The Efficient Market Still Eludes the Sector (Part 3)

"It feels like something is trying to happen." Those are the words of Joel Getzendanner, presiding Trustee of the Fourth Sector Network, at a "deep dive" meeting on the fourth sector last Thursday in San Francisco.

The fourth sector is a broad term meant to encompass the hybrid businesses that are emerging in the space between the for profit and nonprofit corporate structures discussed in yesterday's post. [It, by definition, excludes nonprofits that have no way to produce "earned income" and live by grants and donations only.]

The meeting was "Toward a Capital Market for Organizations in the Fourth Sector: Mapping the System, Moving to Action." Sponsors of the meeting included: The Aspen Institute, Fourth Sector Network, Tides Foundation, Skoll Foundation, Calvert Foundation, and RSF Social Finance. The participants represented a who's who of individuals (and to a lesser extent, organizations) that have been trying to bring structure to the fourth sector and catalyze an "efficient market" in the social entrepreneurial segment of the nonprofit market.

The "something" that the organizers and many of us would like to see happen is the triggering of market forces to finally create a social capital marketplace. With now this broader group of organizations engaged on the issue, the growing success of social entrepreneurial organizations, and the hyper charisma of individuals in the room, there should be momentum for the fourth sector and we should start seeing elements of the fourth sectors starting to connect and flourish.

That "something" is not happening yet, as acknowledged by the leaders of the meeting. The "deep dive" focused on addressing the barriers to market forces. Many of us have been working on this issue for more than two years. The passion for breaking through these barriers was palpable.

A short-term alternative to the organic emergence of market forces was suggested. We should "start functioning as a capital market" among ourselves. We had donors, funders, intermediaries, social entrepreneurs, and even one media representative in the room. The argument is that that should be enough to start a market. A counter argument is that if we haven't done it before now, what has changed that would improve our likelihood of success?

Accompanying the passion was a touch of desperation. The reality is that making a market work is infrastructure building and infrastructure funding is definitely out of favor among our previously stalwart funders. The movement needs more seed capital (time) to allow us to connect and catalyze market forces. For instance, my organization's funding on this issue runs out in April. After that, the potential of the distribution channel to high net worth donors and key intermediaries we've been building (our modest contribution to a future efficient market) may never be realized.

I've heard rumors that some venture philanthropists around the country think infrastructure is an important issue and are predisposed to apply their talent and perhaps funding to the work. There is a high engagement opportunity here with a movement on the cusp. Any takers among our discerning donors?

Carla E. Dearing