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.
Proving long-term gain
At the YMCA of the Greater Twin Cities, the $150,000 grant it received will expand staffing and direct financial assistance to teens and young adults who are in immediate risk of becoming homeless.
The grant will allow its Youth Intervention Services program to serve another 60 people next year, nearly doubling the number it helps. Program director Stacy Sweeney said the rigorous application process was more collaborative and helped the nonprofit look at its long-term effectiveness differently.
"Constellation Fund opened our eyes to how to look at our work," added Erica Gerrity, who heads the Ostara Initiative, a Minneapolis-based parent organization of the Minnesota Prison Doula Project that pairs incarcerated expectant mothers with doulas. The nonprofit got a $40,000 grant to support pregnancy and parenting education for women in the criminal justice system.
In St. Paul, Mental Health Resources, a nonprofit with mental health programs and supportive housing, got a $50,000 grant to back an initiative that helps people get access to health and dental care and address tobacco use and diet concerns. Quantifying how services help improve clients' quality of life long-term was something the nonprofit could never do on its own, said Ann Henderson, vice president of clinical services.
"We don't have an economist on staff," she said. "People want to know, 'Are you doing what you say you're doing?' "
Constellation Fund's grants are also "unrestricted" — flexible funding for operations or expenses of the nonprofit's choosing that's becoming rare as foundations shift to giving donations to specific programs that more closely match a mission.
'What impact at what cost?'
Dayton, who is from one of Minnesota's wealthiest and most prominent families, has pledged $1 million of his money to start the foundation, modeled after the Robin Hood Foundation in New York and Tipping Point Community in San Francisco. His mother is the well-known philanthropist Alida Rockefeller Messinger.
"Things aren't getting better despite all this goodwill, all this generosity," Dayton said of rising poverty. "The question isn't 'Is this having an impact?' or 'Is this helping people?' The question is: 'What impact at what cost?' "
Earlier this year, the Constellation Fund also awarded $293,000 in a pilot program funded by its board to five nonprofits: Oasis for Youth, a Bloomington nonprofit for homeless youth; Alliance Housing in Minneapolis, which provides affordable housing; City of Lakes Community Land Trust in Minneapolis, which provides affordable homeownership opportunities; Neighborhood House in St. Paul, which helps people with food support, adult education, youth leadership programs and family centers; and PRISM, which has a food shelf and other programs for people in need in Golden Valley.
In May, Constellation will evaluate those grantees to see if they've met certain goals. But Dayton said it will likely take years to see if Constellation Fund hits its ambitious goals of tackling poverty and changing philanthropy.
"We're looking to have the biggest possible impact with our resources," he said. "This is a long game we're all playing in this field."
Kelly Smith • 612-673-4141