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Why nonprofits should be courting entrepreneurs as donors

People who start their own companies want to give more money–and more time.

Why nonprofits should be courting entrepreneurs as donors
[Soruce Image: VLPA/iStock]

Most entrepreneurs feel strongly philanthropic, typically giving 50% more annually to charity than people not running or advising their own companies. They are also far more likely to volunteer. (They also realize that acting generously burnishes their reputation, and the reputation of their company.)

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These findings are from a new report called Entrepreneurs as Philanthropists by Fidelity Charitable, which surveyed 3,000 people across a variety of professions. It classified an entrepreneur as anyone who founded or owns a business, excluding public stockholders, unless they hold a controlling share. (Silicon Valley titans weren’t included in the study because they’re a special breed with outsized influence.)

All told, entrepreneurs give about $1,200 more to charity than those working for traditional companies at the same income level. Two-thirds of them also volunteer at least two or more hours per month to cause groups. There’s also a whole lot of them—about 27 million and counting is the often cited figure. Long term, there may be an even bigger benefit for nonprofits that win entrepreneurial loyalty: 70% of those who plan to sell or shift ownership within their companies within the next five years are interested in building some form of charitable giving into the exit.

[Soruce Image: VLPA/iStock]
That’s an intention that at least one organization, the Founders Pledge, has figured out how to preemptively harness. The group works with primarily tech startups to commit at least 2% of any exit to charity. On average, most companies commit more than 7%. So far, the group has secured 1,300 pledges worth a projected $550 million that it will eventually help distribute to cause groups. At least 65 founders have already given $91 million.

Large corporations, on the other hand, traditionally give proportionately less of what they make to charity than the average American does. For nonprofits seeking new supporters, though, it’s also important to consider how this set of folks want to engage: For would-be donors, organizational trust and track record play a huge role in the decision-making process, but most are also looking for ways to be personally involved in addition to just giving cash. Volunteer-wise, entrepreneurs show far more interest than the traditional employees in also donating professional services, helping with fundraising, and serving on a committee or board.

They’re also twice as likely to donate to nonprofits trying new or innovative solutions, as long as there’s the equivalent of key performance indicators—a rubric to track and demonstrate success. For Fidelity Charitable, there’s an obvious benefit to sharing this information, too. The group, which started in 1991, helps donors manage their own philanthropy portfolios largely though donor advised funds and distribute grants to different organizations. Since its inception, it has helped direct more than $30 billion in grants to 225,000 organizations.

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About the author

Ben Paynter is a senior writer at Fast Company covering social impact, the future of philanthropy, and innovative food companies. His work has appeared in Wired, Bloomberg Businessweek, and the New York Times, among other places.

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