Nonprofit organizations don’t exist to make money, but without money, they’ll have a hard time fulfilling their missions – and many are in a constant struggle to stay afloat. According to the National Council of Nonprofits, less than one-quarter of nonprofits have at least six months’ worth of cash reserves. Most have just enough capital to cover their overhead for three months.
These financial struggles have led to a rise in venture philanthropy, in which venture capital firms and other for-profit companies invest in the nonprofit sector. The idea is to give nonprofits the financial wherewithal to foster positive change without worrying about how the bills are paid.
As the Givebutter website noted, venture philanthropy can be either part of a larger corporate social responsibility program or as a standalone venture. In the latter case, venture capital firms often invest in nonprofits that focus on areas of interest to the VC itself, such as battling hunger, fighting climate change, or promoting racial equity.
Most VC firms invest in nonprofits as a small part of the overall business. But a new player in the field, the Levine Impact Lab, takes a different approach. It invests solely in individuals and organizations that accelerate positive change, emphasizing sustainability.
The Lab was co-founded by Peter Levine, general partner at Andreessen Horowitz, a Menlo Park, California-based venture capital firm better known as a16z. The other co-founder is Alex Honnold, a professional rock climber and founder of the Honnold Foundation, which provides grants to organizations advancing solar energy worldwide.
The Lab provides VC-level funding to Honnold Foundation partners whose projects are particularly ripe to scale. In addition to money, organizations will gain access to resources and mentorship to help them with networking, government relations, recruiting, marketing, fundraising, strategic goal setting, board management, and finances.
The seeds for the Levine Impact Lab were planted when Peter Levine learned about Honnold’s philanthropy work. Levine “immediately became a donor and adviser” to the foundation, he wrote in a column for Fast Company. He also learned from Alex Honnold about the challenges the foundation’s partner organizations faced.
“The biggest challenge in climate philanthropy is getting the money and expertise to the people and projects that need it most,” Honnold said. “Big-bet tech projects are easier to fund with big numbers, but it’s a lot harder to put those dollars to effective use with global grassroots organizations. Money and time go much further with the smaller-scale projects and have a much larger human impact.”
Levine saw a way to leverage the VC model to support Honnold, which eventually served as the vision of the Levine Impact Lab.
The Lab’s initial cohort of four U.S.-based organizations are at “varying stages of growth,” Levine wrote.
One of the organizations is Native Renewables, which was founded by two Navajo women to address the energy inequity in Navajo and Hopi communities where 80,000-plus residents still live entirely off-grid. The Honnold Foundation provided a grant that supported the installation of photovoltaic systems on six homes and a paid workforce development program for a small group of local technicians.
“Given the clear volume of need, coupled with a sharp leadership team of PhDs and engineers, it’s clear that Native Renewables has the potential to rapidly scale,” Levine wrote. “Through the Impact Lab, Native Renewables and other cohort organizations will have access to one-on-one mentorship, along with tailored support on future-facing strategic planning, financial management, and HR resourcing, among other topics.
Another organization the Lab works with is Southside Blooms, which grows flowers using solar energy technology across 10 acres of previously vacant land in south Chicago. Through this work, local youth learn to grow and sell their plants. This business model has the potential to be replicated in other communities and “have a broad impact on both environmental sustainability and economic development,” Levine noted.
Through the Impact Lab, each partner organization will receive unrestricted grant funding for the three-year duration of the program, which lets them allocate funds where they are most needed. The Lab also plans to enlist leaders from the nonprofit community to ensure that the organizations have the tools, resources, and expertise they need to grow.
“Given the varied sizes of the partner organizations, we know that their needs will also be varied,” Levine noted. “One might need marketing and communications support, whereas another might need business planning. It will be a bit like matchmaking for nonprofits, and as the Lab grows with a new cohort chosen annually, we’re hoping this expert network will grow too.”