In this interview, Jesse Ehrensaft-Hawley and I talk about how GAP reframed their revenue strategy and invested in change capital to help them stay sustainable in the long-term.
Over the past month, we’ve been exploring the topic of change capital to explore how we can build a capital structure to invest in organizational transformation and thrive in the long-term.
I wanted to explore this topic with an organization that has put the concept of “change capital” into practice. I immediately thought of the folks at Global Action Project (GAP). Back in March, their former executive director Meghan McDermott shared their publication, “Change Capital Investments: One Tool for Moving to Abundance,” so I reached out to GAP’s current Co-Director, Jesse Ehrensaft-Hawley, to learn more about GAP’s story.
In the interview that follows, Jesse and I discuss the process and challenges that GAP faced as they reexamined their revenue strategies and focused on an adaptive, sustainable future for their organization.
Karina Mangu-Ward: Why was change capital the resource that you needed, and why was it urgent?
Jesse Ehrensaft-Hawley: The economic collapse of 2008 and its effect on philanthropy led to Global Action Project losing some key institutional funders, whose youth media docket were dismantled. So, we went from an organization inching towards a $1 million budget to a half a million dollar budget.
In order to respond to the evolving landscape of institutional funding, we began work with Nonprofit Finance Fund to build a financial sustainability plan and develop new revenue strategies. What had become clear over that five-year period is that we actually needed a business model – a long-term model around multiple revenue strategies that will generate unrestricted net assets for the organization.
To complete planning and implement the new revenue strategies, we needed an influx of an initial investment to both cover some upfront startup costs and the first year of ongoing costs to sustain those strategies.
KMW: Change capital in the arts and culture sector is pretty hard for organizations to get their hands on. Where did you go for support and how did you make your case?
JEH: We successfully made the case to two long-time institutional funders, one from the arts field and the other from the youth development field, that we had began some important work with Nonprofit Finance Fund and the Taproot Foundation to assess GAP’s financial patterns and organizational assets and think through strategies towards long-term sustainability. But we needed to develop and assess the viability of various strategies, structure our long-term business plan, and then create the actual implementation plan for the identified strategies. I think we are able to make the case by showing the work we had already done as well as a very clear process moving forward for building our financial sustainability plan.
KMW: How did you put the money to work?
JEH: We used it to pull together the right consultants and stakeholders to do a very in-depth planning process. We have now actually created a pitch for an additional change capital grant for an investment in some infrastructure that will support ongoing generation of new revenue strategies, specifically around a much more aggressive and expanded major donor program and a multi-stakeholder grassroots fundraising program within the organization.
An additional change capital investment would help us pay for one year of a halftime grant writer, a critical step towards freeing up the organization’s leadership to scale up our major donor and grassroots fundraising initiatives. This investment would also allow the organization’s leadership to invest more energy into raising the organization’s profile, cultivating new institutional funding relationships, and, of course, providing strategic leadership to the organization and our programs.
KMW: When do you anticipate seeing a return on the change capital?
JEH: We did a thorough forecasting process for the next three years and we are seeing that by year two, the new revenue strategies will bring a net revenue. So, if we get an additional $50,000.00 one-time grant to invest in some startup costs as well as one-hire, by year two we will be able to expand our major donor programs as well as our institutional fundraising efforts, with an outcome that the new staff position will not just pay for itself, but generate additional net revenue for the organization.
KMW: Why do you feel it’s important to share this story with the field?
JEH: A major reason for creating the article was as a form of advocacy to circulate among our funders to share with their colleagues to make a case for change capital as a viable and critical funding strategy.
Also, we are constantly in conversation with our colleagues in youth media organizations, community-based social justice organizations and arts organizations, many of whom are struggling with similar challenges. Like us, many have questions about financial sustainability and are strategizing to develop ways to move beyond a mode of scrambling for survival to a mode of stability and sustainability. So, we hope that we can initiate dialogue with our peers and that other organizations can learn from our experience and reflections.
KMW: Anything else?
JEH: One of the things that we talked about in the article is the way change capital is typically talked about in terms of larger organizations. I think there is a need to look at what change capital as a framework can do for smaller organizations over a period of years. For a lot of smaller organizations, a smaller level of investment will make a big difference.
KMW: Right. You don’t need a cool mil to make it worthwhile?
JEH: Right, exactly. We’re not asking for a $1 million investment; what we are saying is that, for example, a $50,000.00 one-time investment over and above any kind of general operating funding will, within two-three years, allow us to generate net revenue of somewhere between $70,000.00 to $100,000.00. That is huge!
KMW: It’s a big investment.
JEH: I think that the impact can actually be even greater with a change capital approach to smaller organizations. I would ask philanthropic organizations to investigate and consider this strategy. And as change capital strategies are used to support smaller organizations, it will be critical that documentation and evaluation around those multi-year processes be undertaken and shared with the field.
This interview has been condensed and edited.
During September, I also spoke with Rebecca Thomas (until recently a Vice President at Nonprofit Finance Fund and the architect of their Leading for the Future program) and Holly Sidford (who worked closely with GAP during their process, and with NFF on Leading for the Future). I encourage you to read my interviews with them about their perspectives on the definition and practices of change capital.