 And welcome to one of the several Sibs sessions. We thank you for choosing this session. I know there's one going on right now about India, and there was one earlier this morning, so thank you for your interest in this session. We're excited to talk to you about the details, a little bit more about the complex anatomy behind these transactions, of which we've had four launched to date. And so we'd just love, before we get started, how many of you all in the audience feel like, at this point, given the SOCAPs, given all of these sessions on social impact bonds, how many of you feel like you could explain to somebody what a social impact bond is at this point? All right, how about our panelists? Okay. All right. Well, today we hope to not do the 101 conversation. At this point, we think that's been done. And if I can get the PowerPoint up, we hope to spend just 30 seconds, get everybody on the same page, and then to show you a little bit, put up a slide about the four transactions that are here to date, but then really to turn it over to the panelists to talk about what we don't often get to talk about in panels, which are the challenges, the major inflection points, and the lessons learned as the roles of the investor, the intermediary, government, and provider, really sort of play out in these actual transactions. So I will be your moderator. I'm Caroline Whistler, co-founder and partner at Third Sector Capital Partners. We're a non-profit intermediary, if you will, but really we provide advisory services, consulting to governments and providers to both figure out the feasibility of transactions as well as to structure the financing around them. So I will be moderating through to the discussion. And we have several other panelists that will be talking about their different roles. Gary Graves, who's the COO of Santa Clara County and the county's been exploring pay for success. We've got a blank space for Andy Phillips from Goldman Sachs, who's stuck in traffic, but she's gonna be flying in at any moment. Bill Heizer, who is the California Director of Center for Employment Opportunities, a service provider involved in the transaction. Eileen Neely, the Director of Capital Innovation from Living Cities, and Amy Olsen, a lawyer with Ropes and Gray. So excited to get started, and then we'll have each of the panelists talk a little bit about their lessons learned, their roles in these projects, ask about moving forward, what are the chances that we can actually make social impact bonds part of the way that governments do business, and what will it take to make those enduring? And then we'll have time for questions and answers. So at any point, please save your questions for the end. But just for the real quick 101, if you will, just so we're all on the same page, we've got two major innovations going on, pay for success and social impact financing. Pay for success is essentially the government, a new type of performance-based contracting where government only pays once they see results. It's a little different from performance-based contracting you may know, because it raises the bar on evaluation, so really focusing on rigorous evaluation and outcomes, giving providers more room and flexibility on the service delivery side, so not prescribing exactly what services, but giving more flexibility there, and then also having government only pay at the end of an engagement, versus incrementally along the way, most of the projects we've seen so far have government actually withholding payments to the very end. So type of performance-based contracting, but a little different. And since government's holding back all of those dollars, we've got a financing need that happens, and we call that social impact finance, or that's where the social impact bond comes in. So the social impact bond is really the financing that's bridging that timing gap between when a government initiates that pay for success contract, and when they actually pay for those results. So that's just so we're all on the same page. There are four current projects that you may hear referenced by our panelists. The first was in New York City, the second in Salt Lake City, third in New York State, and fourth in the state of Massachusetts. And you can feel free to ask questions about any of those, but wanted to really sort of turn it over to the panelists at this point to talk about their various roles across these projects and to reference them, and then we can get into some details as well as the project goes on. And welcome, Andy. Great to see you. And actually, if you don't mind, so we've done the 101 and we were planning on starting, really just turning it over to the panelists, having each of you talk about what has been your role, either in the four transactions that are up here or in other pay for success developments, and what have been some of your lessons learned and key inflection points here. So, Andy, if you don't mind, I know you just walked in, but from the funder perspective, how have the roles of, Goldman has been involved in three of these transactions at this point. How has your role at Goldman as an investor evolved and how are you seeing the roles of other funders evolve in pay for success transactions? Okay. Hi, everybody, and I am so sorry for being late. I got trapped in San Francisco traffic, which I underestimated. Right, I should have expected it was as bad here as it is at home, so. So, first by way of just brief introduction, I think in terms of our role in social impact bonds as a firm, it's important to understand where I sit in Goldman Sachs, because oftentimes when people think of social impact investing, Goldman Sachs is not really the name that jumps to mind very quickly. And so I sit in a team at Goldman called the Urban Investment Group. That has been a business at the firm for about a dozen years, investing the firm's capital and now I'm really proud to say we're also investing client capital through our newly launched social impact fund, which is now nearing $150 million of client capital. We make investments that are double bottom line investment, so a financial return and a social impact, something we all in this room know a lot about. As a team, our primary investing strategy has historically focused on real estate and hard assets. But we have always viewed our role as investors as to really think about how you can use private capital to address pressing social challenges. And so when I got a call from Deputy Mayor for Health and Human Services, Linda Gibbs from the city of New York, and she said to me, hey, we've got an idea. Have you heard about these social impact bonds? And after we finished the part of the conversation where I said, Linda, those are not bonds. And we got through that piece of business. And she said, are you guys interested in taking a look? It really made a lot of sense to me and to our team. Wow. I know. That really, when you step back from a lot of the discussions about social impact bonds, really what we're talking about is providing working capital to typically non-profits to expand or replicate their services, right? And that is combined with government doing business differently and instead of reimbursing costs to the organizations that they contract for services instead paying for outcome. And that when you put those two powerful things together, you get something that someone calls social impact bonds or what I call social impact, not a bonds. You know, to sort of then go back from the high level, I think we've learned a lot as a team over the last two years in terms of what does it really take to execute on these transactions and I think sort of on a high level I'd sort of identify a couple key facts. One is I would say sort of globally there is tremendous interest in leveraging this new tool that we think is really, really exciting. The challenge really is how do you get from that level of interest on the part of government, on the part of non-profits and on the part of investors to make these types of investments and actually execute on transactions and something we're very mindful of as we continue to pursue these type of investments is how do we do it in a way that moves us toward scalability and replicability and oh my gosh down the road one day can we really actually legitimately call these bonds and I'm cautiously optimistic that we can get to that but also really believe that the way we're gonna get there is by doing more deals and focusing on strategies that are really for lack of a better term executable. Some of that for us on a very practical basis is identifying transactions that have simple pay for success structures. I find when we're doing these deals that you often wanna say let's not let the perfect be the enemy of the good. There's a real focus on only paying based on randomized controlled trials and the sort of results of those trials. We think there are simpler payment mechanisms and for example in our Utah transaction we pay based on kids that are pre-identified as high risk doing well in school rather than waiting for a long term evaluation. So that's a little bit about our role I hope and sort of what we're thinking about of the challenges but now I'll pass it along. And one quick follow up question for you Andy and Eileen also jump in. As an investor one of your major considerations is the risk of these transactions. How has your perspective on the risk of a particular deal changed or evolved or what do you consider? Sure, that's a great question and I would say when we think about the risk and I put it in three different buckets and so the first bucket is always impact risk and so what we're really doing is underwriting the transaction and saying what is the likelihood that if you do this a given intervention whether it's Roka's unbelievable program in Massachusetts or the amazing granite preschool curriculum in Salt Lake County, if we deliver that intervention can we get ourselves comfortable that we'll get the impact we need to achieve the payment milestones and then repay our loan and in order to analyze that risk we really look at what is the data that exists either published data ideally or current programmatic data that gets us comfortable. The second area we focus on is implementation risk and really that's like you would do with any other investment which is who is the management team? What are their systems in place for performance management? And again going to the Roka example Molly Baldwin and her team are superstars. I would say the same of the Osborne Association and the folks doing early education in Utah. They are deeply committed, subject matter experts and also have very strong systems for managing to their performance so implementation risk is another area. The third area is appropriation risk and that really depends on the jurisdiction and really what we're looking at there is how can we be sure that five years from now when the city of New York needs to pay that they will actually honor that commitment and that's been solved in a lot of different ways in different places. Everything from setting up escrow accounts to in Massachusetts passing legislation to put the full faith and credit of Massachusetts behind it. The area that I think I've learned that you have to focus on more is implementation and when we think about implementation and Eileen and I were talking about this recently it's not just your principles. It's not just the team that's delivering the services. It's what else are they relying on in the social service system to be able to do what they need to do. And increasingly over time what I would say is that has become a bigger and bigger area of focus of our underwriting. What I would say that has also led us to do in terms of doing these transactions is ensure that we build flexibility into the deal at the outset because you don't know what you don't know and you don't know what's gonna come up later on. And so there needs to be a mechanism for making tweaks over time. Thanks. So I'm Eileen Neely, I'm with Living Cities and we are an investor in both the Massachusetts transaction and the New York State transaction. So like Andy, I would say the two areas that I really focused on when I underwrote both of those deals were the operational risk, what's the likelihood that the service provider can produce the outcomes and the other was the appropriations risk, the piece that I really missed and I think all of us missed in both those transactions are how do the participants get into the program? And that's where we've seen issues in all three of the justice recidivism deals, the New York City, the New York State and Massachusetts. You think there's plenty of people in the justice system, we'll have no trouble getting people into the program. And we did spend a lot of time in the underwriting on the attrition. So once they're in the program, what's the likelihood that they're gonna quit? All these guys are gonna wanna quit, right? We didn't think about what it takes for the government systems to talk to the service provider systems and get them in place. And so now instead of thinking only about how do you get people in is what's the way the business is being done today and how is that gonna be different under the pay for success or social impact structure? And that thinking about it that way really helps to identify those change risks. One of the obvious ones is scale. If they're serving 20 kids today and 400 kids tomorrow, that's a serious risk. But if they're recruiting their own participants today and under the SIB, the government is going to refer them very different structure and what happens there. So I think it's the how are things different under the SIB than business as usual. And Eileen, can you talk a little bit about, we heard from Andy the types of risks that are considered and you talked a little bit about the attrition and referral process. What else goes into these negotiations as an investor? Can you shed a little bit of light on the complex anatomy of those negotiations? What doesn't go into it? I think one of the things that we're seeing and we're going to see and Andy really introduced this and her team in the Massachusetts deal which is shut down risk and what happens if one of the parties decide that they no longer wanna play. And we really talked about what happens when things aren't working. And so will the investors want to quit early or will the state wanna quit early? But in the Peterborough deal in the UK, the government decided that they weren't gonna play anymore after. And depending on, I have never visited, I haven't talked to any of the participants there, I'm just outside reading the articles and the blogs and the, so there's some who say, oh, it's because it wasn't going well and others are saying, oh, it was because it was going too well. So whichever it is, they decided that they weren't gonna do it, they weren't gonna go into the next cohort. So what does that mean to the investors? So I think that's a big risk to think about not only for the investors, but the participants of the program. And I'm gonna shake things up, but given that we are talking a little bit about contracting Amy from Ropes and Gray, Amy was the main lawyer to do the, to pull together the Massachusetts Juvenile Justice Contract, which is the largest pay for success to date. Amy, do you wanna talk a little bit about what it was like to not work from a template and what sort of went in, what were the considerations that went into pulling together this whole contract? Great, happy to, I'm Amy Olson and I was pro bono counsel to third sector in their Special Purpose Vehicle Youth Services Inc., which was the kind of conduit, financial conduit to all the various parties. So they were the borrower under the finance, funding agreements, and then the person who received payment under the pay for success contract. And I was one of, Ropes was one of many firms. I think all of Boston's best firms were involved in this transaction as well as excellent counsel. And that in New York. And so it was really quite complex and it's so interesting when Annie was saying, you don't know what you don't know. And I think that I come from a private equity background and there it's a much more, it's been around a lot longer. Sponsors have been around a lot longer. There's kind of people understand what's happening and I think one of the biggest surprises to me was kind of along the lines of like over the course of the deal realizing this really only works for so long as everyone wants it to work. And as long as they are flexible and figuring out what you don't know. And so it wasn't as much of kind of binary negotiations with us with the Commonwealth on the pay for success. I mean, obviously the funding sources care significantly about how is success measured. And I think Andy may have been the one best who understood. I remember being on one call where I'm like, this is, I've wandered into some kind of advanced statistics class and I know nothing. But Andy was there. And so it's interesting because there is no template. And then also there's kind of shifting alignment of whose interests are kind of together. I think the funding sources and the borrower's interests are aligned when you're talking about what is success keeping it simple, keeping it measurable. And then the Commonwealth in our instance or in the borrower interests are aligned when you're talking about what do you have to do to get the money from the financing sources making it as easy as possible. And so that added to the complexity as well. Just so folks can get an idea how many contracts were involved in Massachusetts. 27, 27. And just ropes and gray had over 1100 hours of pro bono legal hours involved in this project. And so I think one of the things I've talked with Carolyn about too is I'm like, it has to get simpler. Like, you know, 1100. And I knew your council was really out here. Yeah, I was gonna make a comment. Yeah, yeah. So the one comment I would make on that that I think is the good news to that story. So we're fairly far down the line with another transaction. And what I will say is the legal piece has gotten simpler. And that to me is tremendously good news. I think as people get up the learning curve, we're getting more comfort with it. And so there's not that same level of, oh my gosh, we're traveling in a land we've never been in. And so we've heard from investors. We've heard from the lawyers negotiating these transactions. At the end of the day, one of the major parties is government. Gary, COO of Santa Clara County, could you talk to us a little bit about what are the major considerations for governments that are thinking about getting in this space and your challenges with this process as you walk down the road? Good afternoon. Again, Gary Graves from Santa Clara County. We've been involved in this process now for about two years. And actually, this was a concept that was brought to us by the community. There was what was called a disruptive innovation grant from the Health Trust. It caught the attention of one of our board of supervisor members and they asked us to take a look at it. And it was introduced to social impact bonds. And I looked at the word social impact bonds and I'm saying, okay, they're gonna ask us to issue bonds. So I immediately said, you know, this really is, I was very concerned about it. And as I learned more about it, it really became something that we became, of course, very interested in. And mostly for two reasons. Number one, it was an opportunity to really focus on outcomes and that's something that government just has to do. It has to really focus more on making decisions that are based on facts and objective information so that good decisions can be made and they're less political. I know that may seem like an obvious thing, but obviously if you're in the world of government, that isn't always the way things work. And so to the extent to which we can move in that direction, I think is a really big advantage. Secondly, we saw it as an opportunity to bring some new capital into solving some of our most difficult problems. And so as a result, we move forward with this project and we're now focused on two areas. Number one is homelessness and number two is acute mental health care. And we've been working with Caroline over the last two years and we arrived at those two projects after a pretty lengthy feasibility analysis or environmental scan because I can tell you that this is not a model that necessarily is gonna work on every problem. And so you really have to be selective and in some ways kinda look at areas where the delivery of service may be suboptimal where you can in fact apply this outcome focus into really improving. And that's where we came up with what I would describe as kind of a dual path approach. On the one hand, the traditional pay for success is about really developing cashable savings that then can be used for your success payments. And what I realized, what in the case of homelessness is that I really didn't think that we could generate cashable savings. But homelessness is a very significant issue for us in Santa Clara County. We have over 7,000 homeless on any given night. And so politically and also just from an overall perspective, it's an issue that we feel like we have to do better. We have to make some progress on. So we decided that we would actually put up the money as part of a general fund expense for the success payments for the homeless project. And so that's the one path. The other path on the acute mental health side is really about developing cashable savings. We think we can do that. The reality that we're facing with trying to do two projects is the issue of the amount of time it's taking. The amount of time that I'm putting into this and staff will obviously have existing jobs. Our county council has just been amazing in the amount of time that they have invested because this is a very complex issue in terms of, once you make your decision about where you want to really apply the pay for success concept, taking that to deal construction and putting all the pieces together is really important. And it really is something that you have to be willing to dedicate a lot of time to. So that's something that as I talk to colleagues in government that they really have to be prepared to invest time because that's really what it's gonna take as each situation is different and unique. And so, I think it's true, you don't know what you don't know and in each government there's gonna be more of that to be faced and how you deal with that is gonna be unique to your own situation. In several cases I've challenged Caroline to say, there really isn't a model, this is so new, let's do it differently in a way that's gonna really be a way that's gonna work in Santa Clara County. So obviously that aspect, the flexibility of it is there but obviously on the other side is the time it takes to really make it all work. And so we've just got to the point where we've selected a lead agency on the homeless and we're really heavily into the deal construction phase at this point. The mental health project is a little bit behind but I'm happy to hear that the legal side is becoming simpler because that's really important to us because as I said, it really is a big dedication of time but at the same time, I believe that it's gonna be worth it. I think that this is the beginning of really trying to change the way we focus on evaluation and outcomes and actually provide better service to the community. So Gary, I think it's interesting you brought up that for the homelessness project you're not looking so much at cost savings and Andy and Eileen as investors they care so they're also caring about appropriations risk. If you're not getting savings how are you addressing the appropriations risk? Well, I think that's a question that doesn't have an easy answer. I mean, obviously we can't bind the board in terms of making future decisions around appropriations but at the same time, generally the way that we budget which is incrementally that once something gets into the base and there's a base investment in this particular purpose something really dramatic would have to happen for that to be reversed but clearly from our perspective if something is a high enough priority we do believe that the board will be there and willing to make that investment for the term of the contract if you will and in the case of this homeless project we're looking at a six year over six years of investing. So I'm confident that the board understands what that obligation is and even though they haven't made the decision at this point they did decide to invest a million dollars in this budget to get us ready to fully implement the project so I think their commitment is there. What I wanted to add is I wanna say hats off to you for thinking about it that way because I think that is incredibly smart and incredibly forward thinking. Government buys services all the time and sometimes it doesn't have to be because you save money but because it's the right thing to do. So from my perspective as an investor I think if we can contractually figure out the appropriation thing I think that's great and I think it's really smart so I'm thrilled to hear you say that. And I do wanna clear up something that I know was confusing to my credit committee which is our payments as investors are not tied to the government savings they're tied to the outcomes and so the government savings calculation has been used in these four transactions to calculate for the government how much they're willing to pay per outcome but it doesn't guarantee that those savings are going to actually materialize and the fact that I'm paying for outcomes that the service provider can manage and affect and not some arbitrary government savings numbers that no one understands government budgeting anyway we'd never be able to find. And Eileen can you talk a little bit about how if governments aren't paying out of savings and you're actually pricing outcomes with pay for success how are you seeing how are your investor committees getting comfortable with the appropriations and how government is promising and making that commitment to pay? Well Andy mentioned certainly Massachusetts set up the gold standard which is they pledge their general obligation or their full faith in credit and so if the outcomes are produced and they don't pay it actually impacts their credit rating and so all their other billions of dollars of indebtedness would be impacted so there's pretty good chance they're not gonna default on a 30 million dollar obligation so that's the gold standard the way that it was done in New York State where they did not pledge their geo basically they do a two year appropriation and so they appropriate for the full amount of the outcome payments every year and that appropriation is good for two years and so in any given year if they don't appropriate then they start to do that wind down that exit that exit risk that I talked about so it's an early threshold so those are the two I know and then in Cuyahoga we just had a conversation and basically they can't pledge their geo but they recognize if they would default they view this as a multi-year contract and they enter into multi-year contracts all the time and they view it as if they default on their pay for success multi-year contract all their other multi-year contracts would be in jeopardy and so when they talk about it they're like can you imagine if we couldn't do a multi-year contract for 9-1-1 services and so that's pretty compelling from an appropriations risk standpoint it's certainly not perfect there's not money sitting there but given all the other risks in the pay for success I, you know, that's an easier one to sell to my credit committee than the others. I wanna make sure we get Bill into the conversation I think we've heard from all these different perspectives about how to set up these contracts how to finance them at the end of the day this is about finding those programs that work and giving those programs the resources they need to hit results so pay for success is trying to help resources follow results and that, you know, with that can't be done without the service providers and without the intervention so in some ways the most important part of the pay for success social impact bond transaction is the intervention whether or not they'll be able to hit that impact whether or not they'll be able to implement and actually change the lives of people they're trying to serve so Bill, could you talk to us about your role your organization's role with pay for success and what you found to be challenging? Sure, so for those who don't know I'm with the Center for Employment Opportunities we are the vendor in the New York State deal and we provide employment services exclusively to people on parole and probation we have a very specific model and serve a very specific population and have been doing so for quite a while and I would say that we really approached this as a solution first effort in that we were going to do the work that we were going to do regardless of whether or not pay for success existed and however the outcomes we seek to achieve were very well suited to a model like pay for success for support and that would allow us to achieve some additional improvements in our program. In particular, what we have seen in New York State that has been most encouraging is that both CEO and the New York Corrections are both highly invested in the outcomes of this project due to its high profile nature. As a result, we have seen on the recruitment side of things that we are working hand in hand with the parole department to identify those participants that are high risk that are close to release that seem to do best in our program. This has long been an aspirational goal of us as an organization and this funding mechanism has essentially driven us to this programmatic end that was very much unanticipated and I think that comes with it a lot of oversight, a tremendous amount of attention to detail and monitoring these things in every way but it took CEO 20 some years to get to the point where we had the internal capacity to be able to handle that that includes a three year random assignment evaluation and so we were very confident in our ability to have the impact and are now actually working out here in California through an award with the James Irvine Foundation to explore what this might look like, whether this is possible in San Diego County. I think it's gonna be a very interesting organizational experience for us to see how our sort of well established long track record in New York City and that project, how does this model function in a newer, younger site that's only got a couple years, does not have the scale and therefore the sort of impact potential that our New York deal does. What's the most different or what's the hardest part about working under a pay for success contract versus another government contract? Well I think the biggest challenge is the sort of attention to detail in the high profile nature of it at each step your commitment to is not just to the government but it's to the various investors, it's to the intermediary and that your concern, you're managing all of these different parties that are highly invested in what's happening and over a very finite set of outcomes and in particular bed days inside of a correctional institution and so putting that much weight in effort behind it does require even beyond what CEO is already capable of I think we're devoting a lot more attention to this project and so it's just operationally more burdensome. And I'm curious, say you meet a California nonprofit here at Socap and they say well what are you working on and you say pay for success and they say that sound, I've heard about that, we totally want to do it. How would you, what advice would you give to them or what would you say if they're all excited? Yeah, I mean I think for us, this is where I think this exploration in San Diego is going to be really interesting. I do not believe that these are right for everything and I think it would be very wise to, we led with our intervention, we were not becoming some sort of contortionist to fit ourselves into this model. All we had to do was run our program the way we know how to run it and we believe that that would achieve the outcomes that would suffice the investment. And so I think the, making it simple and clear that what the goal is when the New York deal started as I understand it, there were a number of providers that could have potentially been involved and it all sort of went down to one vendor and clarity and simplicity seems to be the goal. I think there's other forms of capital out there that may well enable a nonprofit to achieve that same impact on the community without having to go through this particular mechanism and that's something we're gonna take very seriously as we explore San Diego. You know I just wanna point out too, part of the investment that we made upfront was to really improve the capacity of our provider network in Santa Clara County because when we introduced this concept, I mean Caroline and I met with providers, they're very nervous about this because they're not used to operating on a pay for performance type of basis. So there's a lot of nervousness, there's a lot of those providers that we really question if they have the sophistication in order to be successful in this model. So part of our investment is to really help increase capacity in those areas. In our homeless project, for instance, we're requiring the lead agency to be MediCal capable and that's not something that all of our providers are so it really limited the number of providers who even bid on this particular project. And so I think what we're seeing is that we need to invest in our community-based organization community in order to help them become ready to do this if we're gonna expand this as we want to. So I think that that's something that is really important because these providers are also gonna be looked at by the investors, they have to pass their due diligence, they have to prove their fiscal solvency, all of these are issues that you have to be aware of. Last question. I just wanna add, I think one of the things we've heard from the providers that we've worked with that I think is something that is very important is that by putting in place this pay for success structure by bringing investors to the table and having everybody focus on the outcome that that has over the course of the projects served to reinforce stronger performance and more driving towards outcomes. And so that's one of the things that I think is aside from can we scale this, are social impact bonds gonna solve the world's problems, et cetera, I do think that there is a part of it that is around supporting performance management and to your point, helping organizations build that capacity. As you said, it gets everybody to the table because we're all in this together that is incredibly powerful. And what we've heard sometimes from our project partners is, hey, can you give a call to that government official because when I call, I'm just that social service agency but when you call, that's Goldman Sachs and that's a different level of call and that can be really helpful to the project on the ground. So we view from a sort of social impact perspective the focus on outcomes as being really, really positive to the better management. So before we open up for questions, one last comment, anybody can feel free to jump in but obviously you all have spent, the number of hours spent on pay for success and social impact bonds in this room, we're not way more than the legal hours though that's already incredible and outstanding. Why do you all keep at it? Why keep at this social impact bond work and if we are, what are you hoping and what needs to be done to make this an enduring option for government contracting? Well, I think Andy said one of the primary reasons if we can get our service providers to focus on outcomes, huge. If we can get governments to focus on outcomes, huge. If we get governments to know what they are actually paying for, real benefit to taxpayers. So that's all the really aspirational stuff. So we often talk about out living cities or the positive externalities that we're seeing. A lot of them have to do with government intervention. I mean, government innovation. The fact that CEO is now working closely with the government departments who touch their population, huge. The fact in Massachusetts that probation and parole systems are actually now talking to each other? Oh my God, in Cuyahoga County that the homelessness system will talk to the child welfare system? These are amazing, amazing outcomes. Even before we get to how much if we reduce recidivism. So the efficiencies through our whole social economy are really too vast to give up on this. So I think for me personally, it's two things. It's one that 10 years ago I was spending my life actually managing large scale pay for success contracts around workforce development. And what I saw was exactly what we're seeing here, which is we got to better outcomes. We were able to have more of an impact on the people that we were serving through the program. So that I think is really, really important. I think the other piece of it, so that's really the pay for success side. The other piece of it is bringing private capital to the table. And we often get accused of why would we, why do we want to leverage private capital? Government should just pay for all of this. Yeah, I am right there with all of you who say that, but that is not the world we live in, right? If government wanted to keep doing it through pay for success, and there was a way to bridge the risk to the nonprofits, I'm all for it. But we're in a time when the needs are greater than what government is willing to do, let's be honest, and what philanthropy can do alone. And so by using the tool of private capital to just, for leverage, right? And when you look at the deals we've done, you know, you'll see in Massachusetts through living cities and others, there's $3 million of subordinate capital and Goldman invested $9 million. Private capital can help you scale. And that's a good thing. And so I think those two things together really have some power in the time right now. I guess the only thing I would take issue with there, I don't think it's a question of willing. I mean, where the government is willing, Elected government. Oh, okay. Elected government, okay. I already said that. They're willing to, I mean. I'm moving to Santa Clara. Okay. You know, we're at a time where resources for whatever reason, you know, obviously, everybody has a different view of those reasons where resources aren't adequate to meet the needs. And, you know, the cost of a unit of service continues to go up. And it's a real difficulty. I mean, in Santa Clara County, our budget's four and a half billion dollars. And I can tell you the challenge of trying to manage that is significant. So if there's a mechanism that can help us move in the direction of really creating sort of an approach that's more focused on objective data and outcomes, I just think creates the opportunity for a more successful government. And so, you know, if that vehicle, whatever the vehicle is, and in this case, I think pay for success really is one of those vehicles, I think it's worth taking the time, you know, to implement these things, to see if they actually can provide the benefits that we think they can. The additional capital is gonna make a big difference. I know for us, and I think it can for others. So for those reasons, it's something that I really am committed to. And I think that it really has a great chance for success. Yeah, I mean, I would sort of echo what Spitzman said here already, that for us, it drives us as an organization in ways that we wanna go. And it pushes us to be better at the one thing that we do. And so, I think the appeal of it for us is also just to be very frank, there's not a lot of places to get this kind of unrestricted flexible funding, especially at this scale. And I think that that is a tremendous benefit when you're trying to adapt and build a higher performing organization that you don't necessarily know what you're gonna learn in the next month and how you may have to adapt. And so for us, I think this pushes us in ways that we're comfortable being pushed at the moment and without over extending us. And I think that finding that sweet spot is really where I see this as having a lot of value. Thank you, Bill. And thank you all for talking with each other as well as the audience. So we're not just talking heads. Would love to open it up for questions. Any particular thoughts? And please wait, this session is being recorded, so please wait for the microphone to speak. It was a recent article in the Chronicle that said that San Francisco has spent $165 million a year for the past 10 years to community-based organizations to address homelessness. I was on a civil grand jury committee that looked at the $500 million San Francisco allocates over a year to community-based organizations. It seems we're ripe for this kind of solution. And I'm wondering, here we are, SOCAP is here, all the innovation and so forth. What are the prospects for us being able to tap this very innovative financial tool to address some of our problems? It seems we certainly have the money. My advice to you would be, or let me back up for a second. I think when we think about a social impact bond opportunity, and as you can imagine, we get lots of calls from nonprofits and folks in government, the thing that I always say is you need three things. You need an intervention that works and providers that can deliver the service. You need an investor. And I always joke that you're talking to me, so you got that one. And you need government that's ready and willing to do business differently. So really it has to do with how the city is really thinking about delivering those services. On a really practical level, my advice would be to call your friend here in Santa Clara County who spent a lot of time thinking about how you can structure pay for success around homelessness and learn from how they've done it. Because it really is, it's a new way of thinking about contracting. It's what are the outcomes you're trying to achieve and what are you willing to pay to achieve those outcomes? Because to your point, you're spending the money anyway. And then what are you using to trigger that payment? In a lot of cases, what's being used are randomized controlled trials. My personal opinion is that's a pretty clunky mechanism. Maybe what you can do is define who's at risk at the outset and there are payments based on sort of amount of time out of shelter or amount of time until they transition. But I think that's the real work that needs to be done. But I certainly encourage you to piggyback. I think a key issue obviously is to find a champion with a political champion. I mean, that really was the way it got started. And we picked it up because I think we recognize the value. But San Francisco obviously has, I think that we actually have more homeless in Santa Clara County. Obviously it's not as condensed. So there's a variety of issues. And quite frankly, homelessness is a very difficult problem. I mean, when you think about who is homeless and you think about the veterans and you think about what are called two nineties or sex offenders, the difficulty in actually finding places for these people to live is a very significant challenge. And it really takes a lot of people working together to figure it out. And if you can find a mechanism or vehicle that gets people really excited about it, sort of moves the needle, if you will. I think that that's really what has to happen. And obviously easier said than done. But I think it has to start with the electeds really being willing to be champions for a concept like this and then using it as a mechanism to move everything forward. I think beautifully said, Gary and Andy. The only other thing I would add is that there are also, once you have a government champion and investor champion, we've really seen a lot of philanthropists step up with this initial feasibility process to help get to these complex transactions and see if they are feasible. Bill mentioned the James Irvine Foundation and nonprofit finance fund initiative which is funding their work in San Diego, the work in Santa Clara in part, as well as exploration in San Francisco to do this. The federal government just launched their first solicitation from the Social Innovation Fund for Pay for Success projects to invest in feasibility and transactions. So the other piece of this that's promising is that we're seeing some dollars to not only have conversations with those champions but move them from conversations to action to see if we can get to viable transactions. So it's good progress there. In the back, last question? Yeah, right there. Thank you for your leadership and innovation. We appreciate all the work that you do and the leadership you have demonstrated in making this path, paving the way for us, being the trailblazers. So my name's Liz Shepard. I run a social venture in New Orleans and we're exploring a feasibility study to do a social impact bond around growing manufacturing and sustainable business development. And one of the things that you all mentioned is that when you do a social impact bond, people come around the table in a new way in a much more committed way and there's a sense of collaboration and collective impact that is really new. And I was wondering, what are some of the soft technology and the hard technology that you use to help make that collaboration easier? The hard technology might be data sharing. Are there other technology or databases or ways that you've found to help share information across these multiple partners? The soft technology is, how do you build that trust? How do you build those relationships? And if you could speak to those two components of this collaboration, I'd really appreciate it. I can certainly speak to the data sharing component. I mean, that has been a huge step forward for us in the New York state deal in that most corrections departments at this point do some sort of risk needs assessment. More often than not, that information never leaves the department itself and actually arrives at the provider who meets people after they're released. We are now getting that information and are getting it in a way that is very useful and that we have access to the department directly. So that data sharing has been a huge step forward and frankly, it is a big step in the sense of starting to really do some more client matching to need. So, but not everybody coming out of prison will be right for our program. But we know specifically which subset of those people are and being able to identify brings some level of coherence, not just to this project, but to the system as a whole. And I think that there really is a lot to be said for that and the trust that that process in and of itself is engendering trust between us and the department. I can speak to that a little bit too as an organization that tries to help government move and pull these deals together. It's an exercise in project management for sure to bring one of these deals to close with all of these different parties. And so a lot of the hard technology for some of the party's data sharing agreements, you won't believe how long they take, right? Especially if you want outside access to providers and others. So investing in that and the legal processes starting early certainly make a difference. We've found that management tools like efforts to outcomes and others that track real time progress and outcomes are very helpful for the providers as they're implementing the soft technology. No time like FaceTime being in person to develop those relationships, to realize that we're in the business of trying to teach government a new way of doing things and you need to be on the ground, on the phone, working with people to help them build that capacity and to acknowledge like Andy said earlier, you don't know what you don't know. And while we have a few proof points out there, a few examples, each government entity needs to figure out how to do this process for themselves and it may look a little different. And so being open and not dogmatic about one way of doing things has been really helpful. I think on the soft side too is being really clear of everybody's motivation for why they're at the table and recognizing that some people won't fit in the group and being willing to say sorry, wrong motivation at this time. In the Massachusetts transaction, it was amazing how I would say the shared commitment after the results for the young men involved was replicability of the transaction. We all knew the world was watching and so we were all committed to making it the best transaction not for ourselves, which you typically see in a real estate deal, but the best transaction for the world. And I think as I mentioned before, one of the issues for us is the time it takes and so for our organization to have third sector as really managing this effort on a full time basis really has allowed us to make a lot of the progress because their relationships with funders we've established a funders council to get feedback so that we could understand what they were interested in. So we have this ongoing relationship building process in which we're having a dialogue to try to understand what's important to them because obviously funders aren't someone at least in this area that the county has dealt with in a large part. And even philanthropy, it's allowed us to develop some better relationships there as well. But I think importantly for government is to really once it sets sort of the path once you get on that path, you have to sort of make a commitment you have to follow through and people have to see that you're serious and there's no waffling and that's really an important part of this. Any final comments from folks before we wrap up? All right, apologies we couldn't take more questions but I think the panelists will stick around a little bit afterwards if you have others that weren't answered. Thank you all for attending this session and we hope this is valuable. Thank you.