‘Second Stage’ For Startups

Samuel Bronfman and others begin exploring intermediate funding strategies.

04/24/12
Staff Writer
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G-dcast.com is a poster child of the Jewish startup sector, the grass-roots movement that aims to reach the disinterested and unaffiliated by offering new ways — such as record labels, bike rides and online Shabbat services — to connect with Judaism. Over 3,000 educators around the world use G-dcast’s funky parsha-of-the-week videos, which have been viewed over a million times on the web, the group says.

Why, then, is G-dcast about to find itself out on the street?

“It’s not just my problem,” said Sarah Lefton, founder and director of G-dcast, which has doubled its budget and hired three part-time staff in the past year, but will soon struggle to make rent. “All of the young Jewish organizations in San Francisco have the same problem.”

In fact, most young Jewish organizations, wherever they are based, are having a hard time growing. Last week, the Samuel Bronfman Foundation became the first major Jewish philanthropy to tackle this problem in a systematic way, announcing a “Second Stage Fund” to support young organizations with small budgets that are at least starting to plan their next stage of development.

“We are looking for organizations that have thought strategically about their growth and how to address their next stage of development,” said Ariel Groveman Weiner, associate director of the foundation. “We want organizations that know this needs to be a priority.”

In 2010, the Samuel Bronfman Foundation gave almost $3 million in grants to a range of mostly Jewish causes, including newer groups like Keshet, which pushes for the inclusion of gay, lesbian, bisexual and transgender Jews, and established organizations, such as the Federation of Jewish Men’s Clubs.

The new fund will offer up to $100,000 over multiple years to organizations that are least six years old, but have operating budgets of less than $5 million. Both the ability to use the money for operations instead of only programming and the multi-year commitment are unusual, said Nina Bruder, the executive director of Bikkurim, an incubator for new Jewish organizations that recently released a report documenting barriers to startups’ growth and making recommendations. The Samuel Bronfman Foundation also helped pay for the Bikkurim report.

“My experience is that people want to fund sexy programs involving films and kids, and nobody wants to pay for our office space,” Lefton said. G-dcast only has an office at all because a friend of Lefton’s is charging her a token rent for some unused workspace. That charmed arrangement is ending in June.

Bronfman’s Second Stage Fund reflects a larger trend in which philanthropy is seeing a benefit to emulating the business world, where fledgling groups’ progress from stage to stage is more neatly demarcated by different types of investors and levels of funding.

“There are exceptions to every rule, but it’s helpful to think in terms of stages,” said Lara Galinsky, a senior vice president at Echoing Green, which provides funding and other forms of support to social entrepreneurs. “Organizations and funding streams are starting to organize around different phases, and there is a bit of a pipeline, but there needs to be a lot more support.” 

Weiner couldn’t say in advance how many organizations will receive grants from the Second Stage Fund. Edgar Bronfman, who funds the Samuel Bronfman Foundation named in honor of his father, also gives personally and through other vehicles, and doesn't make his total giving public. The Second Stage Fund represents an additional way for the foundation to engage with the field, and its priorities and goals will remain the same, Weiner said.

For groups like G-dcast, which hopes to apply for second-stage funding from Bronfman, getting beyond the scrappy startup stage is necessary. But it’s also expensive and complicated, said David Cygielman, founder and chief executive officer of Moishe House, the growing community-building initiative that helps Jews in their 20s live together and do outreach.

“You operate as a startup, you’re doing things that can keep the lights on, you cut as many corners as you can. Now our financials are more complex; we have to do an external audit; we have to be insured in ways that we weren’t insured before,” he said.

Moishe House’s rapid growth — it has tripled in size to 46 locations since 2008 — prompted the Jim Joseph Foundation, one of its major funders, to pay for $100,000 worth of consulting from Olive Grove Consulting so it can figure out what it wants to look like five years from now.

That’s the size of one of Bronfman’s multi-year Second Stage Fund grants. Cygielman estimates, with the help of Olive Grove, that for Moishe House to reach its potential over the next five years it will need about $18 million.

For Moishe House, growth means geographic expansion in addition to new programs, more staff and upgraded infrastructure, a trajectory that’s gratifying to an organization’s founders and funders. But not every startup can or should grow in this way, Weiner said, and part of the foundation’s reason for starting the Second Stage Fund is to explore alternative models. The Second Stage Fund’s official request for proposals mentions mergers, spin-offs and restructuring.

“For some organizations, financial sustainability may be scaling up, for others it might unfortunately mean closing, and then there are multiple creative possibilities in the middle that might not necessarily need an infusion of huge capital — but just vision and collaboration,” she said.

 

Last Update:

04/27/2012 - 06:00

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I'm participating in a panel next month on the future of Jewish culture and was asked to contribute some preliminary thoughts. I also focused on the issue of second stage funding -- particularly the lack thereof. Check it out: http://www.speakerslab.org/category/panelist-statements/

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