The Foundation at 35

Since its inception in 1986, the Initiative Foundation has helped to change the economic and charitable landscape of Central Minnesota.

From meeting the needs of communities in crisis, to making the most of new opportunities, the Initiative Foundation is all about building a more resilient Central Minnesota economy. One of six Minnesota Initiative Foundations first launched with support from the Minneapolis-based McKnight Foundation in 1986, the Initiative Foundation has had a hand in everything from diversifying Central Minnesota’s economy in the wake of the farm crisis to empowering the region’s next generation of diverse entrepreneurs.

To celebrate the Foundation’s 35th year, IQ Magazine recently sat down with President Matt Varilek, Kathy Gaalswyk, founding president, and Traci Tapani, chair of the Board of Trustees, to talk about the Foundation’s regional impact.

Describe the landscape in Central Minnesota in 1986 when the Initiative Foundation first got its start.

KG: The mid-1980s were a really difficult time in rural America, and Minnesota was right in the middle of it with double-digit unemployment, recession, banks in crisis and rural towns that were just closing down because of the collapse of family farms. The McKnight Foundation, which was the largest private foundation in the state at that time, wanted to help, but they also recognized they couldn’t see the solution from an office building in the Twin Cities. So Virginia Binger, William McKnight’s daughter, and Russ Ewald, the president of the foundation, went out across the state, meeting with everyone from farmers to civic leaders, to gather input. McKnight valued the voices of rural people and believed that the people closest to the problems were the ones in the best position to find the solution.

And the solution they proposed was unusual—building a network of sister institutions that would provide grants in the community as well as gap lending to bring new capital into hard-hit rural areas. It was so unusual, in fact, that you had to get special permission from the IRS to become a community lender. Why was that so critical?

KG: At the most local level, we needed to diversify our economy so that people weren’t so dependent on agriculture or mining, and the most effective way to do that was by starting and growing small businesses. Many rural families didn’t have collateral, or were poor credit risks, so that birthed the concept of being an alternative or gap lender, coming alongside those local financial institutions to share some of the risk and inject some capital into businesses getting started. The IRS eventually accepted this as charitable work because it was all about pulling people out of poverty to create quality jobs.

MV: In this world, where there’s so much drive towards specialization, it’s remarkable that the folks who established this organization were willing to break the mold and have a diversity of functions under one roof, which is now our unique strength. Today, we’re a community foundation that does donor-driven grantmaking, a Community Development Financial Institution that lends to the community, and a nonprofit that trains entrepreneurs to be effective leaders in their communities, and we find synergies across those distinct functions. It’s extraordinary that the people who established this organization had that vision 35 years ago.

KG: It sounds like it was a grand plan, but we broke all kinds of unwritten rules because we didn’t know better. It was about bringing change to rural communities.

The Initiative Foundation was launched during a crisis, and it’s also helped many communities manage crises—from public health challenges like meth addiction to local catastrophes like fires and tornados. How does the Initiative Foundation play that role?

TT: We’re not the Red Cross, and I don’t think of the Foundation as a crisis-response organization, but it’s true that the Foundation is excellent at responding in times of crisis. I think that’s because of some of the amazing work we’ve done building relationships and connections with nonprofits across the region, and by helping communities be deliberate and strategic, and by thinking about our community from this framework of commitment, hope and love for rural communities.

How did that network of connections help during the most recent crisis, the COVID-19 pandemic?

MV: When the governor and lawmakers received small business relief funds at the federal level to allocate to the region, the Initiative Foundation was a natural network to use because we’re grantmakers who also do business lending, so we could quickly validate the eligibility of people operating businesses and distribute $7.8 million in federal support for businesses that were suffering. Managing crises is really where we feel like our value to the region is maybe most apparent, but our impact extends well beyond crisis response. If you add up the total grantmaking and total lending we’ve done since our inception, we’ve invested in excess of $112 million in the region. And we’ve made that funding go even farther thanks to lots of wonderful partnerships with individuals, businesses and units of government. We’re proud that, for every $1 that comes to us from a source within our 14 counties, we are able to invest, on average, around $4 back into those counties. It’s a very strong return on investment that we hope makes the case for our supporters to continue investing in what we do.

Why do donors want to support the Initiative Foundation, and why are they important to your work?

TT: People who live here want to make donations in the region and they want to see the outcome of their generosity. Having a trusted partner like the Initiative Foundation matters to people, and our donors also know the Foundation has done great work in helping other nonprofit organizations in the region develop their strengths and to stay viable for the long term.

KG: Having a strong donor base of people within the region who are putting their money where their heart is shows that local people believe in and are engaged in supporting the Initiative Foundation’s work. Donors are critical to creating the magnetism we often talk about at the Initiative Foundation, which is about helping to attract resources to the region that otherwise might not land here if we didn’t offer the structure, staffing and skills to deploy those resources.

Economic diversification, building the capacity of community nonprofits, and early childhood development have all been themes of the Initiative Foundation’s work over the years, but how have those themes evolved?

MV: There’s been a lot of consistency in our mission, combined with a lot of entrepreneurial flexibility, so as challenges and opportunities have evolved, we’ve changed as well. For instance, we’ve always had a focus on early childhood, but over the years it’s widened to include a broader spectrum of stakeholders. Child care is a place where you have this intersection of the child’s social and emotional development and the economic needs of a community. Parents want to be able to work and fill critical positions in their community, or go and start their businesses, but they can’t if there isn’t a quality, affordable place to leave the kids during the day. That’s why we see child care as one of the systems where our support and intervention can make a difference.

Has the growing diversity of Central Minnesota changed your approach?

MV: Diversity is a driving force in the overall population growth of our 14-county region, which has expanded by 7 percent over the last decade. While we’ve always been focused on lending and providing access to capital, more recently we’ve built out our entrepreneurship portfolio to include the Initiators Fellowship, which works to accelerate the success of what we call social entrepreneurs—people who are building businesses and enterprises that benefit their communities—and our Enterprise Academy, which is 12 weeks of small business training, especially for underserved communities, communities of color, and lower-income individuals. We’re here to serve the people of this region, and that means communicating across cultural differences.

What inspires you about the Initiative Foundation’s history and its future?

KG: I think the Initiative Foundation’s strength is about not being afraid to step into complicated issues and not have an agenda other than a values-driven approach with a focus on respect and honest communication. A unique thing we’ve brought to the table has been a commitment to come together to identify what’s changing, what are some opportunities ahead, what are some hard things we need to do, and ask ourselves, “How can we help people help themselves?”

What do you think the next decade will look like for the Initiative Foundation?

MV: The fact that we can talk about the next 10 years, and not have any question about whether the Foundation will exist, is an important part of who we are as a source of stability and resilience in the region. With the economy, we envision a region where we have an abundance of talented people and job-creating enterprises that contribute to economic growth and vitality. When it comes to community, we envision a region of highly engaged communities where people choose to live, work and play. When it comes to generosity, we envision a region where people continue and grow in their ability to give of their time, talent and resources. And when it comes to our work as a whole, we want to stay true to our mission as we get even better at doing what we do and to grow, along with the region, so that we can take advantage of more opportunities and tackle more challenges.