Impact investors often talk about a new type of investment: patient capital (a term perhaps coined by Thomas Friedman and widely used by Acumen Fund). As opposed to traditional venture capital, patient capital has longer time horizons before investors start demanding a return. For-profit social ventures often need more time to become financially successful because they are attacking tough problems among challenging demographics.
An extension of patient capital that applies both to for-profits and nonprofits is what we will call “patient impact” (if others have used this term in this context let us know in the comments). Not only do financial returns take longer when facing tough problems, impact takes time as well. Startup tenets like Facebook’s original “move fast and break things” can be tougher to apply in the social impact space, when breaking things can lead to actual damage to people’s lives and lead to the nonprofit being cut off from risk averse funders.
The immediate impact that foundations and donors want to see is even more challenging for nonprofit startups than established nonprofits. The timing challenges are further exacerbated for tech nonprofits that have to build a great product before they can scale.
What this means for funders is: realize that optimizing an impact model takes time. Even if an organization is producing current impact it can still have huge expected future impact – but you may have to adjust your risk profile. Set aside funding for startup organizations that account for impact returns in 5 years instead of 1 or 2.
What this means for tech nonprofits is: help your funders realize that impact takes time. Organizations can be so quick to report impact that they miss out of fine-tuning their product market fit. They miss out on bigger impact in the long run to hit modest impact goals in the short term. Give yourself flexibility on impact timing, and don’t use funder impact requirements as an excuse to release a half-done product that ultimately fizzles out. If you get the product right early on then the funding will come; if you don’t then you’ll never have the opportunity to reach the impact and scale that you ultimately want.