Philanthropists who want to help change the world need to act more like venture capitalists -- carefully vetting, then betting on organizations with big ideas, according to a new report.
That would help close the gap between what philanthropists want to do and where their money actually goes, according to a paper by Bridgespan Group, a Boston-based philanthropic advisory. Among public mission statements of 100 large donors, almost 80 percent featured social change as a prominent goal, the researchers said.
Yet reported gifts of $10 million or more between 2000 and 2012 in the U.S. typically went to universities, hospitals and cultural halls, totaling an average of $8 billion annually. Just $1.6 billion a year was directed at social change, according to the report published Thursday.
“The only way we’ve seen real social change happen is through donors investing time to find the right deals, getting that deal flow going and doing that due diligence,” Chris Addy, a Bridgespan partner and co-author of the report, said in a telephone interview.
Silicon Valley investors accustomed to startup ventures are good examples of this kind of giving, he said. The approach may come naturally to high net worth individuals who have founded their own company or run a hedge fund and consider themselves “builders,” he said.
“A reason to take a venture capital approach with your philanthropy is that it can be very high leverage,” Addy said. “You can support early stage interventions and ‘prove out the model’ so that others can grow them massively: IPO in VC, public funders in social impact.”
One way to start is through an intermediary such as the Robin Hood Foundation, according to the paper. The New York- based group, which fights poverty in New York, creates and tracks metrics that would tell donors “if their gift was making a difference,” according to the report. It also invests in research to “find the kind of solutions that might be hard for individual donors to discover on their own,” the authors wrote. Robin Hood’s gala last May in New York raised more than $101 million.
“If you’re a venture capitalist, data is critically important to everything you do,” Addy said. “Robin Hood takes data to a new level in a lot of ways for the social sector.”