In December 2016, Open Impact, a social change advisory firm, reported some strange behavior by Silicon Valley’s wealthiest givers. While overall giving has reached record highs in the region–it’s estimated to be at least $5 billion annually, per data from 2013–very little was flowing to local organizations, many of whom aid those struggling with things like affordable housing, which is directly related to the tech boom.
The group’s latest report, dubbed “The Giving Journey,” was funded by the Gates Foundation and provides some clues to how such oversight can happen. Essentially, it boils down to the fact that helping super-rich donors figure out where to funnel their money could merit its own charity effort. While many entrepreneurial-minded people end up with huge windfalls because of their enormous salaries or shares in some startup, they also don’t know what to do with that wealth. Open Impact’s new report is designed to offer some suggestions.
Much of the tech world traffics in intuitive, user-friendly innovations. For people in that field, the nonprofit sector is especially inscrutable. It’s murky and complicated, with questions about how much different charity missions stack up against each other, what amount of each donation goes to overhead versus cause work (and there are important trade-offs), or how you can track each dollar’s real impact. Loaded first-time donors feel pressure to spend wisely because they can make such big change in the world. But apparently, there’s a resource and coaching gap. So even the richest folks are often reluctant to get started–or they play it safe with smaller gifts as they figure out how best to share their cash piles.
“The field of philanthropy has primarily been built around the more tactical aspects of giving–the how–while taking the why for granted,” notes the report, which was written by Heather McLeod Grant and Kate Wilkinson. Their findings are based on a six-month study of 50 high-net-worth donors in the Bay Area, each with assets between $10 million and $1 billion, who are now giving between $100,000 and $10 million per year. Most of these folks qualify as “new wealth”–their riches are self-made, and have they started making large gifts within the last decade.
Specifically, the report tracks many of these donors’ paths toward “actualized philanthropy”–or intentional, strategic and psychologically rewarding charitable actions–in order to find universal lessons for groups that might want to work with the next crop of new money. The report also points out obvious institutional gaps, and suggests future ways for other charities or consultancies to engage.
Many of the findings aren’t surprising: The Silicon Valley giver often grew up in a charitably minded household, with a family that either stressed the importance of giving back or social equality in general, or was well-off enough to actually contribute to it. Many entrepreneurs figured out what sort of charity work they wanted to personally invest in through firsthand experiences–either by volunteering with a cause group to better understand the problem, or by traveling to an area that drove home the importance of the mission.
That pathway is generally counter to the effective altruism style of giving, which has been backed by a corps of logic-first thinkers in the Valley, including Facebook co-founder Dustin Moskovitz, who has ties to GiveWell, a charity-effectiveness evaluator that recommends contributions to groups based on their life-saving (or at least radically life-changing) impact per dollar spent. “As our research reflects, the supply of philanthropic capital among ultra-wealthy donors is driven by their personal values and interests–not by ‘rational’ economic behavior,” the report adds. At this level, charity is often seen as a “relational” activity, encouraged by social recommendations or other’s close ties to causes as much as demonstrated impact.
Open Impact points out that for some self-motivated donors, a universal news and information sharing site like Giving Compass might be a good resource to start learning the landscape. There are also higher-touch educational services offered by organizations like Silicon Valley Social Venture Fund and The Philanthropy Workshop but there’s often a catch: “[T]hese programs face a paradox of their own,” the report notes. “Donor giving evolves with this type of education, but donors don’t always want to pay for it, preferring more of their philanthropy goes directly to issues and causes.”
What’s left is an underserved market: Billionaires seeking guidance for how to dispense their largesse can join Bill Gate’s Giving Pledge, but there’s isn’t a step-down group for those who are fantastically if not so abstractly rich. Another vehicle for giving that appears underused among this set is giving circles, which some respondents have joined. The Silicon Valley Social Venture Fund, for instance, is one. Its price for entry, which starts in the thousands, as opposed to the $1 million commitment needed to join a highly influential group like the women-led Maverick Collective, is more in line with beginner expectations. First-time contributions among high-net individuals generally range between $5,000 and $10,000, per the report.
In Silicon Valley parlance, the sector appears ripe for disruption.