By David Maggs, Metcalf Fellow on Arts and Society
I lay on the floor of my office, heaped with regret, while the clanging of another jagged cashflow rang in my ears. It wasn’t that I was suddenly encountering my cultural nonprofit’s precarity for the first time. It was that I was finally realizing it was always going to feel this way. That we might have good years here and there, and those years might make it seem like something sustainable lay just around the corner, but we would always end up here, eventually.
Renewable Fragility
In the last essay on moving from scarcity to abundance, readers caught an off-handed phrase. Renewable fragility. While we can have those moments where government decisions go our way, where funding flows, where grants come in, where the clouds part and the precarity lightens its grip, the cultural nonprofit system in its current form always seems to find its way back.
I’ve belaboured the image of the leaky bucket to try and make this issue harder to ignore. Our sector has real structural, systemic challenges that we could improve, that would make our collective lives better if we committed to identify, understand, and address them. Instead, we insist that our only problem is chronic underfunding, and that the only solution is more grants. So instead of doing the hard work to fix the problems we know about, and find the ones we don’t know about, we paper over them, while the bucket gets a little more leaky every year.
When can we move beyond this? When can we get past our perennial insistence on chronic underfunding and incorporate sector-wide commitments to more strategic, structural approaches to sectoral health? Beyond relevant questions of whether we are more deserving of increased funding at this moment than housing, food security, or mental health supports, lies the question of how fast our fragility might renew itself. How soon will the present system need yet more?
I know this is heretical, yet systems in distress often bury their genuine options for better outcomes in their heresies. And surely by now we are growing tired of a strategy that barely treats the symptoms, while deeper causes show no sign of magically improving on their own?
An Opportunity to Abandon Arts Funding?
As this series has explored, Arts & Social Finance is a proposal to work at deeper, structural levels by addressing fiscal capacity, community impact, and revenue mix for cultural nonprofits. It is a proposal to do something other than ask for more grants. Yet as I promote the potential of this approach, the familiar circumstances playing out in Nova Scotia right now are important to address. As the province prepares to run a scythe through arts funding, is Arts & Social Finance a viable alternative? Does it represent an opportunity — and potentially an excuse — for governments to flatten their funding landscapes while still retaining the essential services of a vibrant cultural sector?
Absolutely not.
Arts & Social Finance is not a strategy to make gutted cultural resourcing landscapes viable. It is a strategy to help organizations thrive within our current — yet insufficient — granting environment. In its goal to carry organizations through the difficult process of scaling existing revenues or cultivating new ones, it cannot serve as a replacement for collapsing funding sources. Swimming lessons aren’t much good if someone decides to drain the water from the pool.
The Promise of a Loan?
But how do these lessons make a difference? I have claimed Arts & Social Finance will help organizations diversify revenue, relieve grant dependence, and boost organizational resilience. I’ve even dared to use the word transformation when scoping its potential. But how could low-interest lending be transformative for organizations barely surviving on grants? In other words, how do we explain what we see in the data: that working with appropriate amounts of repayable capital tends to increase overall resilience?
Return to the image of me on the floor, still in my regret-filled heap, desperate to escape the precarity of cultural nonprofitness. Clear now that grants were never going to stabilize our operation, we fashioned a vision for a social enterprise — a teaching program to employ artists in our community, build the base of arts appreciation, and deliver impact to youth and families in our region. But we had to use loans to make it happen, an experience that shed surprising light on the difference between getting a grant and getting a loan.
Whenever I got a grant in Canada, I put my artistic vision down on an application, it got reviewed by a jury of peers, and I got chosen. I opened that letter, saw the word “congratulations,” and went dancing around feeling that I had already earned that money. While we were accountable to an artistic vision, falling short of it had little practical consequence. When we got a loan, however, I was struck by the sudden realization: “Now we need to start earning this money.” Now we are accountable in new and different ways. Now our audience has to show up, our community has to care about what we do, our market has to value this activity in a way that had not mattered before.
Art for Audiences?
Running that cultural nonprofit during its first 15 years, our programming revolved around the standard artistic director question: “What’s my vision for this company?” It was artist-centric and supply-side oriented, focused on what we were going to create, produce, and present. Once we took out a loan, however, we began asking a different question in developing and scrutinizing our programming choices: “How does this activity meet the cultural needs of our community?” In other words, an audience-centric, demand-side orientation, focused on who we were serving, why, and how. A little fiscal awakening to the argument made by those mysterious forces behind Manifesto for Now: art is for audiences first, artists second.
That simple difference proved transformative. Slowly and surely (although definitely not painlessly), it reoriented our relationship to community, diversified our revenue, professionalized our staff, and shifted us from grant dependence to 65% earned revenue while doubling the size of our operation. This is the change in primary relationship identified in the earlier grant dependence discussion. Where once our central preoccupation was to funders, funding sources, and bureaucracy — and the priorities, opportunities, and time cycles associated with that relationship — now we became increasingly focused on community, audience, and market.
“So we just program Frozen all year?”
Michael Trent and I have heard this resistance to the idea of an audience-centric identity as we’ve talked to cultural leaders across the country. The suspicion that weaving in elements of demand-side, community-focused programming leads inevitably to low common denominator commercial grifting.
My response is twofold. Broadly speaking, it is important for the cultural nonprofit sector to distinguish between a community’s cultural needs and its entertainment needs, so that rather than competing with Netflix, we are careful to serve very different instincts, habits, and desires. Deepening our distinction from streaming services and screen-based media is central to grounding our value proposition, as director Chris Abraham has argued recently.
More specifically, back in Newfoundland, this is not the trajectory we’re on. The development of diverse revenue streams is generating sufficient unrestricted capital that we can indulge creative risk in stable, structured ways rather than through the halting, start-stop process of project grants with success rates below 20%. After transforming the focus, capacity, and operations within our organization, revenue diversification has become the very means by which we can consistently serve the risky heart of our mission — something that is increasingly difficult within a myopic relationship to granting alone.
But we had to do it the hard way. Like many cultural nonprofits in Canada, we couldn’t get an ordinary commercial loan, so we had to borrow from BDC, which underwrites the risk of non-traditional lending with higher than commercial rates. It was just a few years ago that we celebrated the day we were able to consolidate this into an ordinary commercial loan. It shouldn’t have to be this way. Not only does our sector deserve better access to capital, it deserves access to social impact capital — low-interest loans with high levels of investment readiness and wraparound support we see available to other social benefit sectors across the country.
But What’s One, Isolated Example Worth?
There is nothing more annoying than the zeal of a convert, someone who takes what happened to work out for them and assumes it will work that way for everyone. To the healthy instinct to say, look, that’s one small example from a tiny corner of the country, we must consider broader patterns.
Before starting to promote this additional resource option for Canada’s cultural sector, I worked with UK colleagues Fran Sanderson and Seva Phillips to review Arts and Culture Finance, a 10-year, $60 million pilot social finance fund that invested in over 30 organizations across the UK. Through the exploration in our report, supported by the analysis of economist Rachel Green, we see a similar effect: working with repayable capital tends to boost overall organizational resilience. I invite you to explore the case studies on Figurative’s website to see how innovative organizations are growing and diversifying revenue streams through social impact capital. Expanding this observation has built relationships with Creative Australia, the Heva Fund in Nairobi, collaborators in the US, and put culture on stage at the Global Impact Investing Network Impact Forum in Berlin this past November.
All to say, there is considerable empirical data behind the underlying hypothesis of Arts & Social Finance: Weaving the right amount of repayable capital into the balance sheets of a cultural nonprofit matures that organization across a range of variables more effectively than grants alone.
For our policy-making friends in Nova Scotia, however, it is crucial to constantly remind ourselves that this is an additive relationship. If loans are introduced as a replacement for grants, those organizations won’t mature, they’ll collapse. Integrate loans in additive fashion, and it’s like vitamins in our diet, or rebar in our cement — it doesn’t replace your original ingredients, it allows you to do more with them.
The Four-Letter Word at the Heart of Our Purpose
Cultural nonprofits have always been ambivalent about risk. Creatively we love it, operationally we’ve learned to fear it. In a world where markets too often fail to recognize cultural needs, grants have evolved from supporting us to protecting us. The irony we have to grasp here, is that this represents its own form of risk. As the world changes rapidly around us, we struggle to contort ourselves into dominant, depleted, capitalized channels of (so-called) attention, while the public imagination drifts further into the distance. We begin to feel like the polar bear, stranded on her paddock of ice, while an ocean widens around us.
This is not a failure of leadership, and we are clearly not alone in this dynamic. It’s happening to virtually all public institutions, from big foundational structures of democratic governments to localized challenges around housing and mental health services, and all that lies between. There is a gap separating our inherited institutional image of the world, and the world that is persistently and increasingly poking that image in the eye. Don’t forget Dr. Robinson’s sage advice, there is no future that is not transformative. So which do we want? Accidental and unsolicited, or strategic and intentional?
Close your eyes. Picture a cultural organization. Now picture a loan. What do you see? High interest rates? Limited institutional patience? An absence of support? Typical commercial lending applied to un-typical organizations? Naturally that makes us anxious. If Arts & Social Finance is to work, it must reverse these variables — patient capital, below-market rates, with substantial supports for organizations ready for the risk that comes with asking, “What does it mean to be me, now, standing here at the edge of the world as it is?”
