John Paulson’s $400 million gift to Harvard earlier this year touched off a new chorus of an old complaint: Why don’t the rich make megagifts to charities that help the truly needy?
That, in simple terms, is the question at the heart of new research by Bridgespan, the nonprofit consultant that works with both philanthropists and charities. Bridgespan’s data confirms the conventional wisdom that few big gifts go to social change; reviewing publicly announced commitments of $10 million or more from 2000 to 2012, it found only a fifth of the total dollars each year went to charities working in education, the environment, health, social services, or similar fields.
According to Bridgespan’s research, charities that land big bets typically:
- Build a trusting relationship with a donor, usually over years.
- Develop a compelling investment hypothesis. Groups should state simply the change that could result from a gift.
- Work with donors who are a natural match. Bridgespan warns that a group shouldn’t move away from its core strengths to fit a philanthropist’s ambitions for change.
- Stress the unique power of a gift. Donors respond best if it’s clear that only their gift can make something happen.
- Give donors opportunities to contribute to the work. Bridgespan suggests “co-creation” is often critical.
- Maintain high professional standards in operations and financial reporting. That matters to donors handing over millions of dollars to a charity.
Still, Bridgespan’s researchers reject the notion that billionaires aren’t interested in changing the world. They note that nearly 80 percent of those who’ve signed the Giving Pledge list some form of social good as a priority, if not their most important goal. Philanthropists, the report suggests, have bolder aspirations than we might think.
So what’s holding them back? The report offers many reasons, including the public scorn that can follow a failed "big bet," à la Mark Zuckerberg’s $100 million adventure in Newark, N.J. But interestingly, Bridgespan also points to structural issues that make it hard for nonprofits to strike multimillion-dollar deals or be "big-bet ready." As one observer notes in the report: "There’s a relatively small number of organizations that can effectively metabolize seven- and eight-figure checks."
In its report, Bridgespan identified 66 gifts to U.S. nonprofits of $50 million or more from 2000 to 2012. It also found 28 groups that have demonstrated that they can land big bets. During that time, each received four or more gifts of at least $10 million from at least two donors. They include such venerable giants as Salvation Army and the World Health Organization but also groups that achieved critical mass in large part because of the big bets they secured.
We write about three of the groups from the report here: KIPP schools network, Conservation International, and Youth Villages. Their stories illustrate that big-bet deals are an art, not a science.
One day in the late 1990s, Peter Seligmann, CEO of Conservation International, was fishing Wyoming’s Green River with his board chairman, Intel co-founder Gordon Moore. The two had grown close after nearly a decade of work together that began with Mr. Moore’s first contribution, a $100 check. Now, Mr. Seligmann wanted the billionaire’s help to create a coalition of U.S. environmental groups to protect biodiversity around the world. The ask: $1 billion. "He laughed," Mr. Seligmann remembers.
Yet as they tossed their lines into the river, Mr. Moore suggested an alternative approach. Rather than funding big American groups, he said, Conservation International should help local organizations tackle biodiversity issues in their home countries.
From this conversation was born a 10-year, $261-million commitment from Mr. Moore and his wife, Betty, announced in 2001 as the largest ever to a private conservation group. It was a transformational moment for the 14-year-old Conservation International but also a confirmation of its funding strategy. Though direct mail fueled many environmental groups in the 1980s and 1990s, Mr. Seligmann and his colleagues decided to pursue chiefly large donations. They wanted donors with deep pockets but also people hungry to make a big difference in the world.
Mr. Moore, for one, doesn’t play small ball. "I’d rather do a few big things that have an impact than a lot of little things," he once said of his philanthropy. "Swing for the fences."
Other big backers of Conservation International include the John D. and Catherine T. MacArthur Foundation and the Walton Family Foundation. Since 2000, the organization has attracted more than 150 gifts of at least $1 million.
Many big donations follow years of relationship-building not altogether different from a university’s cultivation of a wealthy alumnus. But Conservation International’s courtship is helped by the kind of clear "investment hypothesis" that Bridgespan sees as critical to many big bets for social change. By protecting just a small number of biodiversity hot spots worldwide, the organization believes it can save millions of species — a compelling return-on-investment pitch.
From its founding, Conservation International has viewed its donors as investors who expect bottom-line results. "These are people who have achieved success and know what it looks like," Mr. Seligmann says. "They strive and drive and push hard. If we fail, they fail. And they don’t want to fail."
Walmart scion Rob Walton, now a Conservation International board member, says big-bet philanthropy obligates the donor to monitor progress and intervene when needed. "You can’t expect good results if you just throw the money out there and don’t stay on top of it."
Don and Doris Fisher opened their first clothing store in 1969, a jeans shop for teens and twenty-somethings. They called it the Gap, short for "generation gap."
Thirty years later, now graying, retired billionaires, the couple crossed the gulf between the Greatest Generation and Gen X with a $15 million gift to two schoolteachers with an intriguing model of education. At the time, Dave Levin and Mike Feinberg were in their early 30s. Each had started a charter school, then still a novel concept. Total enrollment was about 600. Yet the two came to a 2000 meeting at Mr. Fisher’s office hoping the Fishers would bankroll a national expansion of their Knowledge Is Power Program, known as KIPP.
"You really think you can do this?" Mr. Fisher asked.
"I don’t know," Mr. Levin replied, "but we’d be more than happy to use your money to find out."
In addition to that initial $15 million pledge, the Fishers have gone on to donate more than $100 million to the KIPP Foundation and KIPP schools. The KIPP-Fisher relationship, despite the age difference, proved the type of organic match that often underlies big bets, according to Bridgespan.
The Fishers and KIPP founders shared the conviction that public schools were failing disadvantaged kids. After stepping down from the Gap, the Fishers had plunged into education reform, with Don — a proud product of San Francisco’s public schools and the University of California at Berkeley — even serving on the California Board of Education. They picked Scott Hamilton, a veteran education policy maker, to guide their philanthropy. He says they gave him a simple mandate: "Go find something that’s working."
Nearly a year of travel and research led Mr. Hamilton to KIPP, which was posting impressive results with inner-city kids in Houston and the South Bronx. The Fishers were excited at the chance to build out KIPP through a brick-and-mortar, Gap-like expansion that remained true to the founders’ vision of education.
The Fishers’ business savvy proved critical. Don recognized the potential power of KIPP as a brand. KIPP’s foundation would license the name, but only through agreements that could be terminated if a school didn’t meet operational or academic standards.
At the same time, Mr. Fisher and the KIPP founders gave free rein to KIPP-trained leaders to adjust the model. By contrast, the Gap had owned and operated each of its stores from its San Francisco headquarters. Says Steve Mancini, a longtime KIPP Foundation executive: "Don told me, ‘I’ve learned the limits of command and control.’ He didn’t want to make KIPP a mini-Gap."
Today, 183 KIPP schools nationwide enroll 70,000 students. Don died in 2009, at 81, but his son John is chairman of the board, and Doris has served on the board since its founding and continues to visit schools and help its leaders.
Richard Barth, CEO of the KIPP Foundation, remembers a celebration years ago in which he and Don stood together and watched hundreds of students and teachers dancing and performing. "He turned to me and said, ‘Can you imagine making a better investment?’ "
The story started like a fairy tale and ended like a dream come true. Officials at a big-name New York foundation phoned a little-known Tennessee nonprofit: Can we come for a visit? The organizations had never worked together; ironically, the foundation had rejected a grant application from the charity years earlier. But soon the two began assembling the outlines of what is now a $91-million bid to transform how the country cares for troubled youths.
That phone call was in 2004. A few years earlier the Edna McConnell Clark Foundation had narrowed its focus solely to youth development. Handing out hundreds of program grants hadn’t moved the needle, it decided, so its staff now scoured the country for charities with a proven model of work and the potential, with a big cash infusion, to scale up.
Foundation officials had never heard of the Memphis-based Youth Villages, but their due diligence suggested it was well built, with rigorous measures of impact that showed it was truly changing lives. "We really thought we had found a hidden gem," says Clark President Nancy Roob.
Youth Villages, meanwhile, was focused intensely on its work. Its clients were children whose circumstances or behavior often land them in foster care, juvenile detention, or other institutional settings. Instead, Youth Villages sent counselors into their homes to work with the kids and their families, friends, and teachers. The organization’s internal measures showed that the strategy was twice as effective as traditional programs and much less costly.
Until Clark showed up, Youth Villages had given little thought to going national. Eventually, it embraced the idea that pushing into more states and gaining market share would persuade others (particularly lawmakers who funded youth programs) that the new model was the best approach. "Instead of being committed to helping just a few kids beat the odds, we’re now trying to shift the odds for all kids," says chief development officer Richard Shaw.
Over three years, Clark provided $6 million along with expertise to help Youth Villages create a business plan for expansion. Bridgespan suggests such "co-creation" is critical for most big bets, but Ms. Roob says Clark purposely leaves key decisions to the nonprofit. "The funder in this relationship is in a very powerful position, and you have to be mindful of that."
Since 2007, Youth Villages and Clark have assembled two rounds of funding for its growth totaling $85 million, including another $30 million from Clark. The other 17 backers include the Kresge Foundation, FedEx, and the Bill & Melinda Gates Foundation. Today, Youth Villages operates in 12 states and the District of Columbia. It projects that it will serve 23,000 children in 2017 — nearly three times the number it served when Clark first called in 2004.
"They’re now really poised to make a huge difference," says Ms. Roob.
Correction: An earlier version of this story misstated Don and Doris Fisher’s giving to KIPP.