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Philanthropy Startups: Pitfalls and Progress

Newly minted millionaires and billionaires looking to start foundations need to be aware of the many challenges that they will face when setting up a non-profit organization or foundation. According to Giving USA, philanthropic giving from foundations increased by 6% in 2017, and corporate giving by 8%. New foundations often headed and founded by startup founders and entrepreneurs need to make sure that they don’t become mired in the process of setting up a foundation and focus instead on making sure that funds reach the organizations where they can do the most good.

Keeping It Simple – The Process of Philanthropy

Far too often, new foundations make things more complex than they should be. Complicated systems do little to ensure adequate stewardship and instead become increasingly chaotic and marred by the process instead of looking for ways to decrease the path to effective donations. Instead, newly founded organizations need to look for systems and processes that benefit the organization instead of doing things the way they have always been done. The role of a foundation board is to lead, not to manage the process. With a clear vision and succinct goals, a foundation’s board should be able to drive the vision of the foundation forward and not get stuck in managing the functions of the foundation.

Lean Operations: Use Your Resources

There is much criticism levelled at charitable organizations that utilize a large portion of donations towards the running of the non-profit. This, of course, is unacceptable, but so too is the idea that foundations can run with no investment in employees, training, technology and development. Trying to do good with no support to be able to expand and actually ‘do good’ is one of the reasons that new foundations flounder.

Keep Learning – Keep Growing

One of the biggest mistakes made by foundations, especially boards of directors, is the inability or capacity to continue learning about the areas in which they operate. Often, once the foundation vision is set, the board does little to enhance their knowledge within key areas. Continual learning is key to growing robust and effective non-profit organizations. The board of a foundation often wields a great amount of power over communities that it serves. This can make for a strained power dynamic at times. Foundation leaders need to ‘keep it real’, examine their own decisions and ensure that they are doing work that serves a greater good.

Learn from the Community

Along with institutional learning, a new foundation must take counsel from the communities and areas in which they work. This is especially important when dealing with at-risk communities and working in regions of the world that are not immediately culturally like one’s own. Something as simple as ongoing feedback from both the ‘boots on the ground’ employees and the end-recipient of a foundation’s donation.

Every new foundation or non-profit will go through a learning curve before they become successful and more importantly, relevant. With forethought and humility as well as a constant reminder of why foundations are crucial in the world these problems can be resolved.

Give It All Away

On December1, Facebook founder, Mark Zuckerberg and his wife Priscilla Chan, announced the birth of their first child with the news that they would be giving away 99% of their shares in Facebook during their lifetime, to charity. The couple announced the news in an emotional letter to their daughter on Facebook along with the news that the couple would form the Chan Zuckerberg Initiative to manage the Facebook shares, which are reported to be valued at around $45 billion. In an interesting twist, the Chan Zuckerberg Initiative is not a foundation or charitable trust, but has been registered as a limited liability company (LLC). It’s a decision that has not been without controversy. The choice of an LLC, however, ensures that the couple will have more control over the management of the company, where the proceeds from the shares are distributed and undoubtedly better tax incentives.

More Billionaires Give It All Away

While the Chan Zuckerberg Initiative intends to closely manage the fortune that Zuckerberg has pledged, other billionaires are also pledging to give away large portions, if not all of their billions, within their lifetime. That is the key difference between the modern billionaire entrepreneur and the philanthropists of a bygone era. In the past, philanthropists tended to start making donation, creating charitable foundations and giving away their fortunes rather later in life, some even posthumously. It’s quite different in today’s world. More billionaires than ever are pledging, not only their money, but their time, energy and influence to make a difference within their lifetimes.

The Giving Pledge – How to Give It All Away in your Lifetime

Though The Giving Pledge only started to gain momentum in 2010, it started, in principle in 2006 with Warren Buffet’s pledge to give away much of his fortune, within his lifetime to the Bill and Melinda Gates Foundation. The growth, and subsequent success, of The Giving Pledge has ensured that many more billions will reach the people, foundations and philanthropic organizations sooner.