One Unconventional Approach Deserves Another: Funding Social Change Through Private Investment

Jake Harriman came to Stanford GSB by way of the Marine Corps. Catalyzed by the magnitude of trauma and suffering he witnessed as a platoon commander in Iraq, he resolved to start a nonprofit to help address what he sees as the root cause of global instability: extreme poverty.

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His nonprofit offers an innovative solution to global poverty. Instead of just focusing on a scarcity of resources, Jake’s organization, Nuru International, drills down deeper into the root causes of the problem. In Jake’s own words, Nuru aims to give people living in poverty “an environment to make meaningful choices for their families to improve their lives.”

Jake, who received his MBA from Stanford GSB in 2008, discussed his experiences with Nuru in a Social Innovation Conversation on May 31, 2013 with Jonathan Chang, Sloan ‘13. “I live in a world of choices,” says Jake. Nuru works to bring those same choices — a capacity for change and self-determination — to impoverished regions around the world by training local leaders in poverty-fighting solutions that address the specific needs of their own community. Ultimately, these solutions are funded by local, self-sustaining small business ventures.

Nuru’s unconventional approach has already garnered great success in the Kuria West district of Kenya, Nuru’s first project site. But it took another unconventional approach to get Nuru off the ground. Jake explains how pitching his idea to individual investors — rather than pursuing traditional sources of nonprofit funding — helped him get the capital he needed to turn his vision into a real intervention with the power to save people’s lives.

Don’t Rely on Philanthropy

He stayed away from traditional philanthropic contributions, and advises other social entrepreneurs to do the same. “Don’t go to foundations. Especially if you are a new idea,” he says. The limitations of foundation funding, he explains, start right at the application process. “There is no way you can tell and communicate your brand new idea in a compelling way in a pre-formatted program application for a foundation. It just can’t happen.”

Part of the problem is the complexity and competitive nature of the application process. “You might be putting together a package for $60,000 and it might take you two solid weeks of work as an entrepreneur only to get turned down because you are competing against 200 people with decent ideas.”

But the real issue, according to Jake, is that traditional foundations tend to be wary of an untested idea. “Foundations are not used to your new idea,” he says.

Eventually, once Nuru is fully established, he anticipates turning to large philanthropic funders like the Bill and Melinda Gates Foundation to help sustain the organization. “But that is basically after proof-of-concept,” he explains. “Once you get your idea proven, it’s a whole different ballgame.”

Court Key Individual Investors

Until a social venture can demonstrate proof of concept, Jake recommends searching out funding from individual investors. Because Jake began cultivating funding sources while still a student at Stanford, he was able to start with his mentors and advisers. Stanford, he says, helped him “incubate” his idea for Nuru and “give it legs.” He found key supporters just as his idea was beginning to take shape.

Stanford GSB, he says, “gave me a great network to begin to leverage, to begin accessing capital, and a lot of talent that helped me recruit other people to join my organization.”

Jake’s initial goal was to raise $450,000 to launch Nuru. One mentor in particular was essential to Jake’s efforts, and proved instrumental in both his guidance and his funding.

“He was smart enough to provide a challenge investment to me. He didn’t just hand me $100,000,” Jake recalls. “I went to him and asked for a large amount of money. He came back and said, ‘look, I’ll consider $100,000 but I’m not going to give it to you until you can raise the other $350,000.’”

The challenge, Jake explains, “provided fire under me.” And it also provided just the right nudge for other potential funders. “I could sell that challenge to other investors.”

Jake found that other investors grew more interested in his idea as they began to see who else was on board. “If they know the other people and they feel comfortable with them, they’ll hop in.”

Champion Your Idea

Of course, they’ll only hop in if they believe in the vision of the venture. Inspiring investors to share that vision is up to the entrepreneur — and that isn’t always easy. Just as with foundations, Jake has found that even some individual investors can be skeptical when faced with an unfamiliar idea.

“Every meeting you go to, you have to convince the person across the table. They are going to say it doesn’t work. Why? Because it doesn’t exist now,” Jake explains. “So you’ve got to show why what you’re doing will be able to create that value added and why no one else has been able to figure it out so far.”

To be a strong advocate for your idea, Jake says, you have to be an expert on every aspect of the organization you’re trying to create, from its loftiest goals to all the small steps it will take to attain them.  

“Know exactly what you are trying to accomplish,” he advises, and “have a vivid, bold vision that is going to transform something.”

Don’t Waste Your Time

To get the ball rolling, he says, “you need to get some big wins.” And when you are a student, time is of the essence. “You have a limited amount of time to raise capital,” he says. “So I usually tell people to think strategically about where you are going after your capital.”

Just as he recommends staying away from philanthropy during the initial funding stages, Jake also suggests that entrepreneurs think twice before jumping on the impact investing bandwagon.

To him, impact investing has great potential, “because it’s backed by really smart people who have a passion for this work and want to achieve a global scale of change.” That’s why “it is attracting a lot of flies.”

But, he says, “there is just not enough money there.” And the problem with going after such a limited pool of capital, he explains, is that entrepreneurs can get discouraged at a crucial stage of development.

“My fear is that a lot of good entrepreneurs with really good ideas go after that capital,” Jake says. “They don’t get it and they become frustrated and disenfranchised, and their good ideas are left on the cutting room floor.”

“Go after the big pools of capital,” Jake suggests. “Because in the beginning, it’s just about money; you have to get money to get your idea off the ground.”

Tackling a massive problem the way Jake has done it — by fostering change from the ground up — demands innovation at every stage of development. His approach to global poverty required him to rethink, and reject, every solution that had been tested before. To do this, he had to reject conventional wisdom about financing a nonprofit. His decision to work with private investors, rather than philanthropic foundations, gave him the momentum he needed to launch Nuru International. Profound change wasn’t just Jake’s goal; it was the key to his success.