Study Shows ‘Big Bets’ Are Mostly Add-Ons
May 11, 2017 Andy Segedin
When it comes to making big bets in philanthropy, U.S. donors are generally more comfortable adding on to what already exists than building a campaign or system from scratch. The result is that a half-dozen of the 10 most common types of big bets are seldom utilized.
The Bridgespan Group, based in Boston, Mass., evaluated a sample of 911 gifts of $10 million or more — totaling $22.7 billion — from its database stretching from 2000 through 2013. Researchers then segmented the gifts into 10 categories, the goal being to evaluate not what each major investment sought to achieve, but how the donor went about trying to achieve it.
Four options dominated, accounting for 75 percent of gift dollars. They were: Funding ongoing operations (34 percent); Purchasing an asset (17 percent); Founding an organization (12 percent); and, giving to an aggregator, which aggregates funds and strategically deploys resources (12 percent).
The commonality among the top options, founding an organization being the exception, is that they tend to require minimal time on the part of the donor and also present low or moderate risk in terms of whether the funder’s goals will be achieved with the expenditure, the report’s authors noted. The purchase of a physical asset such as a building for a health center or charter school, for instance, requires a significant one-time investment, but has the advantage of being fairly straightforward.
Funding existing operations, too, is an easy option for donors, so much so that some might be tempted to place restrictions on grantees. Minimal restrictions are generally preferable. Concerns regarding whether a large investment will bring an organization’s budget level beyond the point of sustainability is another concern with the most popular investment method, with bringing in co-funders or endowing an organization as possible remedies.
An endowment is one of the six seldom-used methods of large investments, accounting for just 5 percent of gift dollars. Other infrequent methods include: Building a field such as focusing capacity on single goal (7 percent); Advancing institutional research (6 percent); Waging an advocacy campaign (4 percent); Providing growth capital (3 percent); and, Running a competition (1 percent).
Not surprisingly, with an endowment being an exception, these methods often require large amounts of investors’ time and are accompanied with moderate-to-high risk.
Running a competition, such as having organizations compete for grand prize and technical support, spurs leading minds and also garners public recognition. It can also lead to waste in the form of efforts made by organizations not awarded a grant. Events such as Bloomberg Philanthropies’ Mayors Challenge have tried to lessen this blow by providing post-competition technical assistance to finalists. Similarly, funding advocacy campaigns has the potential of creating social and policy change, but also have a high risk of failure. Some causes, especially those that are culturally and politically charged, can be difficult to move the needle on – campaigns around reproductive health and gun control serving as examples, according to the report.