Philanthropy has changed dramatically over the past fifteen to twenty years. What is fundamentally different, is that donors and innovators are now taking best practices from the private sector and applying them to the social sector.  They are applying a level of business rigor to the social sector that was previously unprecedented. This application has led to many new innovative tools and approaches like impact investing, venture philanthropy, and outcomes measurement.  These changes have been led by entrants like the Gates Foundation, which has revolutionized the entire field of global public health, or the Skoll Foundation, which has redefined the concept of entrepreneurship in the social sector.  Suddenly, change has become possible and these organizations have demonstrated that donors have the opportunity and the power to lead real change. This was the topic examined last week by a forward-thinking panel hosted by Fidelity Charitable titled, “Breakthroughs in Philanthropy: New Approaches Amplified Impact,” and  included SmarterGive, Social Venture Partners Boston, and The Social Innovation Forum.

The application of business rigor has resulted in a number of powerful forces within the philanthropic sector.  When forward thinking donors think about giving a grant or making an investment, they are thinking about a number of high level concepts that ensure the grant / investment has a real opportunity to move the needle on a social issue.

Sustainability—Donors don’t want to fund organizations into perpetuity; they want to consider a long term exit strategy.  For example, a non-profit might have a potential future revenue opportunity, or it may be positioning itself to receive funding from other sources, such as the government, or the issue may be limited in duration (project-based).  Donors know that social problems don’t evaporate overnight but they also recognize that philanthropy will never be a solution into perpetuity; they want to set up organizations to be successful over the long term.

Scalability—Forward-thinking donors are thinking beyond just a narrow set of interventions that target a limited number of people.  They are pushing non-profits to think about how their products and services are applicable to broader populations and much larger numbers of people.  If an intervention works, then there must be a plan for how to scale it up.  It is only at scale that we will truly begin to move the needle on social issues.

Innovation—Donors are uniquely positioned to try and test new ideas. This is particularly true when compared to public (government) funding—which funds the vast majority of social interventions around the world.  Public funding is generally tied to tried and true programs with an evidence base that validates the intervention. There is little room for government programs to test new ideas or innovations.  Smart donors have recognized this gap in public funding and use their funding to fill it. They fund new innovations and experiments, they see what works, and they build an evidence base around the most promising new interventions with the expectation that someday the government might fund them.

Collaborative approaches—There is an increasing understanding that social problems are highly complex and rarely does a single intervention solve the issue.  For example, in education, if you really want children enter kindergarten ready to learn, then yes, providing them with books is helpful, but they also need good healthcare, strong adult / parental guidance, secure housing and host of other interventions that promote good early development.  Rarely does one donor or one organization have the resources or ability to address all these complexities alone.  It takes many organizations, programs and funders working together on many solutions to prepare children who are ready to learn when they enter school.

Capital Allocations—Donors no longer just think about grant-making as the only tool in their tool kit; they consider every lever they have and try to pull it.  These levers include their own asset allocation and the investments they make. Impact investing has gotten a lot of buzz, but it is really about harnessing the power of the capital markets and applying them to a sector that has traditionally been starved for capital investment. It provides philanthropists with yet another tool in their toolbox.

Evaluation–“If you don’t measure it, then you can’t manage it.”   This business axiom has a powerful message, not just for the private sector, but for the social sector as well.  Donors increasingly have realized that they must hold organizations accountable for outcomes and impact. We need to see that change is happening.  It is only through knowing what is working and what is not, that donors will be able to make sound philanthropic investments and advance the most promising solutions.  While the field of impact measurement is still in its infancy, some donors have found smart, simple ways to learn, along with the organizations they fund.

All of these concepts can be complicated when it comes to practical application, but there are many ways for donors to find support. New easy to navigate tools have emerged like Donor Advised Funds and the organizations who manage these funds, like Fidelity Charitable, provide great resources, support, and information to interested donors.   SmarterGive provides personalized strategy support to donors navigating this space, and  venture philanthropy funds like Social Venture Partners and Social Innovation Forum  offer opportunities for education and to meet exceptional organizations. Donors can also join giving circles or tap into the knowledge of local community foundations.  Forward-thinking donors have already invested a lot of time and resources in understanding the sector and developing impactful strategies.  They have created an opportunity for all future donors to build upon these concepts in their own grant making / investing and further move the needle on pressing social issues.  More donors are needed who take true ownership over their grantmaking and the social issues they are trying to solve.


Note: this blog was inspired by a panel discussion, “Breakthroughs in Philanthropy: New Approaches Amplified Impact,” hosted by Fidelity Charitable and included SmarterGive, Social Venture Partners Boston, and The Social Innovation Forum