Advice for Funders Launching New Organizations
At Arabella, we have worked with dozens of funders to incubate new organizations and have noted the difference that a well thought-out planning process, as well as flexibility and partnership on the part of donors, can make. Without proper planning support, new organizations can struggle to define their mission and theory of action and consequently encounter difficulties in charting strategies for long-term success and sustainability. Funders who provide new entities with sufficient planning support, advice, and guidance increase the likelihood that new organizations can define, articulate, and execute on a compelling vision. Here are some best practices we’d like to share based on our experience:
Ensure that starting a new organization is justified. What value can a new entity bring that cannot be attained through the work of existing organizations working alone or collaboratively? Funders should assess their current portfolios and analyze the landscape of the sector or issue area they are focused on to identify gaps and options for filling those gaps. This will help avoid redundancy and potential competition among grantees who may not understand how a new organization relates to the funder’s strategy and their own work on the ground. It will also position the new entity for success in developing a cogent mission, strategy, and business model, and help to foster strong partnerships between the new organization and other organizations in the field.
Take the time to identify and invest in strong leadership. You will be placing an enormous amount of trust in the leader of the new organization and will need to collaborate with him or her frequently. In evaluating potential leaders, look for entrepreneurial capacity and experience as well as the ability to lead a strategic and business planning process. Are candidates able to tackle multiple issues simultaneously and deal effectually with ambiguity and setbacks? Can they motivate and inspire teams? Are they well positioned to engage with key stakeholders productively?
Provide time and resources for proper planning. Give a new leader time to talk with stakeholders, and observe and absorb what’s happening on the ground before developing a business plan. Provide consultants and perhaps an advisory committee who can be strategic thought partners to you and the organization’s leadership during this critical planning phase. These advisors can also help move the work forward until the leader selects staff members.
Be prepared to support all the needs of a new enterprise upfront, not just the programmatic ones. While your programmatic vision may be the catalyst for starting a new organization, the entity will require support in many other aspects of its operations. Ensure that the new organization is planning for all of its needs—programs, communications and outreach, but also governance, compliance, administrative infrastructure, financial management, etc. Also, as much as a new organization may have a solid business plan and financial projections, we can guarantee things will change once the plan is put into action. Flexible funding for start-up organizations to plan, experiment, and make mistakes is critical. Remember to provide for a significant ramp-up period (about two to three years) until the organization can identify and secure other revenue sources.
Consider your role as a partner and communicate often. In the more successful engagements we have seen, donors have positioned themselves as strategic thought partners, asking critical questions and supporting and advising, but not prescribing. Developing this kind of relationship will give the new organization the space it needs to fully think through its mission, role, structure, and functions. It can be helpful to hold frequent check-ins to discuss progress as plans evolve and take shape and as new issues and challenges arise.
Launching new organizations always brings some uncertainty, and there are no guarantees of success. That said, we have found that funders who follow the steps above are better able to help new organizations navigate the ambiguity that accompanies the process and establish a strong foundation for future programmatic and operational achievement.
Renée Eyma is an associate director with extensive experience as an investor and advisor to a number of start-up and early-stage social enterprises. She provides strategy, implementation, and due diligence services to a variety of Arabella’s institutional clients.