Fast Company

The New Face of Social Capital

Young 'venture philanthropists' combine targeted donations with tough-minded oversight to build a new model of community activism.

As a BankAmerica vice president for Business Credit in Chicago, Lafayette Ford knows about due diligence. Before he makes a funding recommendation, Ford commits to months of research, a tour of the company's premises, and dozens of calls to administrators. He used the same approach to check out Henry Booth House -- but Henry Booth House wasn't a corporation looking for millions of dollars. It was a nonprofit asking for $3,500 to help babies born addicted to crack.

Ford, 39, is a member of the Chicago Community Trust's Young Leaders Fund. The Fund is not just about giving money, but also about giving time. "We don't just evaluate proposals," explains Ford. "We go out and see them, suggest changes in their operations, and help them make proposals to our board. We're as tough as venture capitalists in evaluating these organizations."

This new model is sprouting up around the nation: a group of young change agents pools a little money, aggressively seek out grassroots organizations to fund, provide organizational advice and seed capital, and then track their progress. Think of it as venture philanthropy.

The idea was nurtured into existence in 1994 by 31-year-old Liz Livingston, initial chair of the Young Leaders Fund. "It's more than just writing a check," says Livingston, assistant dean and director for development at Northwestern's Kellogg Graduate School.

The group has designed its membership requirements to ensure that the process is taken seriously. It requires an annual donation of $500 from each member (matched by both the Chicago Community Trust and the Elizabeth Morse Charitable Trust). Members must commit to five to eight hours per week to research funding opportunities. The fund carefully screens applicants for evidence of hard-core community leadership. And it requires that members be over 25 years old but younger than 40. The result is a group of 60 members ranging in age from 29-year-old Jackie Harris, a marketing assistant at Quaker Oats, to 38-year-old headhunter Michael Wyman.

Each April, the new membership is split into seven "interest groups" such as education, environment, arts and culture, and homelessness. Their mission : find innovative and entrepreneurial nonprofits flying under the radar of larger foundations. The nonprofits must be less than five years old, have a maximum operating budget of $250,000, and receive no major funding from organizations like the United Way.

The Fund's grants average less than $3,500, but, says Livingston, "most of the organizations we support are small and community-based, so a grant of $1,500 or $2,000 goes a really long way."

Each interest group meets twice a month from May through October, while individual members investigate opportunities and prepare proposals. The group then narrows the ideas down to a maximum of five recommendations, which are presented to the entire membership for their votes.

Ford's recommendation of the Henry Booth House illustrates how the process works. To generate leads for the education group, he called up every teacher he knew. When one told him about the Booth House, he went to see the operation, which uses educational toys to help babies born addicted to crack develop the capacities of healthy children. "It was fascinating," he remembers. "You see in the news how terrible and hopeless it is for these babies, but they actually aren't mentally disabled forever. By playing with certain toys that develop motor skills and other capabilities, they can make up the gap by the time they hit kindergarten." The House needed $3,500 to buy these special toys. Ford drew up a proposal and successfully petitioned the board for the funds.

In 1995, the Fund gave a total of $59,100 in grants ranging from $1,000 to $8,000 to 18 different organizations. The group's members gained more intangible benefits, says Livingston. "We've taught members to look beyond initial appearances and ask tough questions. That's the biggest benefit for most people -- learning how to give."

Other cities around the country are duplicating the success of Young Leaders. Boston Foundation's Next Generation Group is in its second year with 63 members making $31,000 in grants annually; Hartford Foundation's Catalyst Endowment Fund is in its fourth year with 45 members giving a total of $10,000 annually. Although similar groups are rarer on the West Coast, a few entrepreneurial young philanthropists have found organizations that follow the venture capital model.

Take the case of 36-year-old Tina Podlodowski. The former product manager for Microsoft Word left the company in 1992 to take her business skills into the nonprofit sector, increasing the endowment of Seattle's gay and lesbian Pride Foundation from $200,000 to $6 million in four years. Now a member of Seattle's City Council, she sees young philanthropists moving away from traditional city foundations to more progressive groups like the Seattle-based A Territory Resource (ATR).

ATR has attracted a crowd similar to Chicago's group: about 200 members give over $1,000 each to become voting members who visit sites, sit on granting committees, and help to decide where the money goes. In 1995, the group awarded over $500,000 to 126 organizations.

"Donors with new money from high-tech companies are less concerned about getting their names on a building than about seeing that the service is delivered in a cost-effective way," Podlodowski says. "That's what ATR allows you to do -- go on site visits and make decisions about where the money is spent. It's part of a new generation of foundations."

Sidebar: Where to find how to give

Regional Philanthropist Groups

Boston: Next Generation Group, Ruth Reiss, 617-723-7415

Chicago: Young Leaders Fund, Leslie Kase, 312-372-3356

Hartford: Catalyst Endowment Fund, Sandy Wood-Holdt, 203-548-1888

New York: New York Regional Association of Grant Makers, Sally Klingenstein 212-492-6179 (or Funding Exchange 212-529-5300)

San Francisco: Resourceful Women, Pamela Johnson, 415-431-5677 (or Threshold Foundation 415-561-6400)

Seattle: A Territory Resource, Gloria Gross Villa (Gloria@Sprynet.com) , 206-624-4081

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