Shaking the Foundations

From INC Magazine
5/1/2002

By Donna Fenn

Sanjay Chopra is an astute donor. The founder of two technology companies recently joined 59 other fledgling philanthropists to give $50,000 to KidsVoice, a Pittsburgh nonprofit that provides legal services to children in juvenile court. The group chose KidsVoice from 113 grant applicants after nonprofit experts briefed them on Allegheny County's most serious youth problems. Chopra was particularly impressed with the organization's new director, who had ambitious plans to add social workers to his staff of lawyers. Chopra also liked the fact that KidsVoice needed more from him than just money. "My strengths are technology and putting infrastructures together," says Chopra, who will put those skills to work for KidsVoice as it expands.

Such shrewd hands-on management of his charitable affairs is especially remarkable considering that 18 months ago, by his own admission, Chopra didn't even know how to spell philanthropist. The entrepreneur owes his rapid ascent of the learning curve to Social Venture Partners (SVP), a fast-proliferating grant-making network that channels money to local nonprofits. "The idea is to educate philanthropists," says Chopra, referring to SVP's mission of teaching businesspeople to give wisely. SVP not only raises donors' sophistication but also lowers barriers to entry. "Partners" each pledge $5,500 a year for at least two years. Education makes philanthropy more appealing, and the four-figure commitment makes it affordable.

SVP is part of a galvanic shift in philanthropy, from elitism toward democracy. As a result, in part, of the boom years of the past decade, 700,000 households each hold at least $5 million in net worth. While the newly affluent may lack the magnate-scale fortunes of a Rockefeller or a Carnegie, they increasingly want to spread some of their money around. That collective impulse pushed charitable contributions to $203 billion in 2000 from $124 billion in 1995. And the number of donors is expected to swell even further over the next 50 years as at least $41 trillion in intergenerational wealth is passed on. When it comes to giving, it appears, the rich are no longer quite so different from you and me.

The majority of giving is still checkbook philanthropy -- a response to the dinnertime phone solicitation or the heart-wrenching direct-mail piece. But the nouveau generous often want to be more involved than that; they want to personally select causes they find meaningful and to make sure their gifts are well spent. While traditional donors invest in institutions, the thinking goes, new donors invest in ideas. "People are looking for a strategy of philanthropy," says Paul Schervish, director of the Social Welfare Research Institute at Boston College. "They need clarity and insight so they can discern who recipients are, what they need, and how they want to fulfill those needs."

For entrepreneurs, who are accustomed to having more business smarts than money to throw at a problem, the idea of increasing the value of a moderately sized donation through personal involvement is appealing. "I've learned that the nonprofit world is not that different from the for-profit world in terms of fund-raising, revenue, and taking care of your customers," says Chopra. "But they need much more help than typical businesses do with organizational issues."

Not only are more donors demanding more information about more nonprofits, but they're also evaluating more mechanisms for giving. If you're getting seriously involved in philanthropy for the first time, there are choices to make that have little to do with your passion for cancer research or the Special Olympics. Should you set up your own foundation? Put money into a donor-advised fund? Start a giving circle? Pledge company stock? "There's been an explosion of models," says Joe Breiteneicher, president and CEO of the Philanthropic Initiative, a nonprofit research and consulting firm in Boston. "This world is unlike anything I've ever seen. Diversity and pluralism have come to philanthropy."

The new models are a response to growing demand, but they may also help create demand. Many sprang from the minds of entrepreneurs seeking to improve the nonprofit sector (and who also knew a growth industry when they saw one). Some reflect business innovations -- ranging from Internet marketplaces to networked communities -- that have demonstrated legs in the for-profit realm. As such, they make the philanthropic world both easier for ordinary businesspeople to enter and more familiar once they're there.

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