitment of Partners, Partner education,and communication materials—are to be determined on a local level.

20

Exhibit 6: Organizations Interviewed by SVP Seattle

CityCares ~ An authority on volunteering, CityCares was founded in 1992 to encourageand channel the volunteer impulse. Having established an effective model for citizenservice and civic engagement, CityCares works to promote and guide grassroots groupswho engage willing citizens in addressing local needs. CityCares strives to expand theservice capacity of these groups by offering management and accountability tools, start-up help, innovative programmatic models for replication, and cross-fertilization ofthought.

City Year Seattle ~ City Year’s goals are to generate transformative community service,break down social barriers, inspire citizens to civic action, develop new leaders for thecommon good, and improve and promote the concept of volunteer national service.

Community Technology Institute (CTI) ~ CTI is a national non-profit that developsand promotes telecommunications and other innovative technologies to relieve humansuffering and facilitate the delivery of Human Services. Their Community Voice Mail™program won a Harvard-Ford Foundation Innovations Award in 1993.

Great Harvest Bread Company ~ Great Harvest is a nationwide franchise ofneighborhood whole-wheat bread companies. They are dedicated to baking the bestbread and providing the best customer service around, and are known for their generouscontributions to the communities within which they are located.

Hands On Portland (HOP) ~ HOP connects people with volunteer opportunities in thePortland community. They utilize a format that gives people who are unable to makeregular, long-term commitments the opportunity to give back to the community. HOPoperates under the umbrella of CityCares.

REAL Enterprises ~ Since the early 1980’s, REAL has been working to makeentrepreneurial training accessible to the communities and the people who need it most.Initially a program designed to help rural high schools contribute to the economicdevelopment of their communities, REAL now serves youth and adults of all ages incommunities of all sizes.

Replication and Program Strategies, Inc. (RPS) ~ RPS helps organizations and socialprograms of demonstrated effectiveness extend and sustain their reach. RPS assistsprograms and organizations throughout the social sector—from education to humanservices, from community development to health care, from job training to civicengagement—gain wider application.

United Way ~ United Way is at the forefront of building partnerships, forgingconsensus, and maximizing resources to address critical needs in communities acrossAmerica. As the leader in performance-based philanthropy, United Way is focused onachieving measurable results.

21

Exhibit 7: Sample of Potential Organizational Models for Central SVP Organization2

2 Developed by McKinsey & Company

• Independent organizations who want to exchange knowledge,

but– Do not

necessarily have common goals

– Want to retain independence

– Have no need to share resources

• Independent organizations with similar missions & goals who are interested in collaborating to increase impact,

but– Are prepared

to make only a limited investment in enabling infrastructure

– Have no intention to build a common brand and little concern about liability

• Organizations with a shared mission & goals who want to– Share

information & resources

– Build a strong brand

– Ensure qualitybut

– Retain a high degree of local autonomy

– Control costs

• Organizations with a shared mission & goals who want to– Build a strong

national brand– Minimize liability– Exploit

opportunities for national fundraising

– Engage in joint strategy setting

but– Retain local

flexibility and ownership

• Central organization that wants to– Actively

replicate– Retain control

over operating standards and brand

but– Requires

localized approach in service delivery & financial support

• Central organization that wants to– Extend its

scope– Roll out a

standardized business model through subsidiaries

– Control all operating standards, brand development, & service delivery

LooseWeb

EnabledNetwork

LooseFederation

StrongFederation Franchise Subsidiaries

Network Model Federation Model Corporate Model

Organizations That Best Fit Each Model

• Alcoholics Anonymous

• Society for Organizational Learning

• Council on Foundations

• CityCares• Oxfam

International

• Planned Parenthood

• Boys & Girls Clubs

• Nature Conservancy

• United Way• Habitat for

Humanity

• CityYear• Ashoka

Examples

22

LooseWeb

EnabledNetwork

LooseFederation

StrongFederation Franchise Subsidiaries

Network Model Federation Model Corporate Model

501(c)(3) status • Independent • Independent • Independent • Independent • Mix • Shared

Approval & Exclusion

• N/A • Informal process (buy-in to general purpose)

• Approval process with limited criteria andstaff/member review

• Formal approval process with extensive criteria set by members

• Rigorous franchiser-initiated criteria and process

• Internally controlled process

Membership

Shared Name,Logo, & Quality Control

• No • No • Moderate • Strong • Very strong • Very strong

Branding

Primary Role of Central Organization

• N/A • Support knowledge transfer

• Previous plus limited support functions (e.g., member approval, brand development)

• Previous plus strategy setting, & extended support functions (e.g., national fundraising)

• Significant central decision-making & central provision of key support functions

• Fully centralized decision making & key service provision

Staff • 0 • 1-2 • 2-3 • 3-5 • 5-10 • 10+

Cost • N/A • ~$170,000 • ~$260,000 • ~$400,000 • ~$600,000 • >$1 million

Approximate Resources Required for SVP-type Organization

Exhibit 8: Characteristics of Organizational Models3

3 Developed by McKinsey & Company

23

Exhibit 9: Growth of SVP Organizations (through June 2001)

Boston#

New York#

Houston

Portland

San Diego

St. Louis

San FranciscoPittsburgh

ClevelandKansas City

VancouverCalgary

BoulderDenver

Dallas

PhoenixAustin

Seattle

0

2

4

6

8

10

12

14

16

18

20

Jul-9

7

Jan-

98

Jul-9

8

Jan-

99

Jul-9

9

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Launch Date

Nu

mb

er o

f C

itie

s

# Indicates that specific launch date has not been determined.

Note: Groups from Chicago, Minneapolis, Orlando, Salt Lake City, Portland (Maine),and Toronto are exploring the feasibility of establishing additional SVP organizations.

24

Exhibit 10: Overview of SVP Organizations (as of June 2001)

Number ofPartners

Percent ofPartnersActive Launch

Date

PaidExecutiveDirector

Austin 65 70% Jan. 1999 YesBoston ** # Future YesBoulder 27 60% June 2000 NoCalgary 44 # June 2000 NoCleveland 9 # Nov. 2000 NoDallas 75 55% Nov. 1999 YesDenver 80 70% Mar. 2000 YesHouston 5 # July 2001 YesKansas City 16 60% Oct. 2000 YesNew York ** # Future NoPhoenix 90 55% May 1999 YesPittsburgh 47 # Nov. 2000 NoPortland 18 # June 2001 NoSan Diego 24 # June 2001 NoSan Francisco 60 75% Jan. 2001 NoSeattle 290 70% Aug. 1997 YesSt. Louis 12 # May 2001 NoVancouver ** # June 2000 NoAverages 57 64% -- --

# Indicates that data is not available or organization is in the early stages of development.** Indicates that a founding board is in place, but no money has been collected.

25

Exhibit 11: Grant-Making & Partner Education in 2001

Number ofGrant Cycles

CompletedAmountGranted

Number ofInvestees

Number ofPartner

EducationEvents

Austin 2 $230,000 10 #Boston 0 # # #Boulder 1 $100,000 7 #Calgary 1 # # #Cleveland 0 # # #Dallas 1 $285,000 5 15Denver 1 $80,000 4 10Houston 0 # # #Kansas City 1 # # 8New York 0 # # #Phoenix 2 $550,000 10 18Pittsburgh 1 # # #Portland 1 $90,000 2 #San Diego 0 # # #San Francisco 1 # # 12Seattle 4 $1,400,000 25 30St. Louis 0 # # #Vancouver 0 # # #Totals 16 $2,735,000 63 93

# Indicates that data is not available or organization is in the early stages of development.** Indicates that volunteer teams are forming.

26

Exhibit 12: Operating Budgets for 2001

TotalOperating

Budget

PercentFunded byPartners

PercentFunded by

In-kindDonations

PercentFunded by

FoundationsAustin $100,000 53% 45% 2%Boston $100,000 0% 0% 100%Boulder $66,000 24% 76% 0%Calgary $50,000 0% 60% 40%Cleveland # # # #Dallas $218,000 40% 10% 50%Denver $55,000 0% 55% 45%Houston $188,000 48% 4% 48%Kansas City $135,000 5% 85% 10%New York # # # #Phoenix $227,000 0% 43% 57%Pittsburgh $134,000 61% 0% 39%Portland $14,000 92% 8% 0%San Diego # # # #San Francisco $65,000 75% 4% 21%Seattle $270,000 100% 0% 0%St. Louis $163,000 46% 0% 54%Vancouver # # # #Averages $127,500 39% 28% 33%

# Indicates that data is not available or organization is in the early stages of development.

27

Exhibit 13: Distribution of Partners (Percentage) by Industryin Selected Organizations (as of June 2001)

High Tech BusinessFinancialServices

Attorneys&

Physicians Academia

Govern-ment &

Nonprofit Other

Boulder 45 45 0 5 0 0 5Calgary 27 25 10 6 5 0 27*Cleveland 0 0 77 4 7 7 5Dallas 15 30 30 20 2 2 1Kansas City 10 60 10 0 5 10 5Phoenix 7 25 12 9 12 3 32**Portland 55 11 11 0 3 0 20Seattle 60*** 20 7 7 2 4 0

* Primarily from Energy Sector.** Primarily from Real Estate.*** Was close to 90% at launch.

Exhibit 14: Projected Partner Growth as Estimated by Each Organization2001 Year End 2002 Year End 2003 Year End 2004 Year End

Austin 50 50** 50** 50**Boston 42 80 140 200Boulder 30 50 65 80Calgary 50 75 100 125Cleveland 14 40 70 105Dallas 85 150 200 250Denver 80 100 100 100Houston 13 45 80 125Kansas City 25 30 60 100New York 25 85 143 189Phoenix 100 130 160 200Pittsburgh 60 75 100 125Portland 28 56 100 150San Diego 50 85 115 150San Francisco 60 100 125 150Seattle 290 310 330 350St. Louis 25 50 75 75**Vancouver 20 30 50 75Totals 1,047 1,541 2,063 2,599

** Indicates that projection was not provided but previous year’s projection was used.