Defining Social Innovation

Social innovation is the process of developing and deploying effective solutions to challenging and often systemic social and environmental issues in support of social progress. Social innovation is not the prerogative or privilege of any organizational form or legal structure. Solutions often require the active collaboration of constituents across government, business, and the nonprofit world.”

—Soule, Malhotra, Clavier​

Grant Funding is most often thought of, and certainly mostly used for, social innovation. This is a space that draws billions from foundations and corporate giving programs. Recipients in this space are predominantly non-profits because of their tax advantaged status. The US Government is also very active in this space, with many large federal grants going to cities, states and non-profits to tackle social issues.

Where to Find Social Innovation Grants?

Naturally, our suggestion is going to be OpenGrants. Here is a quick overview of what our platform has to offer as a means of searching for grant funding. We highly recommend starting here for two reasons: it's free, and it's the fastest way to kick off your research journey.

Consider the following stats as you examine your opportunity in this space.

Top foundations giving grants in 2020:

Partnering Strategy

There are two main means of partnering that can allow you to access funding from tax advantaged vehicles like foundations or meet non-profit requirements.

Subcontracting

Wondering how to qualify for grants targeting non-profits as a for profit company? You're in the right place. As a subcontractor in a grant contract, you can provide your services, get paid, and participate, while not incurring any major liability. Working with a partner who is the main applicant, and meets any non-profit requirements, allows you to get funding as well.

Unlike prime contractors, subcontractors do not work directly with the funder, but instead work for other awardees. A common example of a partnership involves teaming up with a university, which commonly enjoy tax advantaged status. Many companies will partner with a university or go after foundation funding for research. This allows the foundation to accomplish its goals, and makes them feel confident that funding will be properly administered. The startup benefits by raising its profile, associating itself with a major institution, and they get funding.

Partnering strategies require relationships and deep understanding of your ecosystem to be really effective. OpenGrants is actively working on developing the digital network to facilitate ideal partnerships between stakeholders and grantors. It should be noted that the University/Startup concept is not the only way to partner up. When allowed by a grant solicitation or grantor, partnering strategies can be executed across diverse groups of stakeholders.

Fiscal Sponsorship

Fiscal sponsorship refers to the practice of nonprofit organizations offering their legal and tax-exempt status to groups engaged in activities related to the organizations’ missions. This is facilitated by a fees-based relationship between project and sponsoring organization. Fiscal sponsorship provides an attractive alternative by enabling projects to share a common administrative platform, and take advantage of a legal entity structure in an efficient manner.

With this structure, you can bypass delays and the costly process of creating an organization with infrastructure that would qualify for grant support and other tax-exempt contributions. You can lean into existing infrastructure and established administrative systems, give project leaders bandwidth to focus on the project mission, and produce high quality outcomes while keeping costs low.

Models of Fiscal Sponsorship:

Comprehensive

Project and sponsor are a single legal entity. Sponsor acts as umbrella and has control over project. Project administrators and leaders become employees of sponsor. Sponsor becomes responsible for receiving tax exempt donations and allocating funds to project, as well as undertaking full legal liability for actions of project. In exchange for the assistance provided, the sponsor usually will receive a small portion of the annual project revenue.

Pre-Approved Grant

Sponsor becomes grantee to the entity carrying out the project. Grant relationship emerges where mission goals are compatible, sponsor and grantee maintain separate legal entities. In order for funds to be transferred, the sponsor will accept tax exempt funds and convey them to project administrator as small grants. In this case, regularly scheduled reporting outlining grant funding usage will be required of the project entity. Project liability and project result ownership remains almost entirely under project entity. This model is particularly useful for projects dealing with intellectual property as they will maintain ownership of said property. However the fiscal sponsor must retain “variance power” or independent “discretion and control” over the fiscally sponsored project for the relationship to pass IRS regulation. Most commonly, sponsor will retain a portion of initial funding as payment.

What should projects expect of fiscal sponsorship?

Depending on the model of sponsorship chosen, project admins can expect different levels of engagement. In most models, the sponsor can expect some level of fiduciary oversight/financial management, administrative services, as well as legal status. Each relationship will differ based on pre-established agreements that the partners should have in place before any formal relationship contract is established.

When is the right time to approach a fiscal sponsor?

After establishing a program plan and conducting initial funding research to assure fiscal sponsorship is the right fit for your company and project goals. Project administrators will want to contract with a fiscal sponsor before pursuing donations or soliciting support from funders.

When does fiscal sponsorship make financial sense?

Pursuing incorporation or 501(c)3 nonprofit standing will rack up substantial costs rather quickly for the project. Typical funding for projects just getting started will often struggle with having enough bandwidth to take on the costly process of either of those options. In this type of case, pursuing shared nonprofit status as well as other administrative costs and cutting down time that would be lost from application process of incorporation.

Other Resources In The Social Innovation Ecosystem

There are a variety of other services out there to help you navigate this information. It should also be noted that there are some great free resources provided by the federal government.