A Surprising Prize: Small Dollars, Big Ideas

The Rathmann Challenge is helping to address the basic needs of two million kids across the country. Maybe someday soon the Challenge will assist in cooling the earth’s temperature.

NOVEMBER 14, 2016


My family has been fortunate in the for-profit world to experience firsthand how a relatively small amount of money, if applied well (and with some luck), can launch a big idea. Would the same hold true for the nonprofit world? The Rathmann Challenge is a grantmaking tool devised for that purpose — finding good ideas that might scale to create value for many.

As with other family foundations, our founders were gracious, kind, and…a powerful influence. After their departure, we needed new options for going forward that would honor their creativity, entrepreneurial ethos, and innovative spirit. At its core, the Rathmann Challenge is like any other prize philanthropy program — with all the pluses and minuses. It garners attention by highlighting an issue of the day and then making an award ($100k in this case) to one winner (“the Challenge Recipient”). This is great news for the Challenge Recipient, of course, but not so great news for all the others who spent time working on their applications and received nothing. Perhaps even worse, all the great attention the prize brings to an important problem fades quickly after the excitement of the initial award. We wondered whether the model could be tweaked. Was there a way to make the Challenge a little less “winner take all” and a little more “applicant beneficial?” The simplest and most direct method would be to pay a small stipend to each applicant for applying, but the likely effect on the quality of our applicant pool was concerning. We needed instead to devise a process that, by its very nature, would create value for each applicant willing to put the resources into applying.

Three principles guided our efforts. First, the difficulty of each step of the process had to mirror the likelihood of success for the applicant at that stage. Second, the application itself needed to serve as a tool to help organizations promote existing internal practices that addressed the interests of funding organizations like ours (e.g., the ability to think critically and provide an honest self-assessment about past successes and failures). And, third, the criteria for a winning application needed to prompt each organization to spend time considering ways to scale their impact in the future (and thereby motivate and inspire strategic planning irrespective of the organization’s success in the Challenge).

As our applicant pool was winnowed, the rigor increased, but always with an eye toward creating value for the applicant. We added a discussion piece from a Stanford Social Innovation Review article challenging our finalists to figure out their “endgame” — that is, their definition of total success. Types of endgames included the creation of an open source platform, a replication model akin to franchising, the completion of the organization’s objectives and a wind down, or an adoption model where the mission is undertaken or subsumed by a government entity. Applicants told us the article provided a helpful counterpoint to a world where simply staying alive from year to year can be so challenging that it becomes an organization’s primary objective.

Lastly, we included a peer review phase during which the finalists were asked to read each other’s submissions and then provide a constructive critique. In recognition of the increased time commitment, and to ensure that finalists were sufficiently incentivized to fully engage, we guaranteed monetary awards for at least two Honorable Mentions ($5,000 each), in addition to the Recipient award.

The results were transformative. Despite ostensibly little crossover with respect to organizational objectives, the peer reviews were diligent and insightful and the finalists (both successful and unsuccessful alike) commended the process for what it produced in constructive critiques and novel ideas for implementing future organizational objectives.

The flipside of the desire to revamp the application process was the “one and done” problem with the prize itself. We had to wonder why we would want this whole contest to end with a $100,000 payment when, in some respects, the great work aimed at solving a difficult problem was just beginning. Didn’t we get into this so we could be a part of an important solution? Even better, maybe our foundation’s years of experience could help the Challenge Recipient devise a plan for expanding its reach that its staff had not even anticipated.

We called this enhancement to the standard prize format, the “Even Bigger Idea®,” or EBI, and designed it so the Challenge Recipient could earn an additional $200,000 over the following two years. As one might suspect, the name was a bit tongue-in-cheek, alluding, as it does, to all those claiming to have found the next big idea. But we felt the Even Bigger Idea® also described the relationship we wanted to have with the Challenge Recipient as we applied our collective experience to address a specific problem. Most importantly, we wanted the EBI to represent the recognition that the Recipient already had a successful record of implementing big ideas that had now earned it the opportunity to dream a little bigger and (hopefully) extend its impact.

With the vehicle now in place, all we needed was an idea. But where does one look for an idea that could help make a positive difference in the lives of many? Following our passion (as described in part two of this series, coming on Thursday) seemed like a good a place to start.

Rick Rathmann has served on the board of directors of the Rathmann Family Foundation for the past twenty-five years and as executive director since 2002. During that time, Rathmann has engaged in seed and early-stage funding of a number of life science companies and has served in governance and advisory roles at numerous biotechnology start-ups. Prior to his philanthropic and venture capital work, Rathmann served as an assistant United States Attorney in the Central District of California (Los Angeles).