The Opportunity Beyond the Uncertainty

Thanks to a grant from Nick Barr and the fiscal sponsorship of hackNY, I’ve spent the past year exploring a hunch: that the social sector needs more risk capital to fund experimentation.

During this time, I’ve interviewed a few dozen experts in the field—non-profit founders, execs, board members and senior staff, as well as program officers, impact investors and consultants.

Before I dive into what I’ve learned, let me explain what I mean:

First, by social sector I mean non-profits that address systemic issues like entrenched racism, climate-driven displacement, addiction crises, or the growing gap in access to mental health care, where there is no straightforward market-based solution. For now, I’m excluding social impact startups, which focus on building businesses.

Second, by risk capital, I specifically mean funding that explicitly enables individuals or teams to pursue experiments designed to surface valuable information such as testing earned-revenue models to ensure financial sustainability, piloting new approaches to improve intervention outcomes, or experimenting with ways to streamline operations and engage volunteers more effectively.

(Though this term is primarily investment-related, I’m proposing it be adopted for the non-profit sector as well.)

A Model for Funding Risk

I'm exploring this question because I’ve seen how the venture capital ecosystem embraces risk and uncertainty in exchange for the chance at outsized returns.

While the system certainly has its flaws, it’s worth understanding the dynamics that make it work, as there just aren’t that many out there.

Three key elements stand out:

1. Time and space for transformative outcomes

Up-front funding gives entrepreneurs the freedom to stay close to a problem. It encourages experimentation and iteration, rather than rushing to make a business model work immediately.

This creates the conditions for transformative opportunities to emerge—like a social directory for Harvard students evolving into the world’s largest social media platform, or renting out spare rooms transforming into a global hospitality network.

2. Openness as a force multiplier

The blogging era unleashed a wealth of insights and personal stories from founders and funders, with social networks amplifying this openness and making knowledge accessible at scale.

This culture of sharing unlocked opportunities for investors and entrepreneurs globally, creating a virtuous cycle of learning and innovation that still drives the tech industry today.

3. An embrace of uncertainty

The upstream providers of the capital, limited partners, don’t try to predict which startups will succeed—they accept uncertainty as part of the risk-reward tradeoff. Instead of controlling outcomes, they focus on controlling their participation, diversifying across portfolios, investing over long timelines, and spreading commitments across multiple funds.

This strategy provides a flexible system that can be refined over time, allowing them to navigate uncertainty and unlock the favorable outcomes that lie beyond it.

The result of this approach is a supportive ecosystem: accelerators, investors, communities, courses—an entire infrastructure that makes it easier than ever for anyone with a promising startup idea to get started on their journey.

But what if your primary goal isn’t outsized financial returns, but social impact?Can we create a similarly supportive ecosystem for risk-taking in the social sector, where the profit motive doesn’t apply?

First, an underlying problem

My research revealed that the social sector lacks a foundational mechanism for sharing experiential learning.

Within organizations, critical learning often doesn’t happen, and when it does, those lessons rarely make their way out into the field. This leaves groups working in silos, solving the same problems independently, and duplicating efforts instead of building on shared knowledge.

Unlike the venture ecosystem—where shared learning and iteration fuel innovation—the social sector has no system-wide learning loop to drive discovery and progress.

Without this, the conditions for risk-taking and innovation break down, making it unlikely to uncover new opportunities. 

Fixing this requires addressing two interrelated issues:

Issue #1: An overemphasis on impact outcomes

Emphasizing impact outcomes is sensible, but philanthropy’s power dynamics create pressure to focus solely on them, making learning outcomes, reflection, iteration, and knowledge-sharing feel secondary—or even opposed—to achieving measurable results.

This is straightforward to fix: funders could introduce learning outcomes alongside impact outcomes in their grants, explicitly allocating time and resources for reflection, synthesis, and testing new ideas. Doing so would ensure grantees have the latitude to fully engage in the iterative learning process, enhancing the effectiveness of their work and uncovering new opportunities along the way.

Issue #2: A lack of incentives for openness

The bigger challenge, however, is the lack of structural and cultural incentives for sharing lessons across the field. While some information-sharing happens informally—through peer networks or convenings—it lacks the scale needed to foster ecosystem-wide learning

Part of this is the stigma of failure. Funders and grantees alike fear that acknowledging challenges or missteps could jeopardize narratives or future funding. 

But the deeper issue lies in the pressures funders face, which often lead to gatekeeping of critical insights:

• Family foundations navigate reputational pressures, balancing the interests and expectations of multiple stakeholders.
• Community foundations depend on donor confidence to sustain their work, presenting polished track records to attract and retain donors.
• Program officers operate within institutional strategies that often prioritize measurable outcomes, influencing what insights and results are publicly shared.

These dynamics result in sanitized reports or unpublished reflections, leaving valuable insights locked away and inaccessible to others who could benefit. Grantees spend months working with evaluators, yet their efforts are often reduced to optics rather than advancing the field.

Without incentives for openness, organizations and funders miss the opportunity to share knowledge, build on successes, and learn from failures. The ecosystem remains fragmented, with progress slowed by a lack of collective learning.

So, how do we fix this?

Expanding the Table

To move forward, we need to reframe the situation and recognize that funders often operate within structural incentives that are hard to change. 

Many are doing exceptional work under challenging circumstances to fund vital programs and initiatives.

Instead of asking them to do more, we should add to their efforts by inviting new philanthropic players into the ecosystem—those who see advancing openness and risk-taking as central to their mission.

These funders could offer grant programs centered on experimentation and learning outcomes across different stages and sectors. These might include offering:

• Discovery Grants: Supporting founders testing early ideas for new interventions, focused on surfacing actionable insights.
• Leadership Development Grants: Allowing Executive Directors to nominate employees to pilot internal innovations, surfacing new approaches to improve organizational processes and share lessons learned.
• Reflection Residencies: Supporting executives stepping out of leadership roles to synthesize lessons from their tenure and explore new ideas.

Centering these grants around public learning outcomes could catalyze new norms for sharing insights across the field.

This kind of work doesn’t have to be complicated or burdensome.  

I recently stumbled upon the story of New Story, a nonprofit addressing the global housing crisis, on a podcast.

Seven years into their work, New Story realized they couldn’t address the scale of the housing crisis by relying solely on philanthropy. They took a significant risk, completely pivoting their business model to a market-based solution, charging families a fair price for homes. This approach not only empowered homeowners with dignity and ownership but also unlocked the investment capital needed to scale their impact. The transition wasn’t easy but it ultimately set them on a stronger, more sustainable path.

This is exactly the kind of learning we need more of—even though it came through a content marketing podcast rather than a written report. It’s a reminder that public learning doesn’t have to follow traditional formats.

New Story’s journey also reinforces my core thesis: proximity to a problem, sustained over time, unlocks transformational outcomes. They spent years close to the issue, iterating and learning, before uncovering their current market-based approach.

But what if this wasn’t the exception—what if it became the norm?

What if charity-based funding actively advanced calculated risks like New Story’s, giving teams the freedom to explore, experiment, and uncover new opportunities that are uncertain or non-obvious from the start?

I’m looking for collaborators

My objective is to determine whether we can catalyze a systems-wide change in how the social sector approaches and funds risk taking.

This work isn’t one-size-fits-all; it should align with each funder’s stage, focus areas, and strategies. 

That’s why I believe the best way forward is a collective effort.

To move this forward, I’m looking for a range of funders to collaborate on experiments in 2025 that explore new ways to fund risk-taking in the social sector.

You might already be supporting initiatives that embrace risk and are looking to expand or refine your approach. Or, you could be at the start of your giving journey and seeking a clear strategy to maximize your impact.

In either case, I’m looking for collaborators who share these values:

• Belief in the power of risk-taking and experimentation
• Commitment to contributing to a shared learning ecosystem over the long-term
• A readiness to work with the inherent uncertainty of this approach

If this resonates with you, I’d love to chat—let’s figure this out together.

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