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Susan Schreter Interviews Paul Shoemaker

Susan Schreter Interviews Paul Shoemaker, Social Venture Partners

"Voices that Matter" Originally published at MSN: Business on Main.

Do you want to start a business that can make a difference in your community? Social entrepreneurship involves developing innovative new services and technologies that solve pressing social problems. Business on Main spoke with Paul Shoemaker about Social Venture Partners (SVP), a social enterprise incubator that provides multiyear grant funding and strategic support for this growing field.

Susan Schreter: You left a high-powered corporate career to build Social Venture Partners. What motivated the big change?

Paul Shoemaker: After some professional success, I was at the point of life where I was looking for a new challenge and to be more engaged in the community. At first, I didn't know what that looked like, until I met the founders of SVP.

What was it about SVP that appealed to you?

The fun for me was the big vision. We thought we could bring together the professional skills of private-sector volunteers what we call partners to commit some of their money and time to help entrepreneurial nonprofit organizations become bigger and more effective. Nine out of 10 people that I talked to in 1997 said that I was nuts.

Nuts? Why did they say that?

They didn't think that private-sector people would commit their time and check their egos at the door. They also thought that we couldn't translate professional skills into something that would be productive for nonprofit organizations. All of these concerns were valid. The truth is that what we have created is magic. Each year our partners contribute about $5,000 into a fund and then carefully choose which entrepreneurial nonprofit organizations in their cities will get help.

What kind of funding can social entrepreneurs expect from SVP?

Our model is very much like venture capital in the way that our partners pool together money and then help small organizations grow up to have tremendous community impact. With a lot of philanthropic funding organizations, the relationship usually ends with the grant. With SVP, the relationship starts with the grant. Our objective is to give organizations $30,000 to $50,000 a year over a four- or five-year period.

The other key difference is our grants are completely unrestricted. This doesn't mean that the organization is not accountable, but we don't tell organizations how to spend the money or say that the money can only go for this or that. It's a huge mistake [to impose restrictions].

When a social entrepreneur says, "I have an idea for a new product or service in education, environmental protection, poverty relief, etc.," and asks you, "What should I do first?," what do you say?

My first response is to say, "Study the landscape." Find out if any other organization is offering the same services or attacking the same problems. If there are some similar organizations, see if you can partner with these organizations to implement the idea. You can save a lot of time. If no other organization is working on the same issue, then go ahead.

What types of social entrepreneurs and nonprofit organizations succeed in getting funding from SVP?

They have to be passionate and have a "let's make it happen" attitude. The organization has to be willing to build in a disciplined way, plus have an appreciation for strategy. On our side we ask a lot of questions about the organization's ability to create positive social outcomes. We don't always bat a thousand, but we do know where we can add value.

In addition to financial capital, SVP is known for providing human capital, too. How do you do this?

We sit down with nonprofit leaders and ask some tough questions about their objectives and help them assess their organizational strengths and weaknesses. We don't want them to morph into number-crunching MBAs, but we do want them to understand that better, stronger organizations get to do more and help more people. This is our mindset.

Grantees can get assistance from SVP in the form of workshops, peer group support, one-on-one coaching and board help... When a grantee is facing a particular problem, it's likely that we have an experienced partner in our network who is eager to help out. Our partners get the satisfaction of contributing their professional skills to the nonprofit and our nonprofit grantees get a high level of expertise for free...

We're also seeing growing demand from private-sector business professionals who want to cross over and become social entrepreneurs by either starting up a nonprofit or working for a nonprofit. So now we teach a curriculum on how to create great crossover leaders.

A member of our Business on Main community wants to know if SVP provides training support to help nonprofits motivate their staff. Do you?

We do provide leadership training for grantees in a broad range of management areas. Motivating staff is just one flavor of our work.

Is the process of developing a business plan different for a nonprofit organization than a business plan for a for-profit organization?

I don't think so. People make the mistake of thinking that nonprofits are not ambitious they are just like every other business owner in their desire to grow and succeed. The only difference is that these organizations have a social purpose and always reinvest their profits back into the organization.

There are remarkable parallels between nonprofits and for-profit entrepreneurs. They both start up with a lot of drive and work like crazy on solving a problem or getting their product developed. But they overlook the need to create an organization with the sustainable capacity to support high growth. They can run on fumes for a couple years when they are new and cool. But eventually they crash and burn.

We do help our grantees develop their strategic business plans. Just like in the private sector, we encourage our grantees to think about what their organization can be in five years in terms of services, staffing, operating performance and financing requirements.

SVP as an organization has grown rapidly. What makes it so successful?

Today we have grant-making offices in 20 states, plus three offices in Canada and another in Japan. We've funded over 300 nonprofits and provided thousands of hours of strategic guidance and management training to these organizations. It's just crazy! But, just like any entrepreneurial organization, we've blown some tires too and tried to grow much too fast.

Was SVP's leadership not following its own advice?

[Laughing] I'd say that was correct! Like all startups, it takes a couple of years to build an effective infrastructure. Initially, we weren't ready for the big response and weren't ready to scale. Now all of our cities operate on the same systems and measurement tools. It makes a huge difference. We're ready to bring in more partners and operate in more cities. Right now, if a city is interested in launching a local SVP, we know how to proceed.

What's next for SVP?

Without losing any of our entrepreneurial roots and values, we'd like to engage 5,000 partners and operate in 50 cities. It's going to be fun.

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