EMCF’s experience with youth-serving organizations suggests that:

• Aggregating in advance larger amounts of up-front growth capital should help high-performing grantees pursue growth strategies more successfully, and
• Raising such capital has been slow and piecemeal for most grantees.

EMCF’s resources alone cannot provide all the up-front growth capital that promising grantees need, but we should be able to do more. That is why we launched a pilot to test a capital aggregation approach with three organizations: Nurse-Family Partnership, Youth Villages and Citizen Schools. Subsequently the incoming Obama administration cited all three as exemplary organizations and called for expanding and replicating programs like theirs throughout the nation. 

As of June 25, 2008, EMCF committed $39 million of a $120 million total goal, and 19 co-investors (and each organization's board) committed the remaining $81 million. Co-investors in each organization signed a shared "Memorandum of Understanding" that outlines a joint set of terms and conditions, performance metrics to be used by all investors, shared reporting, and a financial model that allows the grantee to draw down growth capital only if it achieves performance milestones, including the securing of reliable, renewable funding. All the GCAP funding flows directly from investors to the grantees, with coordinated payout schedules. 

(The Bridgespan Group and the Nonprofit Finance Fund assisted Nurse-Family Partnership, Youth Villages and Citizen Schools in developing their growth plans and financial models.) 

In its role as lead investor, EMCF is providing additional extra-financial support to help grantees meet their growth goals, and coordinating performance reporting, payouts and communications on behalf of its co-investors. EMCF plans to continue this facilitating role through 2012.

The grantees participating in the Growth Capital Aggregation Pilot were selected because:

• Their program models have been proven to make a critical difference in the lives of low-income youth.
• They demonstrated strong performance during EMCF's previous investments.
• Their growth plans are national in scope and impact, emphasize financial sustainability, and have the potential to influence public policy.
• They have solid, established leadership, including active boards of directors that are give-and-get investors in their organizations' growth campaigns.
• They have a strong base of prominent private and public partners, and access to the resources required to execute their growth plans.
• They are emerging as strong nonprofit “brands.”

If the pilot proves successful, the initial infusion of $120 million in up-front growth capital will lay the groundwork and pave the way for additional investment and support by others. All three organizations will continue to raise significant amounts of renewable, reliable private and public funding to execute their growth strategies and achieve long-term sustainability. 

Success will depend, of course, on the diligence of the grantees, the dedication of the co-investors, and economic and political conditions. Over time, we expect the pilot will produce the following outcomes: 

• $700 million in public funding will be leveraged by 2012.
• Grantees will achieve organizational and financial sustainability at scale.
• Co-investors will be able to make successful exits if they choose, assured that grantees are in a strong, sustainable position to make lasting contributions to society, including:
  • Impoverished, young first-time families will avoid criminality and achieve greater economic self-sufficiency.
  • Youth involved in the child welfare and juvenile justice systems will benefit from better preventive services that will give them a second chance to lead productive, healthy lives.
  • At-risk middle school students will improve their prospects of graduating from high school and attending college.
• Grantees will expand proven programs at an unprecedented rate and scale, benefitting more than 65,000 youth, in part because their leadership is able to spend more time concentrating on quality and growth, and less time raising funds. 
• Foundations, corporate philanthropy and individuals will successfully partner in other attempts at this funding approach, which in turn will drive more positive changes for disadvantaged youth and encourage improvements in public policy.