Investing in Value
On a hot October night in the Pico-Robertson section of Los Angeles, the emcee known as 'dj handler' keeps a young Jewish crowd jumping late into the night as an Aramaic-tongued rapper, Y-Love, brings forth verses more likely to appear in the Talmud than at a night club called the Joint.
On a hot October night in the Pico-Robertson section of Los Angeles, the emcee known as "dj handler" keeps a young Jewish crowd jumping late into the night as an Aramaic-tongued rapper, Y-Love, brings forth verses more likely to appear in the Talmud than at a night club called the Joint. The young Jews who've taken to the club paid a $15 cover charge for the pleasure of attending this special event - the West Coast launch party for Modular Moods' online Jewish music resource, Shemspeed.
Modular Moods, the label founded by dj handler, or Erez Safar, 28, is for-profit (as is Shemspeed), despite the fact that it is involved in what established Jewish organizations might call "youth engagement." Its nearest competitors receive hundreds of thousands in donations each year to work in the same market. "I haven't really had success getting funding," remarks Safar. "I rarely find enough time to write up proposals or apply for grants. I'm swamped with a million projects and getting the goods out there, which for me is the reward." Modular Moods is not alone: By filling a communal need through a for-profit vehicle, the venture is part of a global trend that blurs the border between the for-profit and non-profit realms.
The distinction between for-profit and non-profit is becoming nearly obsolete as business in general is being redefined as the practice of creating socially valued products that individuals respond to with monetary payments. And as for-profits add social value to their bottom line, non-profits are also becoming more mindful of the need for sustainability, as they develop new methods of generating revenue, such that over the past decade on average less than 3 percent of nonprofit income market-wide came from foundations, and nearly half from the sale of goods and services.
Unfortunately, the Jewish community is a latecomer to this new way of doing business. Flush with wealth and influence, yet sensing a lack of engagement among the younger generations, philanthropists and foundations have rightly devoted unprecedented attention to the "continuity gap." Dozens of studies, hundreds of discussions, and millions of dollars have been focused at creating new vehicles to reach the elusive "unaffiliated" Jew.
But this investment has had unexpected consequences, as the Jewish market develops what economists call the "success-to-the-successful" syndrome. In such a system, well-meaning philanthropists deem projects or organizations successful on the basis of broad studies or a good word put in by a reliable source. While the project or organization itself enjoys the ensuing infusion of capital, it also points to the donation as proof of its success. The subsequent snowball of money-raising occurs based upon this image of success alone, with little valuation of the actual market share achieved by the project. Finally, when sources of funding become skeptical, the bubble bursts - as it did with Enron or with the dotcom bubble in the late 1990s.
To save our community from the boom-and-bust dynamic, we need to prioritize value over image, and encourage young entrepreneurs to seek out value-enhancing opportunities that will allow them to generate returns on investment. To do so, the model of today's Internet start-ups might be instructive: Start-ups now begin with a prototype and seek small seed investment. When a prototype is deemed to work, the start-up may choose to go it alone and build upon its revenue, or convince an investor to help scale its product up. Each subsequent period of growth has self-sustainability as its end - that is, growth will not exist unless the market trial shows that the value generated by the start-up will be sufficient to sustain the venture once funding ceases.
This is easily translated to our own case: Instead of providing massive and recurring grants, philanthropists should focus on translating founders' "sweat equity" into viable prototypes through small grants of seed capital. Then, if the market responds favorably, philanthropists could help bring a venture to scale while requiring sustainability. Finally, out-sourcing, mergers and acquisitions would be encouraged to cause entrepreneurs to share best practices with one another.
A communal system focused on providing entrepreneurial incentives, and on avoiding pile-on funding, would encourage many more social entrepreneurs to enter the game and prove themselves. Projects that produced actual value for the Jewish community would be able to raise second-round investment and grow to their proper size. Further, if the philanthropists were to invest in for-profit initiatives with Jewish goals, the philanthropic dollar would buy so much more value for the Jewish community. A company like Modular Moods, burning on a low flame because the Jewish organizational universe is unprepared to interact with for-profits, could expand exponentially with little investment, going on to sustain itself and the value it produces over the long run.
The Jewish people can create their own global golden age if they replace the current system of image-driven philanthropy with one based on value-creation and sustainable entrepreneurship. With Jewish musicians finding global audiences on non-Jewish labels, Jewish characters featured ever more prominently in popular movies, and Jewish books at the top of best-seller lists, the value of Jewish cultural production has never been higher in the general market. It is time our community recognizes the potential value in "Jewish," and provides the proper mix of philanthropic supply and demand from entrepreneurs who can make this market flourish. That's the way we'll find the path to the elusive unaffiliated Jews: providing valued services and products that will guide them back by the invisible but generous hand of social entrepreneurship.
Ariel Beery and Aharon Horwitz are the co-founders of the PresenTense Institute for Creative Zionism, an incubator for socially-minded entrepreneurs, and MavenHaven.com.