Seeding Change: A New Dynamism in Philanthropy

Philanthropic Capital Efficiency

• In 2015, US charitable giving reached $373 billion, with 1.6 million nonprofit organizations operating; this volume suggests significant duplication of effort.
• Tom suggests a wave of M&A activity to reduce administrative expenses and target dollars more directly toward causes.
• Philanthropy should be treated as an investment portfolio requiring diversification, winner selection, and predetermined efficacy metrics.
• Approximately 11% of the US workforce is employed in the nonprofit sector.

Venture Philanthropy Models (Tom)

• The foundation allocates 5% of its budget specifically to evaluating efficacy, treating philanthropy with the same scrutiny as its for-profit business side.
• Funding is drip-fed based on 6, 12, 18, and 24-month milestones, allowing for tough decisions to cut initiatives that fail to meet targets.
• The strategy prioritizes "entrepreneurial minds" and scrappy talent over established organizations.
• A key approach involves piloting solutions, proving efficacy, and then having the government adopt the policy using public funds.
• Tom advocates for "reverse mentorship," engaging disruptors (e.g., formerly homeless individuals) to inform policy rather than relying solely on traditional experts.
• The foundation explicitly supports the "he who has the pesos has the say-so" model, acknowledging the privilege of funding but the necessity of letting beneficiaries lead.

Medical Philanthropy Strategy (David)

• David's foundation shifted focus after his daughter's Type 1 diabetes diagnosis, conducting 18 months of due diligence before issuing its first grant.
• The foundation targets "tweeners" (like Type 1 diabetes) ignored by big pharma due to lack of business incentives.
• To address data silos, the foundation invested over $100 million to build the "t1d exchange," a registry of 27,000 well-characterized patients with a biobank.
• The foundation funds high-risk, non-fundable projects (like large-scale clinical trials) that public charities cannot undertake due to fundraising imperatives.
• Current goals include improving disease management to keep patients healthy and pursuing primary prevention via a platform screening 400,000 newborns in Europe.
• David views "cure" as a marketing term; the actual metric of success is moving the needle toward FDA approval, payer reimbursement, and commercial manufacturing.

Scale and Context in Developing Economies (Belinda)

• Belinda's foundation initially delivered programs directly (70 staff, 300 schools) but recognized the difficulty of scaling beyond 0.1% of Indonesia's 300,000 schools.
• The strategy has shifted to "seeding" new local organizations and investing in for-profit ed-tech companies to leverage market mechanisms for scale.
• A specific investment was closed with a leading Indonesian ed-tech company holding 1.7 million users to accelerate delivery.
• The foundation is conducting market scans to map donor activity and fill data gaps, utilizing the flexibility of non-fundraising capital.
• Belinda emphasizes passing proven concepts to the government, as philanthropic dollars are a fraction of state budgets.

Partnership and Leadership (Dominika)

• The foundation prioritizes small organizations with strong leaders, avoiding large bureaucracies and "patronizing" large NGOs.
• Dominika believes in building partnerships rather than writing checks, focusing on empowering local leaders to choose their own paths.
• The "Domino Effect" initiative involves broadcasting 32 documentaries on poverty to 1 million viewers weekly to inspire direct action and empathy.
• An example of impact includes supporting a program in Zambia that shifted focus from elephant conservation to teaching local farming, impacting 150,000 people.
• Dominika notes that simple interventions (e.g., deworming, water pumps) are often more effective than complex solutions.

Overcoming Disappointment and Failure

• Philanthropists must accept that failures occur; the strategy is to "fail fast, fail cheap," and learn quickly.
• David defines the exit strategy clearly at inception, determining the specific metrics that would trigger stopping funding.
• Tom highlights the importance of cultural sensitivity, citing the example where bed nets intended for malaria prevention were repurposed for fishing, altering local ecology.
• The "Doing Good Better" approach emphasizes using data (e.g., deworming as the primary driver for school attendance in Malawi) over Western prejudices.

Talent and Overhead Costs

• Criticism of the 990 tax form metric that penalizes nonprofits for spending on talent; high-quality delivery requires competitive salaries.
• Sanjay Joshi (Cambridge analyst) challenged the foundation to stop funding based on overhead percentages, advocating for paying the "actual cost" of world-class talent.
• Belinda and Dominika agree that personnel are an investment in delivery mechanisms, not just administrative overhead.
• Foundations are encouraged to allow for higher indirect costs to ensure program integrity and prevent the "too expensive" stigma.

Recyclable Capital and ROI

• The Cystic Fibrosis Foundation's investment in nascent therapies generated billions in royalties, which were reinvested into the foundation.
• David is exploring program-related investments (PRIs) with royalty returns to de-risk early-stage therapies for big pharma.
• The goal of these investments is not financial return but to pave the way for commercial entities to enter the market.
• Private foundation rules (private inurement) require some return, but the primary metric is market entry and de-risking.

Collaboration vs. Competition

• David mandates that funded scientists must share data and progress to prevent redundant research ("rabbit holes").
• Belinda creates "safe spaces" for diverse stakeholders (foundations, corporations, government) to coordinate and share resources in Indonesia.
• Dominika emphasizes that collaboration is often missing in medical research, and funders must demand transparency.
• David notes that while funders can demand collaboration, it cannot be bought; intrinsic willingness is required.

Measurement Challenges

• Measuring complex social impacts (mindset changes, girls' empowerment) is difficult compared to counting graduates or beds distributed.
• Dominika argues that short-term metrics often fail to capture long-term "domino effects" (e.g., a rescued girl becoming a scientist).
• David advocates for focusing on broad milestones (FDA approval, payer coverage) rather than torturing over the impact of every single dollar.
• The consensus is that while metrics are essential, they must not paralyze the ability to take necessary risks.