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In The News

Who Knew That United Way Invested In Social Entrepreneurs?

Original Source: Forbes

June 7, 2016

By Michael Zakaras

Let’s be honest, when you think United Way , you think old school. It’s the biggest charity in the United States and one of the oldest, a pioneer of the workforce fundraising campaign where company employees donate directly from their paychecks. Its countless celebrity spokespeople and long-time partnership with the NFL have made it a household name.

United Way is probably the last group, meanwhile, that you’d expect to be making bets on early stage entrepreneurs with creative ideas for addressing social problems. But in Dallas, that’s exactly what’s happening.

In 2013 United Way of Metropolitan Dallas launched Ground Floor, a mentor-driven social innovation fund and impact accelerator program that invests seed funding in promising social ventures. The initiative began when local board members challenged the Dallas chapter to find new ways to tackle social problems where traditional avenues were falling short.

The problem is, United Way traditionally operates via a ‘closed partnership model’ – meaning that it funds the same groups year in and year out with little room for new organizations. The Dallas chapter had changed that in 2011 but its requirement that grantees demonstrate proven impact measures ruled out startups that were just getting going. Its three-year grant cycle also didn’t leave much flexibility for quickly spotting and betting on promising new approaches. But rather than throw up their hands, the local United Way team in Dallas did what entrepreneurs do: they found a different way forward.

CEO Jennifer Sampson describes the process as blowing the doors wide open to make room new ideas that addressed old problems. Like any good business, she says, her team knew that you had to be willing to take risks and anticipate what you’ll need 5-10 years from now, instead of only focusing on what works today. The same applied to social change. “We set bold community impact goals for ourselves and realized we needed to open our eyes to the innovative impact work happening in Dallas if we ever wanted to reach them.”

The first step? Find a group of sponsors and philanthropists who would be more attracted by the higher-risk, startup focus than traditional charity. AT&T T +0.22% jumped on board and launched an investment fund, and soon a community of venture capitalists and other business entrepreneurs were looking for ways to participate, including as mentors who could nurture new ideas as they grew.

Today Ground Floor hosts annual pitch days – what they call ‘Shark Tank with a heart’ – which is open to local startups, or innovative programs within existing NGOs, and sometimes strong ideas from outside Dallas that someone wants to import. Investors into the fund volunteer as judges and decide which ideas to go for.  

Ground Floor’s very first investment is probably its most successful: Café Momentum, a top quality restaurant in downtown Dallas that employs young people who have spent time in juvenile facilities. Referred to as the ‘restaurant of second chances’, young staff rotate through all aspects of restaurant work, including side-by-side with established chefs, where they learn all kinds of life and job skills. Café Momentum reduced recidivism rates for the men involved from 60% to just 11%.

The best part is, after a seed investment and launch support, Café Momentum is now showing strong enough results to quality for United Way’s competitive grants program. So in essence, via Ground Floor, United Way is growing its own pipeline of promising solutions to support in the future. And the $1.2M of overall seed funding across all its ventures to date has been leveraged to raise an additional $6.5M, a powerful multiplier effect.

Jennifer Sampson and Kate Knight (Director of Ground Floor) understand that others are paying attention, and they’re not shy about showcasing what they’ve done in the hopes that other United Way chapters follow suit. “We’re modeling what we think is a strategic new practice for the United Way community. This is a big change to a historical model that won’t be the only model that allows communities to thrive in the future.”

Ground Floor is also a reminder that social innovation isn’t limited to Silicon Valley but is, in fact, taking off across the country as a whole, sometimes backed by the unlikeliest of partners willing to test new ways of directing philanthropic dollars.