100% Mission Alignment to Move Beyond the 5/95 Model
By Ruth Shaber, MD
How impact investing helps us build new relationships with capital—and each other.
In this latest episode of the Make Shift Happen Conversation Series, I talk with Erika Seth Davies, CEO of Rhia Ventures, about the 5/95 model of philanthropy and how foundations can work within it—and beyond—to move toward 100% mission alignment.
I was so struck by this point Erika made about how our relationships to capital shape our relationships with each other. She said:
“Having a nonprofit as part of the venture fund, I actually see how the relationship to capital—how it moves and what the expectations are—are so different. There’s a willingness to write a million dollar check to a fund where you think you’re going to get it back having multiplied itself. But at a nonprofit, it’s “We’re going to give you a $250,000 restricted grant to use in the way that we think you should use it. Go solve intractable social issues.” It’s so different.”
Two things stand out to me in this comparison.
First, the contrast between writing million-dollar investment checks with the expectation of returns versus parceling out small restricted grants speaks volumes about trust, control, and our assumptions about who can vision and steward resources effectively. I’ll return to this in a minute.
Second, Erika’s example makes clear why the 5/95 model, where foundations only pay out the legal minimum of 5% of their assets each year, doesn’t meet the scope of challenges we’re trying to address.
Our movement spaces need big, sustained, unrestricted funding across organizations to meaningfully move on our goals for justice. A restricted $250,000 grant isn’t going to cut it, especially not right now.
But the movement to go beyond 5/95 often stops short here: at payouts and grantmaking. And while I believe our ultimate goal as philanthropists should be moving ALL of our resources back to communities from which they were extracted, I recognize this isn’t an immediately feasible practice for every institution or individual. Many of us require intermediary steps on our journey to restoring resources to community stewardship.
This is where impact investing, and the pursuit of 100% mission alignment can offer a bridge.
Putting endowments to work in service of your mission, whatever your payout rate, creates multiple opportunities to open up the limitations of the 5/95 model.
This may feel like basic common sense— and at Tara Health, we’ve shown that this strategy doesn’t need to be concessionary. For instance, our mission-aligned public markets portfolio has outperformed major benchmarks since 2015. While this challenges the myth that mission alignment means sacrificing returns, what’s more important is what these results prove: the regenerative potential of investing in community-led and -powered solutions.
This brings me back to that first insight: what becomes possible when we stop using capital as a mechanism for control and instead as a resource for collective thriving? Erika and the team at Rhia Ventures are at the forefront of this question in their work to transform the reproductive and maternal health market.
Rhia Ventures’ approach, and impact investing more broadly, opens a window into a new way of relating to capital, resourcing movements for justice, and ultimately, relating to one another.
It’s yet another strategy that helps us not only imagine a different way of being, but of working in the interstitial space we’re in: meaningfully creating the world we want from the world we have.
Rhia Ventures works at the intersection of racial equity, women’s health, and capital to drive systems change, innovation, and financial and social returns. As Tara Health’s first anchor organization, Rhia Ventures has stewarded our private investment strategy since 2018 in alignment with our commitment to 100% mission alignment.
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