The Constellation Fund, a new data-driven foundation in Minneapolis, is doling out grants to four nonprofits this month as it aims to "disrupt philanthropy" with a new model of giving in the Twin Cities.
The foundation, started last year by Andrew Dayton, the business owner and son of former Gov. Mark Dayton, taps the expertise of an economist and researchers to determine nonprofits' return on investment, hoping to measure their impact, reduce poverty and provide greater transparency to donors.
"We are the most generous state in the country, and we have some of the worst results to show for it when it comes to poverty," Dayton said, "so I think we need to be open to new ideas and to rethinking our strategies."
This month, the first grants funded by the foundation's donors are going to the Annex Teen Clinic, Mental Health Resources, Ostara Initiative and YMCA of the Greater Twin Cities — part of $650,000 given out this year. The Constellation Fund says the average cost-benefit ratio is more than 6 to 1, meaning every dollar spent on the nonprofit's services increases the quality of life of the people they serve by $6.44, such as saving people money long term by improving their health or helping them keep a job.
"They've helped strengthen our understanding about talking about the impact of our work. That's just invaluable," said Brian Russ of the Annex Teen Clinic, a sexual health clinic for teens in Robbinsdale that got a $60,000 grant, one of its largest ever.
Usually, nonprofits tout how many people they serve a year in grant applications. But the Constellation Fund reversed the process, using data and research to quantify how Annex Teen Clinic's services help teens save money over time by, for instance, preventing an unexpected pregnancy.
The four grant recipients were selected out of 75 nonprofits that applied. Fifteen of those had advanced to a six-month evaluation of their finances and leadership, who they are serving and whether they are making a difference long-term. For instance, Dayton said, if a nonprofit helps teens get minimum-wage jobs, are those turning into long-term jobs? The 11 nonprofits that didn't get a grant this time still got that free analysis worth tens of thousands of dollars, he said.
Since launching last year, Constellation has raised $3.5 million and plans to give out another $1 million in May as it ramps up fundraising. Unlike most foundations, Constellation has no endowment; it gives out all of its donations while its nine-member board of directors pays the foundation's $800,000 annual operations budget.