After Google went public in 2004, creating a financial windfall for Kathy Kwan and her husband, Google executive Alan Eustace, their wealth adviser suggested that they establish a foundation for tax purposes.
He handed Ms. Kwan 20 pages of IRS guidance to get her started: Avoid conflicts of interest. Grant money only to 501(c)(3) organizations. And don’t use private foundation money to pay for gala dinner tables.
“It basically kept me out of jail,” she says. “It wasn’t necessarily helpful in terms of how do I pick an organization. How do I engage in a constructive conversation and dialogue with a not-for-profit or grantee.”
The Google IPO made Lucy Caldwell’s family wealthy too, a matter of “being in the right place at the right time,” as she describes it. The Stanford graduate made some donations to colleges and private schools her family had attended, as well as to local causes, mostly in a haphazard way, she recalls.
“I had this feeling of needing to give back, but I didn’t have any idea of how to do that or where to engage,” Ms. Caldwell says. “My footprint was initially very small.”
Today both women are very active, generous donors. But the philanthropists say it took years of introspection, research, networking with and learning from other donors, and relationship building with nonprofits to vault them to where they are now. And there were lurches along the way.
Their experiences and others’ are captured in a new report by Open Impact, a Bay Area consulting firm that works mostly with foundations and wealthy donors. It is based on first-person interviews and small-group discussions with 50 self-made, ultra-high-net-worth philanthropists in the Bay Area, as well as wealth advisers and subject-matter experts. The donors interviewed had net assets of at least $10 million.
Heather McLeod Grant, a co-founder of Open Impact and co-author of the report, said it identifies key stages of and common psychological and practical barriers to charitable giving by the region’s richest individuals. One goal of the report, she says, is to help unlock more capital faster for nonprofits to tackle social problems.
“I think what the nonprofit leaders can do is really be thoughtful about listening and empathizing with the philanthropist,” she says. “I know that sounds crazy, because most nonprofit leaders are like, ‘You have all the money. You have all the wealth. I need some of it.’ "
Getting Stuck
Paid for by the Bill & Melinda Gates Foundation, the new qualitative report follows a quantitative study published by Open Impact in late 2016 that found that Bay Area private foundations were directing only about 7 percent of all giving to local nonprofits. (The data got much attention because it seemed to backup complaints by charity leaders that area donors aren’t doing enough to support community groups.)
What she and her colleagues have seen with some of their clients and what the new research bears out, says Ms. Grant, is “some of these donors are really getting stuck, and they have a hard time ramping up. And philanthropy isn’t as easy as people might think it is.”
Among the barriers that ultra-high-net-worth individuals face in initiating or scaling up effective giving are extraordinary demands on their time, anxiety about making mistakes, and doubts their money can make a difference, especially when compared with the giving of billionaires like Bill Gates and Mark Zuckerberg.
“We actually heard a number of these donors talk about how stressful it was,” Ms. Grant says. “Oh, my God. What if I give to the wrong nonprofit? What if they misuse my funds? What if they can’t deliver on what I want?”
Other donors said there are simply too many nonprofits working on similar or overlapping issues.
“Many donors look at this fragmented landscape and can’t distinguish between organizations,” the report says. “They are overwhelmed by the possibilities and don’t yet have a way of discerning which groups to get involved with.”
And while some big financial-service firms are starting to build philanthropy consulting into their suites of offerings for their most well-heeled clients, many wealth advisers still fall short when it comes to steering would-be donors to helpful resources.
Building Relationships
Patient, empathetic listening can go a long way with wealthy individuals trying to feel out their philanthropic goals, Ms. Grant says.
“Nonprofit leaders interested in going after ultra-high-net-worth giving — they need to understand it could be a five-to 10-year time period of building relationships,” she says.
Nonprofit leaders who aim to help newly wealthy individuals gain traction in philanthropy, the report says, should also consider developing philanthropy training and tools for wealth managers, as well as decision-making tools for couples that include real-world examples.
Supporting donor networks and donor-education programs could also pay dividends for nonprofits when it comes to getting the ultrawealthy to give and give more, the report states.
Ms. Caldwell says it was one such donor group, the Silicon Valley Social Venture Fund, or SV2, that helped her move her giving from haphazard to more focused and informed.
“It was actually a conversation at the playground with another mom. We were talking about, well what else do you do? How do you spend your time?” Ms. Caldwell says. “She said I’m involved with this really neat organization called SV2. It is a philanthropy organization. We get together, and we do grants and volunteer and pool our resources.”
Ms. Caldwell attended a meeting and began giving through the fund, starting with $5,000. She has since become engaged with several donor networks, including internationally.
Ambitious Leaders Wanted
Their credentials as highly successful businesspeople mean that many of today’s self-made, big-dollar donors also “demand metrics and measurement and prefer to invest in leaders who bring a “businesslike” approach to social change,” the report says. “Unfortunately, many nonprofits aren’t prepared to deliver what these new donors demand, leading to greater disconnects between the two sides of this social market.”
Bill Unger, a venture capitalist and veteran philanthropist who was interviewed as part the new report, said that one of his favorite nonprofit leaders to work with these days is Charles Knowles, the president and co-founder of the Wildlife Conservation Network.
That’s because Mr. Knowles, a former software entrepreneur, runs the nonprofit “like a Silicon Valley company,” Mr. Unger says.
“Everything happens on time. He continually exceeds expectation and commitments. His team loves him. They have no unplanned turnover, ever.”
Mr. Knowles is a tough guy, Mr. Unger says, and he also has recruited a tough board that knows what great performance is all about. The board meetings are a thing to behold, Mr. Unger says.
“He doesn’t welcome stupid comments, but he welcomes the challenges, and he welcomes the opportunity to keep ratcheting things up.”
