Business-Plan Competition Draws 460 Applications, Awards 4 Top Prizes

Two technology services aimed at nonprofit groups, a finance institution that makes low-cost loans to overseas agricultural cooperatives,

and a venture that sells new books to children’s charities took top honors in the third National Business Plan Competition for Nonprofit Organizations here this month.

More than 460 nonprofit organizations submitted plans for business ventures designed to supplement their income from grants and donations. The competition — which is sponsored by the Yale School of Management, the Goldman Sachs Foundation, and the Pew Charitable Trusts — selected 20 finalists from the applications. From those, it awarded four grand-prizes of $100,000 each and four runners-up of $25,000 each.

Three of the prizes went to business ventures aimed at providing services to other nonprofit groups.

At the meeting, representatives from the organizations that were named grand-prize winners in 2004 talked about their ventures’ progress and the challenges they have faced over the past year.

Coastal Enterprises Inc., a community-development organization in Wiscasset, Me., has struggled to reconcile its nonprofit culture with the business-oriented mindset of CEI Community Ventures, the venture-capital fund it runs, said Michael Gurau, the fund’s president.

“There’s a structural, cultural tension in having for-profit people mixed in with nonprofit people,” he said.

One point of contention: While employees of the venture fund earn less money than many of their counterparts at other venture funds, they do make more than employees who work for the parent charity.

The fund’s parent organization also is starting to realize just how difficult the venture-capital business is and is asking itself whether the organization should be involved in such work, said Mr. Gurau.

At the same time, the fund wonders if it might be more effective in the market on its own, rather than as part of a nonprofit organization. The answer, he said, might be to loosen the affiliation between the two entities.

“The culture is so engrained in the cellular structure of the nonprofit,” Mr. Gurau said. “I’m not sure that it’s reasonable to think that an established, long-standing nonprofit can really make that jump” into business.

VolunteerMatch, a San Francisco charity, is in a different position, looking to strengthen the ties between the employees of its business arm and the companies it works with. The group runs a service that helps companies manage and measure their employee volunteer programs.

One of the biggest changes the venture has made has been to add consulting services for the people who oversee employee volunteer programs at companies, said Luisa Perticucci, the organization’s director for business services.

“When we first started out, our client-relations department was dedicated to helping our clients use the service really well,” explaining the ins and outs of the VolunteerMatch software, said Ms. Perticucci. Yet “our clients were saying, ‘Help us do our jobs really well.’”

VolunteerMatch has created an advisory board made up of people from the companies it works with as a way to keep better track of customers’ needs and respond to them.

The Rescue Mission, in Liverpool, N.Y., has also had a positive experience with its business venture, a “$1 Shopper” section at the organization’s thrift stores that sells new items, such as socks and underwear, cleaning supplies, and baby-care products.

Darlene Carrington, the group’s social-enterprise director, said all of the charity’s employees have started to think in a more entrepreneurial way since the group won one of the grand prizes at last year’s competition. The Rescue Mission’s food-services director, for example, decided to put excess kitchen capacity to use and won a contract to prepare food for a summer feeding program.

However, Ms. Carrington advised charities to approach business ventures carefully and seek additional expertise.

“It’s critical that you get an outside set of eyes to look at your venture,” said Ms. Carrington. “They will come back to you with your blind spots.”

The Partnership on Nonprofit Ventures, which runs the National Business Plan Competition, is now looking to revamp the award program and its own operations as its support from the Goldman Sachs Foundation, the Pew Charitable Trusts, and the Yale School of Management comes to a close at the end of September.

The partnership plans to seek out foundations, corporations, and individuals to provide funds for particular awards as a way to continue the competition.

The sponsor, for whom an award would be named, could designate the award for a particular field of interest, geographic area, or stage of business development, but all of the awards would be part of the main competition, said Cynthia W. Massarsky, co-deputy director of the partnership.

“Our plan is that ultimately all nonprofits that want to enter the competition will be able to enter because they will find at least one category of the competition in which to enter,” said Ms. Massarsky.

She said the partnership, which is currently housed at the Yale School of Management, is in talks to become part of another nonprofit organization.

Ms. Massarsky hopes that the partnership will be able to announce a new round of the business-plan competition at the beginning of 2006.