The New World of Philanthropy

Philanthropy has taken a different turn over the past few years as tech-savvy entrepreneurs who have achieved great success in other ventures look for ways to solve social and economic problems. A number of Silicon Valley millionaires and billionaires have turned their focus to philanthropic giving and support through a unique avenue, which has recently been coined “philanthrocapitalism.”

Philanthrocapitalism: What Does It Mean?

Intersecting technology, investments, and philanthropy is a relatively new way to support non-profits and other support organizations. Well-known and wealthy individuals like Mark Zuckerberg (a founder of Facebook), Larry Ellison (CEO of Oracle), Pierre Omidyar (founder of eBay), and Sergey Brin and Larry Page (co-founders of Google) participated in a surge of charitable giving that allows people to focus their donations and support on organizations that fall in line with their philanthropic passions.

When Zuckerberg gave his largest charitable donation to date to REBBL, a small company that makes an herbal beverage, the company was able to get its drinks into Whole Foods Markets in Northern California. However, this company does more than sell herbal drinks. A part of Not For Sale, an anti-slavery and anti-human trafficking non-profit organization that is backed by Humanity United, Path, and Causes.com. By selling a for-profit product, the herbal drink, the organization can theoretically get more money for its charitable mission than it would if it were simply relying on donations.

Zuckerberg and other entrepreneurs are taking more active roles in the business of philanthrocapitalism to reinvent the way non-profits garner support. These shifts came partially out of necessity when poor economic conditions made it harder for people to donate to organizations and charities. In response, leaders of non-profit organizations started looking for ways to generate their own revenue to sustain operations.

TOMS Shoes as an Early Example

Another example of the philanthrocapitalism model is TOMS Shoes, a well-known footwear brand established in 2006. The company’s founder, Blake Mycoskie, saw firsthand how children across the globe struggled when they grew up without adequate footwear. He created the company with a One for One business model, which involves giving one item to someone in need for every item purchased by a customer. TOMS Shoes donated one pair of shoes for every pair purchased. Since its founding more than a decade ago, TOMS Shoes has given over 60 million pairs of shoes to children in countries around the world.

The company has expanded rapidly, adding accessories, eyewear, coffee, bags, and more to its product lineup. It also now gives more than just shoes; current initiatives work to provide clean water in six countries, community-based eye care programs, glasses, medical treatment, surgeries, safer birth services, and anti-bullying campaigns. By selling appealing products that people want to buy and can feel good about purchasing, TOMS Shoes started a trend of giving back through capitalism. Mycoskie shared this vision and passion with students at New England College, while speaking at the school recently.

Since TOMS Shoes launched, other companies have followed suit. Bombas Socks gives a pair of durable, high-quality socks to a homeless shelter for each pair sold and has donated over two million pairs. When the company’s co-founders sought to develop a better sock for athletes and everyday wear, they found that socks are the most requested item in homeless shelters.

When a customer purchases a pair of Bombas Socks, the company donates a pair of high-quality socks to a homeless shelter. So far, the company has donated more than two million pairs of socks. Well-known entrepreneur and clothing designer Daymond John was an investor in this company, bringing his knowledge and expertise in the apparel industry to a new charitable organization.

Improved Efficiency and Increased Social Benefits

Many tech-savvy entrepreneurs give similar answers when asked why they choose to invest in non-profits and get involved in philanthrocapitalism initiatives: expected value and benefits to those in need. This concept, also referred to as effective altruism, is especially popular among philanthropists on the West Coast, or more specifically, in Silicon Valley. Donors are looking for projects that will deliver great results efficiently.

One of the co-founders of Facebook, Dustin Moskovitz, and his wife, Cari Tuna, look at the expected value of a non-profit donation, which is a similar approach to how they might look at a venture capital investment. The purpose of effective altruism is to do as much good as possible with the resources available.

Taking More Risks

Entrepreneurs who succeeded in the tech industry and other similar industries tend to focus on these types of initiatives because they may be willing to take more risks. According to William Foster, the head of consulting at the Bridgespan Group, tech people are often more interested in startups in the early stages. He also said that those coming in with tech-based backgrounds are more willing to support new ideas that might be disruptive to what people perceive as normal in the non-profit and charitable giving world.

These entrepreneurs tend to be better at changing their approaches when ideas fail, which is likely due to their experience in a fast-paced industry, and will get involved more directly in the campaigns. By using the skills and knowledge they gained by starting tech companies and working closely with others in the early stages, these savvy entrepreneurs can apply their experience to charitable organizations and help to make a difference.

Jacqueline Novogratz is the founder and CEO of Acumen, an investment firm that invests philanthropic capital to help create sustainable businesses that support poor people across the globe. Acumen has invested more than $100 million in 100 companies throughout the world. As a guest speaker at the New England College commencement in 2017, Novogratz focused on the importance of philanthropy. While she knows firsthand the possibility of failure, Novogratz also knows that “…if you rule out failure as an option, you rule out the possibility of bold success as well.”

The world of philanthropy is changing with tech-focused and skilled entrepreneurs stepping in to improve the overall operations and make more of an impact. Those interested in being part of this important work may consider further education to expand their knowledge in the realm of non-profit leadership. The needs of non-profit organizations are very different from those of for-profit business entities, so understanding those differences is critical to success.

Learn More

New England College’s online Master of Science in Management – Non-Profit Leadership degree helps graduate students learn more about human resources, volunteer management, fundraising, and other aspects of non-profit governance. Earning a Master’s in Non-Profit Management online can provide the tools needed to improve charitable organization management.

Sources

https://www.nytimes.com/2016/11/06/giving/philanthropy-in-silicon-valley-big-bets-on-big-ideas.html

https://www.usatoday.com/story/tech/2013/02/11/facebook-google-salesforce-nfs-amazon-oracle-microsoft/1872999/

http://www.toms.com/about-toms#companyInfo

https://bombas.com/pages/our-story

https://www.forbes.com/sites/toriutley/2017/02/06/meet-bombas-the-social-impact-company-that-gave-2-million-pairs-of-socks-to-the-homeless/#4803387b288b

https://npengage.com/social-good/5-trends-in-giving-that-will-reshape-philanthropy-in-2017/

http://rebbl.co/#

Sept 2017