OPINIONS

Seeding Social Impact

It’s a fact: Silicon Valley and Stanford University are inextricably connected. The New Yorker’s April 2012 article “Get Rich U” by Ken Aluetta voiced concerns about this relationship, but in my opinion, the connection is valuable and particularly additive in the field of social impact.

A few Silicon Valley-isms that are seeping into the world of doing-good and supporting young people in achieving change: the ubiquity of accepting and progressing from failure, a ‘get-out-and-try-it’ mentality, the importance of building empathy with your user, a prerogative to solve big problems, the commonality of adolescent CEOs…The list of trends goes on.

I want to focus on seed funding — chunks of capital, usually under $1 million, provided to an entrepreneur whose venture is in the idea stage. Seed money mitigates risk enough to test the product, market, and/or team, and hopefully prove that the concept can go from idea to company.

Traditionally, this money comes mostly out of the pockets of friends and family, but the process is now more institutionalized and popular. Seed funding is currently at an all-time high in the venture capital world.

“Last year, about half of all venture deals were in the seed and early stages — the highest proportion since 1985,” noted Nathan Heller in his recent article, “Bay Watched.” Prominent venture capital firms, such as KPCB, Khosla Ventures and Floodgate recognize the importance of supporting promising ideas and their creators in the initial stage.

Some venture capital groups even make their support for positive social change explicit. Sequoia has made “charities the backbone of our client base.” Their Great Causes initiative supports hospitals, foundations and other social change organizations as Sequoia’s investments profit. Another example is RSF in San Francisco, which only invests in nonprofits and is “dedicated to transforming the way the world works with money.” They also recently launched a Social Impact Fellowship program.

The positive ideology around financing young people with big ideas is spreading, which is great news for those interested specifically in positive social impact. Why? Seed funding supports thinking that is valuable to social impact initiatives.

Innovations are much better placed to flourish when given early financial support that can encourage user testing and product iteration. Accessing unrestricted funds for this is challenging for nonprofit social change organizations. Instead of devaluing the nuts and bolts, VCs encourage supporting the backend elements — development and overhead — in seed-funded ventures.

Lack of this kind of support is common in nonprofits, as noted by SSIR’s article “The Nonprofit Starvation Cycle.” Secondly, it is a reality that money flows define value in our society. Funding social impact initiatives signal that public sector problem solving has worth.

This was one of the main factors that inspired Steve and Anita Westly to create the Westly Prize, an annual initiative of their foundation that awards four young people with $20,000 each to pursue a problem-solving innovation. “We want to incentivize young people to try big things, to take risks, to be leaders. We hope that the Westly Prize will help in demonstrating the importance of working toward the public good,” Mr. Westly explained. This is venture capital seed funding, but for under-28-year-olds in California focused on social change.

Kiah Williams, one of last year’s winners, voiced her appreciation of the prize’s flexibility. “Having unrestricted funds was hugely important<\p>…<\p>it allowed us to ask ourselves how we can do what we do better, and then actually implement it.” SIRUM, William’s organization, connects clinics and donated drugs from suppliers, pharmacies and health facilities.

Williams noted that the prize allowed SIRIM to replenish areas that had been bootstrapped by her and fellow founders in the organization’s early phases, as well as experiment with technologies to improve company-efficiency, not to mention the added-value of mere monetary recognition from a respected source. “It means a lot that someone like Steve Westly, who has had a great for-profit career, is demonstrating interest in the innovative ideas of young people,” said Williams.

The Westly Foundation also initiated Social Impact Grants, a new program through Stanford’s Haas Center for Public Service granting up to $1,000. Structured by the Haas’s Principles of Ethical and Effective Service, students are free to use the money in the manner that best helps them.

Such support is, of course, not new in concept. Monolithic examples include Jeff Skoll, who has been supporting social entrepreneurs since 1999, and of course Bill Drayton has been leading the way for multiple decades. But these small-quantity, high-impact funds specifically for young people seem to follow the flow of Silicon Valley in a unique way that meets the need of this young population to create.

As Steve Westly explained, a generation ago an entrepreneur had to be 40 or 50 years old to achieve real change. The Nobel Prizes exists, but usually marks the end of an individual’s career. But in this technological era, you can solve a big problem in the world when you’re 16. Investing in that reality — through venture capital or foundation dollars — is critical. I look forward to seeing social impact being more and more supported by our Silicon Valley ecosystem.

 

Contact Elizabeth Woodson at ewoodson@stanford.edu

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