How funder collaboratives are disrupting traditional philanthropy 

Bob.Allen
Feb 15, 2023
1 year ago
Heart puzzle
Heart puzzle

Making donations can be just as complicated as financial investments — a challenge that has spurred a recent surge in funder collaboratives, in which individuals or institutions join forces with a shared philanthropic goal.  

Such collaboratives have seen a spike in recent years, with more than half of philanthropic funds launched in the past decade, according to a survey of 200 such funds by The Bridgespan Group, a Boston-based firm that advises philanthropists and nonprofits. Respondents estimated annual giving of $2 billion to $3 billion in 2021. 

When Mark Stoleson and his partners co-founded Legatum, a Dubai-based investment business, in 2006, they embarked on a parallel mission to allocate some of their capital to helping others. Stoleson and his co-founders searched for an organization that could provide prospectus-level information and analysis on philanthropic opportunities — ​but couldn’t find one.  

So one of the partners established Geneva Global, among the first platforms for funder collaboratives or collaborative philanthropy. Geneva Global uses rigorous due diligence, reporting and management to present philanthropic opportunities in a way that family offices, ultrahigh-net-worth people and other capital allocators can understand, Stoleson said.  

“If you want to turn your money into meaning,” he said, “then you need to be just as mindful about your philanthropic investments as you are with your financial investments, not unlike you would with a company that you might want to invest in.” 

HIGHLIGHTS 

  • Funder collaboratives are joint efforts by individuals or institutions with a shared philanthropic goal. 
  • More than half of them launched within the past decade. 
  • They operate with a lean management team and focus on a specific cause. 
  • Their advantages to family offices and ultrahigh-net-worth individuals: lower costs and fewer resources required, increased transparency and targeted reach 

After learning from the success of Geneva Global, in 2006 the Legatum co-founders established The END Fund, the only private philanthropy initiative focused on ending neglected tropical diseases. 

Although different models exist, many funder collaboratives operate with a lean management team that relies on those closest to the problem to advise where the funds will have the greatest impact. Most funder collaboratives focus on specific causes, bringing expertise that other organizations — including nongovernmental ones — typically lack. 

The reduction in costs and resources, increased transparency and targeted reach resulting in greater impact have proved to be an attractive model that’s expected to continue growing.  

Subhead
GREATER EFFICIENCIES, GREATER IMPACT 

Greater transparency and the efficiency of outsourcing resource-intensive tasks such as research and due diligence are some of the reasons that collaborative philanthropy has become increasingly popular over the past decade. 

One benefit of funder collaboratives is efficiency, said Nick Grono, CEO of the Freedom Fund — was set up with two other foundations in 2014 to end modern slavery, such as forced labor and human trafficking. Like many donor collaboratives, the Freedom Fund works with several smaller, community-based organizations, with an average grant size of $50,000 for a single organization. Due diligence is applied for grants of any size, a process that often makes multiple smaller grants cumbersome and costly for individual donors or family foundations.  

“If you’re a significant philanthropic foundation, you may not be comfortable supporting small grassroots organizations because there are lots of potential risks,” Grono said. “If you can instead give through a pooled fund, it de-risks the investment while also ensuring that your funds go to a strategy that’s identified as one of the most effective in driving change.  

“We fund over 100 community-based organizations. Funders that collaborate with us get comfortable directly supporting those organizations but not making the grants and the management of those grants and all the rest of it themselves. It’s much more economical to give in this way.”

Subhead
A GENERATIONAL SHIFT IN GIVING 

The ease of collective giving increases access for donors and recipients, said Alison Powell, a senior philanthropy adviser at The Bridgespan Group. “A lot of very wealthy individuals are not interested in setting up large, staffed foundations,” Powell said. “When we researched the more than 160 who signed the Gates Giving Pledge, only just over 10 of them had staffed philanthropy institutions with more than 50 people.” 

Younger generations who have either earned or inherited wealth are less interested in plaques with their names on buildings than they are with collaborating and creating impact, said Regan Pritzker, president of the San Francisco-based Libra Foundation, which supports communities of color. Pritzker comes from a family with a legacy of philanthropy. 

“Donors become learners and listeners, and allies,” Pritzger said. “Resources can be better used out in the field than in an endowment waiting for each generation to trickle out 5% a year.” 

Liz Thompson and her husband, Don, use a hybrid approach. Their family foundation supports education-related issues, while their 1954 Project operates as a funder collaborative, awarding grants to Black leaders in education.  

Different vehicles serve different purposes, Thompson said. Funder collaboratives are structured for multiple external donors, whereas the  Internal Revenue Service limits external donations to family foundations.  

“The benefit of funder collaboratives is that they can be more specific,” Thompson said. “For us, the donor-advised fund is the broadest. Our family foundation is more specific. And then our funder collaboration is even more specific than that.” 

Thompson and others think that group giving delivers greater impact — not only because there’s strength in numbers but also because of the hyper-localized grants typically awarded. 

Greg Hilditch is interim executive director of the Global GreenGrants Fund, which supports grassroots environmental causes around the world. Most of them, Hilditch said, have low visibility to traditional donors but deliver big impact.  

“We give small grants between five [thousand] and $10,000 and make lots of them,” he said. “We may provide a small grant to work on a specific campaign objective — for example, holding polluters to account in the Niger Delta. We’re casting a wide net rather than making huge, one-off or multiyear grants to one or two organizations.”