Through a combined grant of $4.5 million from the Goldman Sachs Foundation and the Pew Charitable Trusts, the Yale School of Management will initiate “The Yale SOM-Goldman Sachs Foundation Partnership on Nonprofit Ventures” this May.
The partnership will fund a business plan competition for nonprofit organizations seeking to engage in “for-profit” activities with the intention of financing their philanthropic activities.
“Nonprofits across the country always have had to balance their social mission and the bottom line,” Pew director Don Kimmelman said in a draft press release. “Traditionally, most have been more concerned with doing good work — carrying out their charitable purpose — than with their finances. We expect that this pioneering project will have ripple effects throughout the nonprofit sector.”
The partnership will begin accepting entries to the business plan competition in May. After the nonprofit firms spend a year developing their plans, the SOM will select 20 candidates to come to the final competition in May 2003.
Four grand prize winners will each receive $100,000 to launch their business proposals. In addition, four semi-finalists will receive $25,000 each.
SOM Deputy Dean and project co-director Stan Garstka said that although not all 20 teams will receive financial rewards, they will all benefit from business advice offered by the SOM. After being invited to attend the final competition, each of the 20 organizations will receive on-site business assistance from a team of consultants and SOM students.
In order to complement the students’ involvement in this partnership, the SOM will offer a course next spring on nonprofit ventures. Garstka said working with professional consultants and nonprofit organizations will give SOM students a valuable learning experience.
But SOM professor Sharon Oster, who is also co-directing the project, said the most distinguishing characteristic of the competition is that it is not geared primarily towards students, whereas nearly all other business school-sponsored competitions are.
Oster said the idea originally began with the Pew Charitable Trusts, an organization that provides grants for nonprofit ventures. After the SOM agreed to participate in the project, the Goldman Sachs Foundation decided to sign on as a partner because of its commitment to social enterprise.
“[The partnership] is a perfect fit for us because it entails a social mission, entrepreneurship, finance and economics,” Oster said.
The Pew foundation will invest $3 million over three years while Goldman Sachs will donate $1.5 million over two years and also provide additional financial services.
Garstka said he is excited about the prospect of meshing SOM expertise with the social missions of nonprofit organizations.
“The objective is to turn their nascent ideas into real business plans,” Garstka said. “And we want to take entrepreneurship and hard core, for-profit business skills and put them to use in socially responsible, nonprofit ventures.”
While Oster and Garstka are still in the process of forming the 10 to 12 person executive board, Oster said the body “is shaping up to be a very high level, distinguished board.”
Oster said the board will include Rajat Gupta, managing director of McKinsey and Co., one of the world’s leading consulting firms. A significant portion of the professional consultants provided to the nonprofit contestants will come from McKinsey.
Organizers will hold a May 1 gala at the Yale Club of New York to formally begin the project. In addition to faculty, administrators and alumni from the SOM, representatives from Goldman Sachs, Pew, McKinsey and a host of nonprofit organizations will attend.