Approach Your Philanthropy With A VC Mindset

Here’s an idea for executives with means and a will to make real change in the world: Philanthropic donors create more impact if they approach their investments with a venture capital mindset.

Many CEOs know that mindset well, particularly those who helped build their companies from the ground up.

Trust-based philanthropy among the wealthy and wealthy executives has been gaining momentum in large part because of a new megadonor. MacKenzie Scott isn’t merely famous for giving away more than $14 billion of her fortune and counting in less than four years. The ex-spouse of Amazon founder Jeff Bezos is famous for the way she’s doing it: Allowing the organizations she funds, both big and small, to decide what to do with the money rather than dictating terms for them.

Perhaps not coincidentally, a year after Scott’s giving began garnering headlines, the Trust-Based Philanthropy Project got its start as well. The trust-based approach is also increasingly popular among other high-dollar executive donors, such as Microsoft billionaire Steve Ballmer.

The U.S. venture capital industry is often criticized for its methods. But its ability to identify and nurture talent is built upon its willingness to fund risky endeavors, created by potentially visionary executives, under the assumption that one large return more than makes up for nine failures. It’s one of the only places that small, often-unconventional teams can go to find the funding they need to take on what often seem like intractable problems.

This is true even for the vast majority who don’t have the scale of megadonor executives. Those with the capacity to write checks for $2 million or $100,000 can have just as much impact, provided they’re willing to let the leaders of the organizations they’ve entrusted know they’re going to be entirely in the background.

Even executives fundamentally aligned with the idea of trust-based philanthropy can create paralysis among the organizations they fund by adding bureaucracy to the process. Organizations that have been starved for funds for years may find it difficult to spend a single dollar, let alone spend it effectively, if they think that money comes with obsessive scrutiny.

Trust-based philanthropy as a concept has long been linked to funding for the poorest, most-neglected communities, in part because those are the groups that have always been least able to meet the burdensome grant-reporting requirements that often come attached to funding.

It’s too simplistic to say that donors should simply cut checks and get out of the way. Once a donor finds an organization that knows the landscape and the specialized problems, micromanagement will just slow down the work and increase the odds of outright failure. Sound familiar? Whole philosophies of executive management have been developed that focus on the perils of micromanagement.

A hands-off approach is not meant to make donors feel comfortable. It’s meant to make them used to the idea of having less control, but gaining the ability to do more good, more quickly.

Executives who have prioritized charitable giving should focus on that last point. Not only is the goal of trust-based philanthropy to have the maximum impact, it’s also to do it in the shortest amount of time possible. And “better results faster” is a message executives can embrace.