In 2008 I launched my previous company, Dexterity Ventures Inc. We built charitable giving technology using data driven decision making to support donors on their philanthropic journey. In the spring of that year I wrote a blog post about how the Silicon Valley was influencing the charitable landscape. At the time there were a number articles hitting mainstream media about venture capital meeting venture philanthropy – Philanthrocapitalism. The one referenced in this earlier blog was in the NY Times Magazine, Self-Made Philanthropists. It shares the story of one couple – Herb & Marion Sandler.
Of note – While the Sandlers have been criticized for their role as banking executives that precipitated the low-interest mortgage lending melt-down in the US, Mr. Sandler was also one of the larger philanthropists speaking out against pay-day lending and supporting causes around banking for the under-banked.
Mrs. Sandler passed away in 2012.
Fast forward a decade and things have changed… slightly. The venture philanthropists have become more sophisticated in their understanding of the charitable sector and charitable organizations are starting to get the nuance of the “new philanthropist.” The entrepreneurial spirit that is pervasive in The Valley is shifting to other regions and as a result the non-profit organizations that are part of the ecosystem are being infused with this mindset.
The Sandlers who were the focus of the NY Times piece, wanted to support effective investigative journalism so this is what they did, something that few others had done:
They chose a path… Rather than give money to someone who approached them, they did the approaching. Rather than finance an organization that already existed, they started their own outfit – ProPublica. They found a star to run it. They seemed almost to relish the thought that they risked failure with this new, unproven model of journalism, though if truth be told, they don’t think they’ll fail. And they gave a lot of money — $30 million for the first three years, with the expectation of continuing that commitment, if not more, for years to come…
On one level Herb and Marion Sandler are part of the new wave of philanthropists that Matthew Bishop of The Economist calls “Philanthrocapitalists”: wealthy entrepreneurs who are applying to philanthropy the same principles that made them successful business people. They make big bets, demand results, take risks, want some control over how their money is spent and so on. The quintessential philanthrocapitalist, of course, is Gates, but many others are now following his lead, trying to forge a new kind of activist philanthropy. Even among the philanthrocapitalists, though, the Sandlers stand out. Herb, in particular, can sound nearly contemptuous about how other philanthropies go about their business. Mainly, it seems, they don’t do it the way he and Marion do.
Looking back at this approach it makes me wonder where and how the average North American donor, can apply investment-style principles and an entrepreneurial mindset to philanthropy. It is one thing when you have $10Million to risk in a new start-up, it is an entirely different thing when you are taking the Lean Start-Up approach to building out a social solution.
As North America realizes the effects of the largest inter-generational wealth transfer in recorded history (somewhere between $30 and $50Trillion); as the income gap grows increasing demands on the social services sector; as the demands on healthcare related organizations increases based on an aging demographic; is it better for society to have more selection of charitable services, or is it better for society to have fewer charities that are addressing more needs?
If we take a page out of the business handbook there would be considerations for supply and demand. In the charitable sector, under traditional philanthropy, these two opposing pressures do not manifest themselves as they would in the new philanthropic paradigm – Philanthropy 3.0. The Supply:Demand conflict in the charitable sector plays out like this:
- Donor Driven – Individual/Company seeks out organization to support drives resources (Time, Talent, Treasures, Ties) to that organization
- Client Driven – User-based demand seeking services and creating a solution if there isn’t one already in existence. This new entity may or may not be a registered charity/501c(3)
- Charity Driven – A social need is presented and an organization is created whereby the business model is around grant writing and solicitations
- Government Driven – Cut backs to different sectors requires the private sector to step-up and fill in the gaps (service delivery and funding), or the charitable sector to fill in (service delivery)
- Collectively Driven – Social systems identify the needs, find the gaps, create the solutions, test the solutions, share their findings and iterate à The Social Impact Lab model
Understanding how Supply and Demand works within the Social Profit sector we are now able to participate in new ways of financing solutions. Examples include stakes in Social Purpose Businesses Social Impact Funds and Social Impact Bonds; rewarding socially positive consumer behaviour through tax credits and incentives for banking in a community bank; and creating loyalty programs for those who choose to shop in community-based businesses like Co-Ops and Main Street companies.
An entrepreneurial mindset to philanthropy is not about doing charity as a business. It is about assessing the risk and reward associated with a certain investment. According to the Sandlers, they spent as much time researching one of their recipients as they did in preparing for a corporate acquisition.
10 years in, the Sandlers’ model is still a unique breed of philanthropy – understanding the landscape and the problems within, designing the solutions around the problem, seeking out the expertise to execute on the solution and taking a risk. Looking ahead at the next decade what we call Traditional Philanthropy will all but disappear. New funding models to solve complex social problems will be the way that money flows to organizations… and perhaps even traditional charity models will be obsolete.