What is Third Sector Capital Partners?
Third Sector Capital Partners, Inc. (Third Sector) is a 501(c)3 nonprofit advisory firm that leads governments, high-performing nonprofits, and private funders in building evidence-based initiatives that address society’s most persistent challenges. Our mission is to accelerate America’s transition to a performance-driven social sector. We are guided by our five values of respect, rigor, resourcefulness, results, and reflection.
We have a six-year track record of working with communities to re-write how they contract for social services, thereby aligning vast amounts of public resources to move the needle on social problems. We use contracting tools like Pay for Success (PFS) to make diverse funding streams drive social impact versus simply paying for services. Our partnerships with dozens of communities nationally have mobilized over $100 million for programs focused on outcomes in homelessness, child welfare, justice, and workforce development.
What Problem Are We Addressing?
The way in which our government has traditionally funded social programs works against the power of innovation. It is a system based not on outcomes, but on the delivery of established services. Think of it this way: a provider gets paid if it follows the same old government-prescribed formulas, but not if it innovates new and better ways to help people. Taxpayers are left with the financial burden of outmoded social solutions, and it is our most vulnerable citizens who pay the price.
In an effort to create programs that are impactful and result in measurable outcomes, communities are turning to new models to improve the delivery of services addressing issues such as homelessness, behavioral health, recidivism, and workforce development. To build and implement these types of performance-based contracts, communities have relied on Third Sector to identify and develop solutions that measurably improve the lives of people in need.
What is our Theory of Change?
Third Sector believes that bringing an outcomes orientation to government contracts will shift incentives and yield more effective and efficient solutions to pressing social problems. Our work supports both top-down policy-level changes around budgeting, procurement, and the use of administrative data as well as bottom-up community level shifts to thinking about how to drive outcomes in social services.
Who are Third Sector's Clients? What are Third Sector's Services?
Third Sector works with city, county, and state governments; nonprofit organizations; and private funders to build evidence-based initiatives. We offer our clients services such as outcomes-based contracting feasibility studies, PFS project construction, PFS project fundraising, stakeholder inclusion, and technical consulting around areas such as cost-benefit analyses, procurement, and identifying optimal beneficiary populations.
Third Sector is an architect and builder of the nation’s most promising Pay for Success projects including those in Massachusetts, Cuyahoga County, Ohio, Santa Clara County, CA, and Salt Lake County, UT. We work with the state and local governments to develop the PFS projects and then often continue our partnership to assure the projects are delivering the promised results. These projects have raised over $40 million in private capital in grants and loans to catalyze funding for prevention programs.
In addition to developing PFS projects, Third Sector has also engaged with more than two dozen communities nationally, to develop and deploy outcomes-oriented strategies to align resources with results.
How is Third Sector Funded?
Our clients pay for our services on an hourly basis or based on the achievement of certain milestones, including the launch of a project. Third Sector also receives support from a range of philanthropic sources including foundations and private individuals. We are also the recipient of several grants from the Corporation for National and Community Service’s Social Innovation Fund.
What is Pay for Success?
Pay for Success is an innovative contracting model that drives resources toward high-performing social programs in areas such as poverty, education, welfare, recidivism, homelessness, behavioral health, and workforce development. It is a form of performance-based contracting where a government entity agrees to pay for outcomes achieved (rather than on a fee for service basis).
The core elements of PFS are:
- A clearly defined beneficiary population experiencing adverse circumstances
- An intervention that can improve selected outcomes for the beneficiary population
- Rigorous evaluation of the intervention’s impact on the selected outcomes
- Payments linked to performance on the selected outcomes
In order to run PFS programs, third party funding is often used to bridge the timing gap between government payments and the upfront capital needed to deliver services. This financing is also sometimes referred to as a “Social Impact Bond.”