Today's high-net-worth donors are rejecting the passive and obligatory ritual of charitable giving in favor of a more interactive and customized philanthropy that reflects their passions and interests.
Customized Philanthropy
The
philanthropy marketplace for the ultra-high-net-worth individual is
growing exponentially. There are more than 70,000 private foundations
in the United States with assets of more than $550 billion.1 In the
past 15 years, the asset size and the amount of giving from foundations
have tripled.2 Likewise, the growth in donor-advised funds has been
dramatic and now represents approximately $23 billion.3 There has been
a 25% increase in the amount of new assets to donor- advised funds in
2007 alone.4 Not all of these resources come through an individual or
family philanthropic entity. The new philanthropic investor often
collaborates with other like-minded donors in "giving circles." There
are an estimated 500 to 800 giving circles nationwide.5
The customization or personalization of philanthropy extends beyond traditional grant-making. An emerging cottage industry incorporates the experience of philanthropy into luxury travel for the high-net-worth individual. For example, the Ritz-Carlton recently launched The Give Back Getaways program allowing guests to participate in a humanitarian or environmental project near various Ritz properties throughout the world.
Tangible Results
The
philanthropic investor increasingly dislikes the idea of joining a
group to help the greater good. Those who are in Generation X or
younger are 50% less likely to support a membership-based nonprofit,
such as an art museum membership, as did those in prior generations.6
The philanthropic investor does not want to join the United Way in his
hometown simply because it is the right thing to do. He prefers the
immediacy of knowing specifically what he has purchased with his
philanthropic dollars.
The nonprofit sector faces a Darwinian struggle for donations. Even as Americans give nearly $300 billion7 to charitable organizations annually, there has been an exponential growth in the number of nonprofits competing for these donations each year. The most successful of the nearly 1.5 million nonprofit organizations in the United States have found a way to appeal to the new donor as an investor rather than as a contributor.
For example, Internet-based nonprofit Kiva.org makes micro-loans to business owners in the developing world in order to alleviate poverty. It became so popular in 2007 that it had to limit new donations to $25 increments. Few charities can imagine having to turn away donors because of overwhelming demand. This example is emblematic of what donors are hungry to see in their philanthropy.
Take PlayPumps, a part water pump and part merry-go-round championed by AOL founder Steve Case. More than one billion people worldwide do not have access to clean water. PlayPumps addresses this overwhelming social problem in a measurable and accessible way for donors-one pump at a time. Likewise, Nothing but Nets allows donors to make a dent in the public health scourge of malaria by focusing just on the cost of providing mosquito nets at $10 per net. The blue-chip charities with well-respected brands have taken notice and have begun to adapt their message to the new donor preferences.
The Do-It-Yourself Philanthropist
Adapting
the rules of entrepreneurship to philanthropy has engaged a new
generation of donors. Venture philanthropy adapts a market-based
approach and the language of venture capital to the nonprofit sector.
The idea of incubating a nonprofit venture and building its capacity
over time appeals to today's donor.
Home Depot co-founder Bernie Marcus, one of the country's most successful business entrepreneurs and philanthropists, embodies this "hands-on" approach to philanthropy. He reportedly requires all of his foundation staff to watch a video describing in detail what he does and does not want his philanthropy dollars supporting. This new breed of donor does not wait for others to get things done. When Marcus wanted to create a new aquarium for the city of Atlanta and a resource center for autistic children, he built them himself.