Not that anyone needed a symbol of the world’s fragility and chaos in 2020, but there it was: a computer with all of his nonprofit’s financial information on it, casually sitting in the back seat of a colleague’s car.
As the one who put it there, Sean Vereen, the president of Steppingstone Scholars, remembers the scene well. The next day, his board chair called. This could be an opportunity, the chair said of the shift to virtual work. Vereen kept thinking about the computer — and perhaps the Philly potholes that lead to the computer falling off the seat — and had the opposite reaction. “Are we even going to exist tomorrow?” he remembers thinking.
Steppingstone, in fact, would not exist by the end of 2022, but not for the reasons you might assume. It didn’t suffer a financial demise. It wasn’t squeezed by the Great Resignation. Even that computer survived. The nonprofit, with its staff of 30, navigated Covid-19 and managed to keep providing educational programs and tutoring to hundreds of middle and high school students in Philly, just like Steppingstone had been doing for more than two decades.
So, what happened? Call them Houdini because Steppingstone intentionally disappeared.
In December 2022, Steppingstone formally merged with 33-year-old Philadelphia Futures to form Heights Philadelphia, of which Vereen is president. Both educational nonprofits had annual budgets of roughly $4 million and were looking for ways to grow. Futures was focused on first-generation college students and their career readiness; Steppingstone, on the other hand, provided academic enrichment to low-income students at the secondary level.
Together, they realized, they could advise students along a greater continuum, from adolescence up to young adulthood. Moreover, they could be a part of larger, citywide conversations about economic mobility and workforce development, in addition to the educational sphere, if they combined.
“There really isn’t a playbook for how to explore potential mergers and partnerships, but the Repositioning Fund is as close to a playbook as you can get.” — Sean Vereen, Heights Philadelphia president
Getting to the finish line took about four years in total. It involved difficult conversations with board members, donors, and staff members — the subtext being: You know the way we’ve been doing things for decades? Well, there’s actually a better way.The process required a lot of emotional labor, along with hard resources. “Mergers are expensive,” Vereen puts it bluntly, noting the contributions of lawyers and consultants.
Luckily, there was a benefactor helping to pay for it: Philadelphia’s Nonprofit Repositioning Fund. Created a decade ago by some of the largest grantmakers in the region, the Repositioning Fund supports what it calls “sustained collaborations” between nonprofits — including mergers, back-office resource sharing, program transfers, and more. For example, the fund contributed more than $67,000 worth of grants, which Vereen described as pivotal, to the creation of Heights.
“It takes a special type of leader to tap into this resource,” says Lindsay Kijewski, the director of the Repositioning Fund. “Sometimes, the best thing for a nonprofit is to actually move its programs elsewhere or to join forces with another organization.”
The end goal, says Kijewski, is to build a stronger and more resilient nonprofit sector. In order to get there, the Repositioning Fund wants organizations to take steps ensuring that their organizational structure doesn’t come before the people they serve.
“There is a lot of allegiance to organizational structure in this field,” says Kijewski. “Your real allegiance is to the mission, not your EIN.”
The ‘M’ word
The Repositioning Fund is based on a model developed by SeaChange Capital Partners, a New York-based “merchant bank” that is dedicated to improving the financial health of nonprofits. In 2012, SeaChange launched the New York Merger and Collaboration Fund, the first initiative of its kind in the country. (There are now 11 such organizations, including the Repositioning Fund.)
The idea was simple: If funders could pool some of their resources and issue non-programmatic grants for things like sustained collaborations, they could in turn make a bigger impact with their traditional grant-making.
“It goes completely counter to the way that philanthropy usually works,” says Kijewski. “Philanthropic institutions usually identify their priority areas and tend not to aberrate much from funding in those areas. And ‘collaborative funding’ is not anybody’s program area.”
The vast majority of philanthropic grants are for programming, restricted from being used on strategic planning or administrative restructuring. The Repositioning Fund fills that void, offering grants to nonprofits partners willing to explore a big change to their business model.
It’s also emerged as something of a think tank for our nonprofit-rich region, trying to shift mindsets about what a successful legacy looks like for a nonprofit. Often, as organizations grow, the added layers of fundraising, compliance, and other business pressures end up detracting from their ability to deliver quality programming.
In Philly, the ever-increasing ranks of nonprofits are often competing over a dwindling pool of donors and grants opportunities.
And yet, it’s not easy for leaders to scale back or let go of what they’ve built. Sometimes, egos get in the way. They’re fearful of losing control or being perceived as a failure. Kijewski wants to change those perceptions.
“When I first got involved in this work, ‘the M word’ — merge — was very taboo to bring up in conversations,” says Kijewski, who notes that in the corporate sector mergers are celebrated with golden parachutes and big bonuses. “Thankfully, we’ve seen the tide turn on that a fair amount over the past 10 years.”
Early on, the majority of requests for grants through the fund had to do with leadership succession. Now, roughly half of Repositioning Fund grants support mergers. The fund has even made grants for a handful of dissolutions — although Kijewski is quick to point out that right-sizing the sector is not explicitly part of the mission.
“We’re not looking for a leaner sector at all. We want to make sure that the sector is vibrant and has the support it needs to be the vital player and economic driver in our region,” she says.
Nonprofit bloat
Whether or not the Repositioning Fund is trying to condense the number of nonprofits, there’s little doubt that Philly is oversaturated with them.
In 2017, the Philadelphia Foundation commissioned a report that highlighted the alarming state of financial health amongst local nonprofits. Based on a survey of more than 3,000 nonprofits (excluding large eds and meds), more than 20 percent of Philly nonprofits reported having less than a month of cash reserves on hand.
“Zombies” is the term some experts use to describe them, which I remember first hearing about while attending an event tied to that same Philadelphia Foundation report. “They’ve become so weak, they use all their energy to keep the lights on,” John MacIntosh, a partner at SeaChange, told the audience. “The capacity to innovate is gone, and perhaps gone forever.”
And what a wild ride it’s been in the years since then. The pandemic. The rise and fall of relief funding. Not one, but two Trump presidencies throwing the economy into a blender. Not to mention the recent DOGE crusades, which have slashed billions of dollars in grants for nonprofits around the country.
“We’re not looking for a leaner sector at all. We want to make sure that the sector is vibrant and has the support it needs to be the vital player and economic driver in our region.” — Lindsay Kijewski, Repositioning Fund director
In Philly, the ever-increasing ranks of nonprofits are often competing over a dwindling pool of donors and grants opportunities. In fact, according to a 2017 analysis by the Chronicle of Philanthropy, Philly is one of the least-charitable cities in the country, ranking 43rd out of the 50 largest metro areas when it comes to tax-deductible donations. Still, the total revenue for all Philly area nonprofits — again excluding the big eds and meds — is around $11 billion, which is a lot to sustain.
What’s more troubling is that several of the city’s most celebrated nonprofits have recently closed or announced financial challenges, which led Citizen co-founder Larry Platt to ask, “Are We in a Nonprofit Bubble?” last year. Among the examples he cited were the spectacular disintegration of Benefits Data Trust, UArts going belly up, and the unfortunate demise of the Greater Philadelphia Coalition Against Hunger.
All of that turbulence could be a call to action. “We as nonprofits need to rethink how we operate, especially when the sector is under duress and probably going to shrink,” says Vereen.
Knowing what we know now, it was a prescient idea to launch the Repositioning Fund In 2015. A group of nine local funders, led by the Philadelphia Foundation and the Philanthropy Network, got the project off the ground. Over the past decade, the fund has awarded more than $2.4 million in grants to local nonprofits for the purposes of exploring and implementing a strategic realignment.
Today, the fund exists as an extension of SeaChange (based in New York), although its leadership remains local. Kijewski joined the fund as a graduate-student intern while attending Penn. Now as director, she reports to a de-facto board — the Repositioning Fund’s “governance committee” — consisting of the major grant-makers in the region which contribute to the project, including the Barra Foundation, ComcastNBCUniversal, and Scattergood.
“It’s been incredibly helpful for funders to come together and talk about the bigger picture of what’s happening in the nonprofit sector,” says Jessica Richards, a program director at the William Penn Foundation and a member of the governance committee.
“I don’t think there’s any nonprofit leader out there who hasn’t been through the ringer in the last five years,” says Jessica Richards, a program director at the William Penn Foundation. “The volatility has encouraged more people to take those steps earlier, which is a testament to Lindsay and the fund.”
Merging equals
When nonprofit mergers make the headlines, it’s typically because of a crisis — one struggling provider getting absorbed by a healthier one. But as the story of Heights Philadelphia shows, that’s not the only way.
“There’s an opportunity for healthy organizations to come together and do better than they could separately,” says Vereen. “Mergers are humbling experiences as a leader. I think it was a blessing though, pushing us to up our game.”
Vereen and Sara Woods (the then-president of Futures) had actually been discussing the idea of a merger well before the pandemic. The lockdown kicked those conversations into high gear.
If funders could pool some of their resources and issue non-programmatic grants for things like sustained collaborations, they could in turn make a bigger impact with their traditional grant-making.
Before the merger, both Steppingstone Scholars and Philadelphia Futures were narrowly focused on the students they served. Heights is now working at a larger scale, supporting not only educational success but also workforce outcomes. “We now serve kids from middle school through college graduation, and beyond, which is something that we wouldn’t have been able to do on our own,” Vereen says.
Throughout the merger talks, according to Vereen, the leaders of both organizations often invoked the principle of 1 + 1 = 3. And now, quite literally, the budget of Heights reflects that: $12 million, significantly larger than the combined budgets of its predecessors. They also felt that co-leadership was important in the new organization, serving as co-presidents until Woods stepped down in September 2024.
But the benefits of the merger extend beyond the numbers. It’s unlocked partnerships with universities, City Hall, and the business community. Also, the expanded mission has allowed Heights to step into a greater role as a thought leader and advocate for citywide issues, on top of students and their families.
“We are an economic mobility catalyst,” says Vereen. “And we’ve been able to spread the idea that young people should be at the center of the city’s economic mobility efforts.”
Without the help of the Repositioning Fund grants, the merger might have died on the vine.
“There really isn’t a playbook for how to explore potential mergers and partnerships, but the Repositioning Fund is as close to a playbook as you can get,” says Vereen. “The nonprofit sector has to rethink how it functions.”
MORE COVERAGE OF PHILLY’S NONPROFIT SECTOR