As the above examples suggest, The Pershing Square Foundation has focused on supporting solutions with the potential for scale. Although we have long understood that there is no one size-fits-all approach, we have learned from an array of exceptional organizations that impact at scale can take many forms: direct impact, new models for replication, policy influence, or some combination thereof – for starters.
Direct impact at scale
Some organizations successfully scale their operations by improving efficiency and reaching new markets at a rapidly compounding growth rate. These nonprofits are not unlike technology companies in how quickly they can scale their operations, provided they find philanthropic, corporate or government support to do so. As we have seen, in the near decade since PSF first invested in One Acre Fund, the organization has grown 100 fold, from 4,000 to 400,000 families, while repeatedly halving the philanthropic subsidy required per farmer every four years from $100 to $50 to $25.
New models for replication
Many organizations in the PSF portfolio achieve impact at scale by creating new models that can be replicated around the world.
For example, while One Acre Fund (OAF) plans to reach one million farmers by 2020, there are millions more across the globe it cannot serve. The good news is OAF is part of a growing and holistic view of the needs of smallholder farmers. At the same time we invested in OAF, we also invested in Root Capital, a nonprofit social investment fund that provides capital, training and market access for farmers to grow their way out of poverty. Unlike OAF, which works directly with smallholder farmers, Root Capital serves cooperatives and private businesses that aggregate the harvests of hundreds or even thousands of farmers. Root Capital finances businesses that supply buyers like Starbucks, Whole Foods, and Keurig Green Mountain, which in turn pay higher and more stable prices to small scale farmers than they would otherwise obtain. To date, Root Capital has made $1 billion in loan disbursements to more than 600 borrowers reaching nearly six million poor agricultural households across Latin America and Africa. Scale is important, but the model even more so, as organizations like Root and OAF have inspired a new generation of rural agriculture entrepreneurs. In 2014, PSF invested in myAgro, a Mali-based organization started by One Acre Fund alumna Anushka Ratnayake that uses phone-enabled savings and pay-as-you-go financing to help farmers ‘save their way’ out of poverty through improved farm yields. These organizations have not only reached millions of the rural poor; they have changed the way the world – philanthropy, development finance institutions, governments – thinks about and addresses global poverty.
In recent years, PSF has focused increasingly on supporting organizations that aim to achieve impact at scale through policy change.
For example, PSF has partnered closely with the Innocence Project on its state policy reform program, expanding access to post-conviction DNA testing, mandatory recording of interrogations, and changes in eyewitness identification practices. Through their work, the Innocence Project has helped to shift the overall climate around criminal justice.
Working with state and local governments, Social Finance is an organization that mobilizes capital to drive change in a number of areas, including educational achievement, public health, workforce development, and criminal justice. Core to Social Finance’s work is the development of pay for success financing, also commonly referred to as Social Impact Bonds (SIBs). When PSF first invested in Social Finance, pay for success was a mostly obscure and abstract idea – no one in the U.S. had yet executed a SIB, and few were familiar with the model. Today, pay for success is a mainstream idea with a thriving ecosystem of public and private sector participants.
Globally, more than 60 pay for success projects have been launched in 15 countries with more than $200 million raised. In the U.S. there are more than a dozen active projects and more than two dozen states developing new initiatives.