Agenda

• 7:15-7:30: presentation by Sophia on philanthropic foundations
• 7:30-7:50: discussion on readings
• 7:50-8:00: activity
• 8:00-9:00: guest speaker: Kevin Jones of Good Capital

Class Notes

Foundations and Venture Philanthropy

Nonprofit Institutions:

Funding:
-$40.7 billion from foundations, 71,000 foundations in US
-70% funded by individuals, 14% government, rest by corporate sources
-Programs like immigrant training, etc. receive more from government

Nonprofit Mix:
-54% of income earned, 36% gov. 10% foundations

Foundations:
-Individuals provide bulk of support
-90% of foundations are either independent or family run
-5% mandated payout by law of endowment value
-Need to earn more than 5% + inflation to preserve endowment
-Community Foundations, Donor Advised Funds, Corporate Foundations

-Around 2% of funding goes to international causes ($591 million in 2007, representing a 41% increase over previous year)
-501(c)(3), no taxes

Common criticisms of foundations include: Slow to respond to change, lack of transparency, lack of accountability, measurement/effectiveness criteria, lack of balance between donors/recipients
-Foundation funding usually comes with restrictions

Why would you go after philanthropic dollars from foundations?
-Provide signaling mechanism for organization credibility
-May draw individual donors as a result
-Conduct extensive due diligence/research on quality of recipient organizations

Venture philanthropy:
-1.4% of philanthropic grant making is in the form of venture philanthropy
-Focus on capacity building, defined timeline, exit from investment, and sustained partnerships

-Some organizations are not 501(c)(3), (e.g. Google.org) which provides them more flexibility in where they make investments

Kevin Jones:
-Early markets
-No body knows where the value is
-No one knows who to partner with
-Focus on becoming an information hub, bring different elements together

-Traditional Market mentality:
-Make most money at highest margin
-Business involves focusing on one single variable: the bottom line
-Social entrepreneurship involves multiple variables, multiple groups to be accountable to

Competition in the non-profit marketplace
-Not enough creative destruction right now
-Moves have to be made towards transparency
-Losers need to be allowed to fail and winners succeed
-Right now bad foundations don’t fail
-Existing system is highly inefficient

Assignments for 2/5

• read sections of If the Shoe Fits: Nonprofit or For Profit? The Choice Matters, REDF
  

• read pages 1-5, 7-12
• read the profile on one organization from pgs 12-14 (Cadbury Chocolates, Salvation Army, or Goodwill)
• read the profile on one organization from pgs 15-18 (Evergreen Lodge, Wolf's Neck Farms Natural Beef, or Springboard forward)
• post 2 discussion questions