12/21/2012 11:20 am ET Updated Feb 20, 2013

Impact Investment and the App Store


My tenth grade creative writing teacher told me, among other useful life lessons, to never explain your title references in the opening paragraph. He would often grumble that this tactless action was reserved for "those damn lawyers." I am not certain I get the reference, but I have a suspicion this particular quip arose from one or possibly all of his three divorces.

Ignoring that for a moment: The term "impact investment" is herein defined as philanthropic foundations, state or city agencies, or any public/private partnership that invests time and money in supporting a citizenry.

App Stores are marketplaces. You may be familiar with Apple's iPhone App Store, but there are many others. Google has an application store for their Chrome web browser and Android mobile operating system. Microsoft has an app store for its Xbox gaming system and so on. To the average consumer, an app store looks like any other web-based commerce tool. However, for app developers, App Stores are the distribution channel for relevantly developed, useful or otherwise fun digital tools. Independent app developers, not working for the company hosting the app store, use that company's framework, their API, to develop these applications.

A few nights ago, I was having dinner with the lovely Ms. Shelton, and we got into a discussion around the similarities that exist between app developers and community developers. They both have incentive to serve a community and themselves. They are both independent, and both are beholden to a process within which they must construct their particular product, be it an app or an impact project. The chief distinction between them is a significant difference in perspective about the process.

Among app developers, the perception is that if you develop an application based on the rules of the hosting marketplace, the app will be approved and placed inside the app store for the greater good of the community and the developer. This is not so true for community developers. Their app store equivalent is the grant funding ecosystem, and the consensus perception around a grant funding application is that you will be declined. Think about the market implications to an ecosystem dependent on ongoing innovation when the perception of the onboarding mechanism is that you and your project are not specifically applicable.

The crux of the issue is incentives for community leaders. If the goal is civic progress and the product impact capital, the marketplace is matching those projects most likely to return the highest impact per dollar in your particular area of focus, with your money. There are enormous implications in the advent of app stores and specifically the always growing, decentralized developer base inherent in their usage. The "API to App Store" methodology is efficient and provides clear incentive to to speed up the cycle of innovation and grow quickly in a state of constant iteration. I would argue that most current civic investment models have misaligned incentives and may be leaving those most likely to have significant impact on the sidelines.

I believe those investing in the durability of communities can learn from the advent of App Stores. Designing a simple framework of investable assets for citizen-doers to build atop while actively communicating a clear mission will inspire productive work towards impact within a measurable context. The most cost-efficient and effective solutions will rise up where constraints exists and creativity thrives.

Now, one might argue that the current practice of accepting grant proposals is an adequate equivalent. I would urge that person to conduct even a cursory qualitative study of those communities they wish to affect. I am confident one of the results would be a clear understanding of how traditional grant procurement procedures deter potentially effective impact providers. Still, even if you believe all those having the will and ability to be productively engaged with community development are doing so, the presence of a rigid, mostly non-transparent framework is counterproductive. Further, you inevitably have preconceived notions about how best to facilitate impact in line with your mission. And you may be correct -- the key word being facilitate. What you do not have are the most optimal solutions to address the need on the ground. Those most aligned to affect a community optimally are the ordinary people operating within the contextual constraints of their communities, iterating on them at eye-level daily. Today, these folks remain removed from ready access to your assets and for good reason. You, as an impact-funder, could not function sustainably by spending all day in meetings with people pitching partially ready vehicles in which you could not reasonably invest.

This is where having a transparent framework on which to build comes into play. An underlying platform developed based on the investor's individual goals allows funders to frame in advance their goals and conditions in detail. Here, you are conveying the conditions approval. Should someone create and prove viable a solution that fits the stated parameters and submit it, there is a market assumption it will be approved, funded and if applicable, provided with technical support.

The improvement of our neighborhoods must be highly contextualized. Moving forward, an impact funder, communicating a clear mission or series of missions, each with a package of resources (capital and technical support) can set the pace for other funders, leading a legion of independent community developers towards optimizing the community impact-per-dollar-invested equation.