Knight Foundation recently issued a report with the Rita Allen Foundation on how civic tech startups are seeking sustainability. Here, Christie George, director of the seed fund and angel investor network New Media Ventures, writes about two paths to getting into the black.
In their new report on sustaining civic tech, the Knight and Rita Allen Foundations raise critical questions about the future of our field. My firm, New Media Ventures, is committed to funding innovative approaches to civic tech, so we especially appreciate these two foundations publishing a critical landscape analysis. So much of what is covered in the report – honest assessments about scale and sustainability, critiques of existing funding norms – is usually only available to those deeply inside the field. In sharing these observations more broadly, the report democratizes access to knowledge and provides an opportunity for reflection for funders and founders alike.
1) The need for funders to support an organization's staffing capacity, particularly in sales.
2) The opportunity – and challenge – for civic tech groups to leverage small dollar donations as a revenue stream.
It's tempting to focus on the "tech" part of civic tech, but the report provided a helpful reminder that sales skills and capacity have been crucial to the success of some of the fastest-growing startups in the field. The authors cite Y-Combinator founder Paul Graham's observation that, "enterprise software companies aren't technology companies, they're sales companies, and sales depends mostly on effort." But the report also notes that most civic tech organizations launch before they have dedicated sales staff, and often don't hire these roles until they secure significant funding. I was struck both by the clarity with which the report identifies sales capacity as a need, and the challenge of getting funding for it from the philanthropic sector.
As the report notes, while venture funding often invests in core capacities such as tech development and sales staff, philanthropic funding for civic tech startups is largely project-based. While there are a growing number of philanthropic funders that provide general operating support, too often these institutions prioritize project or restricted grants for nonprofits. This model is especially limiting in the case of civic tech startups, as it doesn't allow founders to invest in the kind of sales talent required to scale quickly.
At the same time, many philanthropic funders continue to undervalue organizational capacity, despite efforts to dismantle the overhead myth within donor circles. Sales staff are what might traditionally be considered "overhead" in the world of philanthropic funding. But of course, effective sales allow startups to achieve goals and scale impact more quickly. Philanthropic funders should embrace this reality by investing in sales capacity so organizations can reach their full potential. As investors in the field, we have an opportunity to fund in a way that builds capacity and positions our grantees for success long after our last grant is made.
As a funder of activist tech, New Media Ventures supports many projects that raise significant money through small dollar donations, and we're excited about more organizations in the civic tech sector leveraging this scalable financing strategy. After all, as the report notes, since the 2016 election we've seen dozens of activist organizations scale quickly simply by asking their volunteers to become donors as well.
We agree that small dollar donations can be a powerful lever to improve long-term organizational sustainability, and make startups less susceptible to the whims of a single, large donor. But we particularly appreciated how cleareyed the report was in highlighting the challenges of creating a small dollar donor program. It's not simply a matter of adding a Donate button to a website. The report offers examples of groups like Avaaz, that "invested resources early in the infrastructure needed to cultivate small dollar donors. This included building a mailing list, investing in digital marketing capabilities and understanding how to run goal-driven campaigns to engage its community." Clearly, designing and optimizing a small dollar donor program requires significant investments in infrastructure, staff and technology. And none of this happens without the commitment to capacity building that I noted earlier.
Whether we're looking for opportunities to kickstart new organizations or improve existing ones, a commitment to building capacity is essential to success. Thank you to Knight Foundation and the Rita Allen Foundation for providing this analysis. With the right investment, civic tech can be a powerful driver for social change.
George is the director of New Media Ventures, the first national network of angel investors supporting media and tech startups that disrupt politics and catalyze progressive change.