New Effort Seeks to Drum Up Gifts to Spread Proven Programs

For all the talk among foundations about spreading nonprofits’ very best programs to many more communities—called “scaling”—precious few organizations have the money to do it.

Since the late 1990s, grant makers have envisioned a nonprofit version of venture capitalism in which high-performing charities receive enough money to blanket the country with their programs.

But such growth is expensive—few foundations can afford to pay for such expansion for even one of their grantees. And outside of a few high-profile examples—like the growth-capital fund organized by the Edna McConnell Clark Foundation—grant makers have rarely teamed up to finance transformative growth for charities.

Now a new effort, called the Scaling Marketplace, seeks to make it easier for foundations to collaborate and help charities with proven results expand more rapidly. The marketplace hopes eventually to attract the interest of more than 1,000 foundations, and selected nonprofits will have the opportunity to pitch their growth plans on the website and potentially raise tens of millions of dollars from a diverse group of supporters in a matter of months.

The marketplace was started by the Social Impact Exchange, a membership organization that includes many foundations interested in expanding proven programs. The exchange’s members nominated and vetted the eight health and education nonprofits now featured on the platform. Soon to come: charities that focus on fighting poverty and opportunities to invest endowment funds in social enterprises with potential.

Participants in the marketplace currently include 69 foundations, such as large grant makers like the Robert Wood Johnson Foundation and the Bill & Melinda Gates Foundation, and fast-growing charities like New Teacher Center and Playworks.

Christopher Langston, program director at John A. Hartford Foundation and a member of a group that established the marketplace’s health section, says the platform should appeal to any foundation that aspires to make headway against social problems.

Hartford, he points out, has assets worth $500-million—which at first blush may seem like a lot but is less than what Medicare spends in a day.

“The big idea here is that to have really substantial national or international impact on the social problems that face us, we need more than the resources that any of us have alone,” Mr. Langston says. “The notion of trying to bring partners together to invest in the best projects is very appealing.”

Ready to Expand

For each of the two topic areas currently available in the marketplace, 20 or more foundations have come together to identify nonprofits with proven programs that are ready to expand. Before nominating groups, foundations must have already provided substantial grant money to the organizations.

In the health section, for example, at least three foundations that did the vetting must have collectively given at least a quarter of what any nominated group is trying to raise before the charity’s growth plan is posted on the site.

The four featured charities in the health section of the marketplace are the Center to Advance Palliative Care, Impact (a project at the University of Washington that provides an innovative approach to mental-health treatment), Playworks, and Project Echo. The four featured education charities are the Achievement Network, Expeditionary Learning, National Center on Time & Learning, and New Teacher Center. (Playworks is also listed on the education platform.)

To be considered, nonprofits must have independent studies that document the effectiveness of their programs and have already demonstrated some ability to spread the reach of their organizations.

The eight charities are collectively trying to raise $140-million for their growth plans.

Since late 2012, when foundations began to meet to pick the groups they wanted to expand, the eight charities have raised a total $62-million for growth, nearly half of which has come from the foundations helping to build the marketplace.

New Teacher Center, which provides training to experienced teachers so they can help serve as mentors to new teachers in their districts, plans to more than double the number of large school districts it works with by 2018 and develop an online platform so it can also help smaller districts.

New Teacher Center had already raised nearly all of the $23-million it needs to pay for that growth by the time the Scaling Marketplace was unveiled.

Even so, Ellen Moir, the charity’s founder and CEO, says she’s had trouble in the past getting donors to contribute unrestricted dollars that can be used to finance growth. Many donors would prefer to support a specific program or community, she says, even though the charity’s needs are often greater for functions such as information technology, human-resources, and program evaluation.

Ms. Moir says she “loves the idea” of foundations pooling their resources to invest in helping the best nonprofits grow. “Raising capital is hard, and raising unrestricted dollars is even harder,” she says. “To really scale and grow, you need those unrestricted dollars.”

‘Broad Ecosystem’

The Social Impact Exchange unveiled the marketplace in December. So far, very few funds have trickled in from foundations that did not help vet and nominate groups.

But Alexander Rossides, president of the Social Impact Exchange, says he hopes to persuade more than 1,000 foundations to support nominated charities by 2017.

“We’re trying to create a broad ecosystem to connect funders with opportunities that fit with what they’re interested in,” Mr. Rossides says. “Our vision is that in just three to six months, a charity with an effective intervention ought to be able to raise $15-million. It has to be that simple.”

Whether it will ever be that simple is hard to say. Donors give for all sorts of reasons, and only a small number are sharply focused on helping high-achieving charities expand.

Mr. Rossides says the marketplace wants to attract people who work with foundations and other big donors—such as regional associations of grant makers and philanthropic advisers—to share the vetted programs with their members and clients.

No money will change hands online: The charities themselves will have to negotiate grants from interested foundations or individuals. The Scaling Marketplace pays for its costs with grants from the Robert Wood Johnson Foundation and others, but Mr. Rossides says membership and administrative fees will gradually be phased in next year and may fully cover the marketplace’s expenses by 2017.

Cultural Shift

Even those who strongly support the marketplace say a cultural shift is needed if it is to achieve its potential.

Jill Vialet, the CEO and founder of Playworks, whose school-recess programs have increased physical activity and reduced bullying at schools in poor neighborhoods, says she was impressed by the venture-philanthropist Mario Morino’s 2011 book, Leap of Reason, which challenged nonprofits to ask the question “To what end?”

But foundations, too, must ask that question, she says. Are foundations willing to change their grant-making habits, she asks, and focus their dollars on the few charities that have demonstrated that they can make progress against persistent social problems?

“Something like the Scaling Marketplace is critical for changing the conversation,” Ms. Vialet says. “Will this effort—the first one out of the barn—be the one that foundations jump on? It’s hard to say.”

Like New Teacher Center, Playworks was nearing the end of a campaign when the marketplace was unveiled. Playworks has raised more than $21-million toward a $26-million campaign that aims to double the number of children the charity serves by 2016.

Mr. Rossides concedes his vision for the Scaling Marketplace is “ambitious,” but he believes more and more foundations will eventually rally behind the idea of helping proven charities grow.

“If you have a program that you know can turn a life around,” he says, “there’s a moral issue in terms of making sure it gets to the people it can help.”