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CALLING ALL BILLIONAIRES: STARTING A NEW FOUNDATION ISN’T YOUR ONLY OPTION

July 23, 2010

I want to thank my friends at Duke University for letting me serve as guest blogger on the Intrepid Philanthropist this past week. Offering unsolicited advice to the Friends of Buffett and Gates (FOBGs) as they consider how to make a splash with their philanthropy has been more fun than I’d imagined. And it’s reminded me of all the great things that are happening in this field, and of all the smart thinking grantmakers are doing about how best to put their philanthropic resources to work.

The final point I want to make this week, while I still have this great platform, is that the FOBGs needn’t go it alone. Yes, it’s always tempting to make your own mark, but with so many grantmakers and their nonprofit partners already wrestling with many of the same issues, and modeling successful approaches to problems from poverty to environmental degradation, then perhaps the best approach for the philanthropists of tomorrow is to join with others who share your priorities and your passions.
My final bit of advice is to start by taking this question seriously: Is creating a new foundation the best way to support the change I’d like to see in the world?

There are countless foundations already identifying and supporting strong nonprofits and directing their philanthropic investments to promising people and ideas. To the extent that new philanthropists help bring in new resources so that the most promising work can reach more people and communities, then grantmakers will get more bang for their philanthropic bucks.

The Edna McConnell Clark Foundation recently successfully piloted an approach that every donor would benefit from learning more about: capital aggregation. Capital aggregation involves pooling philanthropic resources for an individual nonprofit poised to have a broader impact. Funding partners agree on common terms and conditions, performance metrics and shared reporting so that the nonprofit can focus on the challenges of increasing its impact.

EMCF’s Growth Capital Aggregation Pilot Project raised $120 million from 20 “co-investors” for three successful nonprofit youth-serving organizations so they could scale up their programs and serve thousands more young people. REDF, for its part, uses the term “strategic co-funding” to refer to grantmaker collaborations that follow a venture capital model, where investors come together to support a promising organization or idea. Right now, there is a huge mismatch between the problems we are working to solve in our communities and the resources available to solve them. Nonprofits need broader infusions of capital without the commensurate expense of raising that capital. And to the extent to which foundations pool their funds, agree to common reporting requirements, or rely on a trusted partner’s due diligence, transaction costs are curtailed and more money is available for the fundamental work of social change.

When Warren Buffett decided to donate the bulk of his fortune to the Gates Foundation instead of giving it to his own stand-alone philanthropy, he told Fortune magazine: “If your goal is to return the money to society by attacking truly major problems that don’t have a commensurate funding base—what could you do that’s better than turning to a couple of people . . . whose ideas have been proven, [and] who have already shown an ability to scale it up and do it right?”

Warren Buffett was talking about Bill and Melinda Gates, but there are countless other potential partners, countless other innovators in philanthropy who can help the FOBGs exercise their philanthropic impulse efficiently and effectively in the years to come.

I’m eager to hear you reactions to these posts or GEO’s work in general, so feel free to contact me directly at enright@geofunders.org.

Kathleen Enright