Philanthropic funders can support Pay for Success (PFS) in many ways, from investing in projects to providing grants that lay a foundation for impact.
Investing in PFS
Funders participate in PFS projects and funds as an impact investor, providing the upfront capital to support service delivery. Philanthropic partners often bring a critical understanding of the challenges and opportunities in local and issue area context, and can incentivize other impact investors to support a project or fund. In PFS projects, some foundations participate as traditional investors, while others provide more catalytic capital, committing to a first loss position or providing credit enhancement to other impact investors.
Social Finance can facilitate philanthropic investments of many types — program-related investments (PRIs), mission-related investments (MRIs), recoverable or recyclable grants, funded or unfunded guarantees, and other investments.
Laying the Foundation for PFS
Philanthropic organizations and individuals can help build a strong foundation for PFS projects.
Grantmaking can support project design through feasibility assessment, which could include evaluating the social problem, examining evidence-based interventions, identifying growth-ready service providers, and modeling potential transaction economics. These analyses prepare investors, payors, and other project partners to pursue a PFS project, and help identify any additional capacity that a service provider needs to pursue PFS.
Philanthropic support is also critical during the design phase; foundations and individuals can help build capacity among different PFS stakeholders, support early project pilots or evaluation costs, and contribute to outcomes payments alongside government and other payors.
Catalyzing Innovation and Thought Leadership
Foundations have played an important role in Social Finance’s ability to innovate since its founding. Initial supporters like the Pershing Square Foundation and the Rockefeller Foundation supported our early work adapting the Social Impact Bond to a US context, and helped us launch our first project in 2013. In recent years, we have worked with philanthropic partners to design and test Outcomes Rate Cards, and Career Impact Bonds, now core parts of our strategy.
Foundations also help build the PFS field through market education and thought leadership. From webinars to publications and workshops, we have partnered with foundations to share our learnings, and develop a strong and sustainable PFS market.
Currently, we are working with a group of philanthropic funders and three Federal Reserve Banks to develop a book-length publication and engage in nationwide conversations on innovative workforce partnerships.
“Silicon Valley Community Foundation believes we have the responsibility to help guide our donors in maximizing their philanthropic dollars not only through traditional grantmaking but also through place-based and impact-first investments. Partnering with Social Finance has allowed us to expand the tools we offer our donors to help them amplify their impact, achieve their philanthropic goals, and contribute to equitable recovery efforts.”— Nicole Taylor, President and CEO, Silicon Valley Community Foundation
Our philanthropic partners include individuals, family foundations, private foundations, and donor-advised funds. See a list of our supporters >>
- “A $10M (AUD) Award and Why We Are Using It to Address Economic Mobility,” Social Finance
- “After the Pandemic: Addressing the Permanent Crisis with Pay for Success Programs,” Stanford Social Innovation Review
- “Charting the Course: Reflections on the South Carolina Nurse-Family Partnership Pay for Success Pilot,” Social Finance
- “To Support an Equitable Recovery, Donor-Advised Funds Should Look Beyond Grantmaking,” Inside Philanthropy
- See more publications >>
The Social Finance team brings experience from government, private foundations, nonprofits, and leading financial, consulting, and legal firms. Learn more >>
For more information on supporting our work, contact Vice President Annie Knickman Plancher.