Pay for Success Explained (and Illustrated)

By Chris Ellis and Sara Blumenstein

At Fourth Economy, we are interested in—and experts in—a new generation of funding mechanisms that are enabling the expansion of interventions with proven results. (See these posts from last year introducing Social Impact Bonds and Three Questions to ask to demonstrate impact.)

The key stakeholders involved in a Pay for Success transaction

 


To help advance this work, and to better explain how one example of impact investing called Pay for Success works, we have made a two-page explainer that introduces the key players in a PFS transaction, shows how they interact over the course of a transaction, and details how Fourth Economy can support organizations interested in exploring this funding mechanism to support their communities. 

When Should You Consider Pay for Success?

  • Do you support or operate a successful program serving social, environmental, or economic needs and are interested in scaling?
  • Are you working to implement a proven intervention and increasing upfront capital would allow you to move faster?
  • Are you interested in diversifying funding streams that support your programs? 
 

Why are we excited about Pay for Success?

Communities across the country have used PFS to improve outcomes related to education, health, workforce development, green infrastructure, and other issues. We think PFS has a lot of potential, and we’re interested in working with organizations to help them understand if it is a feasible funding option for them, their grantees, or their interventions. To that end, we offer a PFS Feasibility Study, a two-part study that works with service providers to clarify the outcomes of their proposed interventions, and then analyzes program and external data to create a cost-benefit analysis and a model illustrating the investment structure and the costs expected to be avoided. During this process, we also identify project stakeholders and their potential involvement in a transaction. We are excited to explore this funding stream with our partners as a tool to help create better communities and stronger economies.

Click here to view our Pay for Success explainer, and let us know if you would like to learn more.