Foundation-funded EveryBlock sold to MSNBC

Ten years ago journalism was such a hot industry that writers could expect to score upwards of five dollars a word. Now, business is so bad that media ventures are literally looking to charity for help.

The Knight Foundation is one of the leaders in using charitable grants to foster socially beneficial innovation in journalism--and these grants go to both nonprofit and commercial recipients. This in itself is not new--charities have been giving money to for-profits serving public benefit long before blended value became a social enterprise buzzword.

What can shift, however, is how such grants are perceived. One factor is the context--an economic downtown is a far different environment from a boom economy. Another is scale--benefits accruing to a big business can have a different valence from support for a microenterprise. Additional factors include the presence of an identifiable personal beneficiary--did charitable dollars make someone rich--and the level of public involvement in charity's work.

For a perfect storm of cognitive dissonance, check out this Gawker piece on reactions to the sale local news site EveryBloc to MSNBC. EveryBlock built its base on open source, crowdsourcing and a $1.1 million Knight Foundation grant. The founder gets a payday, and MSNBC gets the charitably-developed site.

It's all technically legal until it's not. This is exactly the sort of transaction that could call public attention to how charitable grants to commercial entities result in personal profit and substantial private benefit. We've seen such blowback before--in the U.S., private foundations have to deal with statutory restrictions imposed forty years ago in response to perceived outrages. Ain't nuthin' stoppin' that from happening again, only this time, with negative consequences for all charity that seeks to promote blended value.

How to forestall such negative feedback? One strategy would be for a grant to a startup or other commercial entity to be conditioned on some sort of charitable clawback provision, requiring the organization to pay back the grant--and possibly more--should the venture change ownership or generate substantial revenue. Thank yous are nice, but when you've been funded by charitable money they may not be enough.

The key thing, though, is the principle. Charities don't want to risk creating the impression that they are taxpayer-funded ATMs for well-connected profiteers.