Do Foundations Support Social Enterprise?

By Rolfe Larson on January 25, 2011

Well, yes and no.  They all want their grantees to develop “sustainability” strategies, by which they mean they want you to continue into the future without their money.  So if social enterprise will help an organization diversity its funding sources and rely less on philanthropic support, they’re all for it.  They like reading about it in grant proposals, and like even more finding out that you’ve started social enterprises that help you accomplish your mission and provide funding at the same time.

Will they then put money into starting social enterprises?  Mostly not, at least directly.  Sometimes they will provide small planning grants, which can be helpful but never enough to turn idea into reality.  Sometimes they will look more favorably at a grant proposal which has an explicit sustainability strategy that includes social enterprise; such as project community and outreach efforts where the data collected will also become part of the market research for a future venture.

And in rare cases, where they already have a productive, long term relationship with a grantee, it can be demonstrated that a social enterprise is highly feasible (foundations are fairly risk-averse), and that project outcomes would exceed what their grant would otherwise deliver, foundations have been known to put real money into starting a social enterprise.  But don’t count on it.  It’s pretty rare.

Now, there are foundations that have supported social enterprises through Program Related Investments (PRIs), which tend to be low-interest, long-term loans and loan guarantees rather than grants, involve larger projects, and usually involve community economic development.  Here’s some more information about PRIs, including a list of major funders who do PRIs.

Finally, in terms of new SE investment strategies, here’s a good article by Paul Lamb entitled The Rise of the Entrepreneurial Activist, in the Huffington Post, which lists some foundations that have supported social enterprise, usually focused on leadership training rather than venture start up funding.  He also addresses some new startup funding strategies (for example crowdfunding), which might help some start ups.   Good luck!