The Peery Foundation has funded Vittana since 2008 with grants totaling over $600,000, with our last grant going out to Vittana after their announcement was made to close Vittana's doors. For those interested in a description of the why, or the mechanics of the decision to shut down Vittana, see Robin Wolaner's blog post, here (former CEO), or Kate Cochran's Next Billion article, here (former COO). Kate, and I sat down for a reflective virtual chat about what we could both learn from Vittana's story given the grantee-grantor relationship between Vittana and the Peery Foundation. We came up with many questions we wanted to ask each other and tried not to shy away from those more difficult to answer…
Jessamyn: How have people reacted to the news?
Kate: I'd say that people have reacted very kindly, expressing sadness because it seemed that we were having real impact but also there's a fair amount of surprise because nonprofits don't close very often. They are particularly surprised when we explain that we weren't forced to do this because of immediate funding problems but because the model just wasn't working the way we promised it would. Once they understand that, I've been touched by how many people have called our decision courageous.
Jessamyn: Was that a scary decision to make, Kate?
Kate: Yes, absolutely. I worried that we were giving up too soon or letting temporary fatigue or frustration cloud our judgement. But some exercises we did a few years ago really helped confirm the decision. In 2010, we created a strategy statement that promised that our partners would make 200,000 student loans by 2015 and the loans would be so successful they would inspire another 800,000 from competitors. We are approaching 2015 and our loan numbers are closer to 27,000, which is a pretty stark contrast. Our Board Chair also led us through a process of defining the standards every strategic decision should meet: Is it scale-able? Market-driven? Impactful? Data driven? Using that framework, we could not pretend that we were hitting the scale needed to be sustainable. So while the decision was scary, it was easier since we had these clear and long-standing decision criteria.
Kate: Vittana has always felt incredibly lucky that we could be fully transparent with the Peery Foundation--what's working/what's not. How much of a surprise was this news to you?
Jessamyn: It both was and wasn’t a surprise. We expect a portion of our grantees to not reach the scale they aim for or build the organisation they planned on building. This decision came out of the blue to some extent. Although we knew you were experimenting with Vittana’s funding model and trying to find the right path to scale, typically we see organisations truly flounder in the fund raising department before they close their doors, or they experience some unprecedented event of magnitude that becomes insurmountable. Vittana’s decision to close its doors came without (or before) those situations occurred. So in that regard it was more of a surprise.
Kate: What do you think the role of the funder should be when a social enterprise isn't meeting its targets?
Jessamyn: It depends on why they aren’t meeting their targets. For us it’s less about milestone achievement determining confidence in a team (and thus future funding), and more about how teams are learning from and adjusting their milestones—whether they achieve them or not. The tricky thing is it often takes much longer than anticipated for social entrepreneurs to reach proof of concept and find a path to scale. During those years it’s not unusual for targets to be missed and for goals to be adjusted as the team tweaks and iterates on their model. The hope is that eventually a scalable model emerges.
There has to be some flexibility from funders in understanding that perfect target achievement is not realistic (or means the targets aren’t ambitious enough), but also recognising when to have difficult conversations about whether the targets are realistic, and what course of action should be taken to adjust or step back from goals. I don’t think funders should be the ones to call for an organisation to discontinue their work—that should be a carefully considered decision between an org’s team and board—but it would be good if funders established relationships with grantees where they could appropriately vocalise concerns they might have long before they consider discontinuing funding.
Jessamyn: Do you think more non-profits should close their doors? In what circumstances?
Kate: I really do. At a very macro level, I worry that we have 1.4 million nonprofits in the US and so many of them stay so very small, taking tiny bites at very large problems. But my head isn't so disconnected from my heart to think that it's easy to give up on an organization that may mean a lot, even if it's to a small group of people. People form nonprofits to address a perceived need and those needs rarely disappear over night. I would like to see a few changes in how we perceive "exits" in this sector though. First, I love the short-term or special purpose nonprofit that identifies a need and establishes a limited time to address the need. By establishing a timeline upfront, it's less jarring when the organization eventually closes. I would also love to see more mergers or at least joining forces through collective action. Finally, I would like nonprofit executives to be brutally honest about what's working and what's not. Sometimes, that honesty will lead to a change in direction but I think it's ok if it leads to closing an organization.
Kate: You have an interesting perspective in seeing lots of different non-profits, each believing they are unique and effective. What's your take on the question of whether more of them should close or merge?
Jessamyn: There’s no question we need more efficiency in the social sector. I’d like to see fewer brand new orgs with new models launched and more entrepreneurial individuals start explicit replications of proven models that simply don’t exist in their geography. I’d love to see more non-profits either form partnerships with each other or consider merging in order to share knowledge, align services, and prevent doubled efforts and resources being spread too thin. As for closing, I’d imagine it is the right move for some non-profits out there, but I don’t think I’m the right person to judge which ones or in which circumstances that is the appropriate course of action.
Jessamyn: I have a hard time categorising Vittana as either a success or a failure. It seems like a bit of each—neither nullifying the other. Does the Vittana team regard this as a success or a failure?
Kate: Such a good question! I recently was on a panel with a well-known venture capitalist who made some kind remarks about Vittana's decision. He said that Vittana helped replace uncertainty and conjecture with knowledge and facts, which should be considered a success. I like looking at it that way and we're committed to sharing that knowledge so that the next entrepreneur can take this idea forward. We also feel very good that student loans exist now in places where they didn't before Vittana. There are 35 active programs in 17 countries that we believe will continue, especially with Kiva's ongoing support. Our role was to launch the products but these programs don't need us to continue to keep reaching students.
Kate: Do you think there are any lessons from this experience that might affect how you interact with other grantees?
Jessamyn: Absolutely. I learn new things from every grantee we have at the Peery Foundation. At any one time I have several things on my list for our team to discuss and figure out how to improve. In this instance I think I’d add to the list, 1) how can we remember to not step too far back when we have a long history with and org and a high degree of trust in their abilities (not that I believe anything we could have done would have changed the outcome, but we’d like to be more valuable thought partners to our grantees wrestling with hard questions), 2) how can we set the tone that mergers or closing down can be the right course of action and not something to be afraid of considering or doing, 3) this work takes an interesting balance of impatience and patience--sometimes we just need to go back to the drawing board or let some time pass before a path to scale is clear and viable. While being conscious of the power dynamic of funding, there's a lot we can do to positively influence grant seekers in considering less heroic but ultimately more responsible options.
Thanks for taking the time, Kate. We certainly admire everything you and the Vittana team accomplished in paving the way for truly global student loan availability!