The L3C from A to Z, June 6, 7 at NU’s Kellogg School, Levy Entrepreneurship Center

Americans for Community Development is hosting its first conference exploring the intricate financial and legal aspects of the L3C with true experts in the field. As Liaison for the Media Working Group for ACD, I’ll be hosting a conversation with others in the journalism field about the possibilities of an L3C newsroom. This is an everything you ever wanted to know about L3Cs, what they are and how they relate to 501(c)3s and the whole concept of social enterprise and sustainable social change.

The L3C (Low-profit Limited Liability Company) is a hot topic in the nonprofit sector that up until now has only received minimal attention at all the nonprofit conferences and meetings. It may change the way socially beneficial services are delivered. It may represent a whole new paradigm in private public partnerships. And it may finally bring substantial amounts of market rate investment dollars into the social sector.

Americans for Community Development and The Levy Entrepreneurship Center of the Kellogg School of Management at Northwestern University have partnered along with Supporting Sponsor Council On Foundations to present the first conference devoted exclusively to the L3C.

Do you work in the charitable sector, an economic development agency, a foundation, a government agency, social finance,
healthcare? Are you interested in how we can do more with less from government, while rebuilding our infrastructure? Is social enterprise your thing? If any answer is yes, you need to be in Evanston, Illinois June 6th and 7th, 2011.

For additional information or questions
Karen Woods: (231) 578-0905
Janice Lang: (914) 248-8443

To register, visit the ACD website.

PRI-Makers open to choices, including L3Cs

“The jury is out,” as to whether new corporate forms like the L3C (low profit limited liability company) and the B-Corp certification will make it easier for social enterprises and foundations to work together, agreed foundation executives at a 2010 meeting of PRI-Makers in Chicago. But foundation executives also said they are open to having more choices. [see note about program related investments at end of this entry.]

Discussions of the L3C and other forms are emerging on the social enterprise landscape with rapidity these days. The Internet gives them viral energy but the question of how philanthropy responds during this adaptation phase is key to how effective these forms will be moving into the future.

“I am really interested in these forms of innovation,’” said Jeff Clarke, from Alaska’s Rasmuson Foundation. “The conversation we are having is ‘How do foundations adapt and test these new forms?’ There’s all kinds of activity happening in the capital markets — How do we participate and how do we influence?”

In a conversation about what PRI-Makers call “this alphabet soup” of new corporate forms a collective light bulb went off as to their usefulness. The following is an interview with Mary Anne Rodgers of the David and Lucile Packard Foundation. Rodgers moderated a session on new corporate forms at the PRI-Makers conference.

“We had a good discussion about the move to L3Cs and other kinds of corporate forms,” Rodgers said. “What we learned is that the growing interest in corporate forms addresses different needs that are perceived to make not just funding — but also receiving — PRIs easier.

“One of the challenges for a PRI is to establish the charitable purpose and establish that the principal purpose is not to make money but to achieve some other mission,“ she said.

“When you are giving to a 501(c)3 public charity, that test is pretty easy because by definition the organization is a charity and by definition they will not make much money,” she said. “But if you are giving to a for-profit organization, you need a harder test because it is expected the corporation is going to make money, yet you have to be sure the organization is really not just about making money.”

“The point of these different corporate forms is to somehow embed in the corporate structure a charitable purpose or a partially charitable benefit so that the test for foundation investment is easier to meet,” Rodgers said.

“The benefit to the organization is that the manager using that form [the L3C entrepreneur] would not be subject to criticism if in fact they were not maximizing profit but were instead maximizing the charitable benefit.”

“I think the jury is out,” Rodgers said. “These forms are new. They are being adopted at some states. Some states are taking different approaches. The jury is out as to how effective they will be but I think most people in the audience [of PRI-Makers] think the more choices the better. Some forms will work for potential recipients and for potential funders. Others will not .”

“These forms may well make it easier for people to come together and meet the fundamental tests of charitable investing,” she said.

“I think PRIs are things smaller foundations can do. Absolutely,” Rodgers said. “If you want to get started and you are not sure what to do, one terrific thing you can do is find your local community development organization and make an investment that supports community development [through a CDFI, community development financial institution.

“You get a federally insured investment,” Rodgers said. “That’s simple.”

PRI stands for program-related investment, which PRI-Makers define as a type of mission or social investment that foundations make in order to achieve their philanthropic goals. Like grants, PRIs are vehicles for making inexpensive capital available to organizations that are addressing social or environmental concerns. Unlike grants, PRIs are expected to be repaid, often with at least a modest rate of return. Once repaid, PRIs are reused for other charitable purposes.

NOTE: I received this comment from Robert Lang, head of Americans for Community Development. “The statement that PRIs are expected to be repaid is very wrong,” Lang says. “Although PRIs can be loans they may also be equity investments, loan guarantees, low cost leases and anything else that would classify as an investment in the commercial world. This is a common misconception even among some PRI Makers,” Lang says. “If PRIs are to repaid they must be used for a new PRI or grant within one year of receipt,” he says.

As dots connect, whole is emerging for future of news

Chicago Journalism Townhall
Chicago Journalism Townhall (Photo credit: sally garden)

As dots connect, whole is emerging for future of news

The online dots are quickly connecting. Gov2.0 entrepreneurs are building a strong backbone for a hyperlocal new stream. And much of it is happening here in Chicago.

Continue reading As dots connect, whole is emerging for future of news

CMW panel on L3C and some thoughts on PRI-Makers Network

The Community Media Workshop held a panel May 7 on the future of news as a social enterprise and the L3C [low profit limited liability company] model.

The following Monday, I attended the bi-annual conference of the PRI-Makers Network. PRIs are Program Related Investments and they are posed at the center of the L3C model. A PRI is an investment made by a foundation — in various forms —  at below market rates. The foundation expects a return on the money – with varying degrees of rigidity. And this investment is “program related” because its is tied to the program areas funded by the foundations. Pretty simple concept!

I will be sharing more of what I learned during those three days in some upcoming posts. Meanwhile, some of my thoughts going in were confirmed: only a small number of foundations are making PRIS. PRIs are only a tiny percent — 1%— of total funding by foundations. As I say in the clip, PRI makers are similar to angels in that they seek and expect a dollar return for their investment.

Their money is, however, patient, [unlike venture capitalists] in that they are asking a below market rate return and will work with the social venture to ensure its success over time. Topmost they are expecting a return in social good for their investment. Foundations are typically working with many partners to make these deals work and there is a lot of haggling at the table over details as in any deal. Foundations themselves are going through a vast culture shift themselves over PRIs and how they fit into philanthropy.

I informally floated the idea of a journalistic operation as a social enterprise by a few PRI-Makers and the idea was met with interest, albeit reserved, as to be expected. More to come

Video 3 from Community Media Workshop on Vimeo.

L3Cs — time to define terms.

It seems we have our work cut out for us.

As we collectively blue sky different operational models for new media companies, we really have to work very thoroughly at helping our new news entrepreneurs and would-be entrepreneurs understand what we are talking about.

I was on a panel Friday with veteran social entrepreneur John Plunkett, hosted by Thom Clark, President of the Community Media Workshop, discussing the low-profit limited liability company (L3C) and its potential for media. It was the first in-depth conversation about L3C operations I have participated in here in Chicago. And deep indeed did Plunkett and Clark take us. Maybe —for this group at least —just a tad too deep into the operational and budget linkages of Plunkett’s new, first ever L3C.

We had a great turnout and I was glad to see many colleagues there, notably Steve Rhodes of the Beachwood Reporter, Andrew Huff of Gaper’s Block and Gordon Waleck of LISC New Communities. Occupying the front row were Vivian Vahlberg from the Chicago Community Trust/Knight Foundation Community News Matters program and a few seats down sat Clark Bell, head of journalism programs for the McCormick Fundation.

I learned quite a bit. I could see Vivian — as well as a few others — very happily scribbling away. But I came away with the impression that we need to back up a few paces before we can host an informed and informative conversation of this type. Foundations, corporations, corporate foundations, and every other kind of entity in between, have very different reasons for giving money. And they have different pots of money that they give from. If we are going to ask for that money, we need to know what those pots are and what the foundation requires in return.

This is not the stuff journalist’s dreams are typically made of.

So it seems it’s time we define our terms, to see if they are terms the new news can live with.

That is one of many reasons that I volunteered to report and blog from the PRI Makers conference next week, a gathering of those foundations that make those elusive “Program-Related Investments” at the heart of the L3C model.

I’ll be Twittering as I go at hashtag #PRI10. Read along and learn with me.

What do PRI Makers care about?

What do PRI Makers care about?

Well it says it right there on their website.

Says Alaina Smith, Communications Manager for Philanthropy Northwest, who is running the conference here.

Innovate. Leverage. Grow.

Innovate: In making PRIs, foundations are employing new and evolving approaches to philanthropy. By making inexpensive capital available to enterprising organizations, they are encouraging new approaches to addressing social needs.

Leverage: Foundations use PRIs to make the most of their resources. PRIs are recyclable. Their proceeds can be reused over and over to extend their value. Strategically timed and deployed PRIs can attract additional investment from private public sources, multiplying their impact.

Grow: While grants are instrumental in testing ideas and establishing programs, additional kinds of investment are necessary to build sustainable organizations and bring effective programs to scale. PRIs can accelerate that process and help organizations reach greater numbers of people.

There’s also a clue in the language revealed under one of the PRI Maker home page drop-downs

Finding Deals
Investment opportunities
PRI Activity Database
Deals Clearinghouse

Doesn’t sound much like charity, does it? That’s why I like the sound of it for media.