By Nick Salter, Progressive Philanthropy Group
This article first appeared in December 2018 in Inside Philanthropy.
“We have an infrastructure mismatch in our sector,” Stephanie Gillis of the Raikes Foundation told me. The vast majority of the charitable dollars in the U.S. — more than 70 percent — come from individual donors, yet most of the learning networks, resources and discussion around strategic, higher-impact philanthropy support professional staff from foundations and corporate philanthropy.
But new tools, funding and intermediary organizations are expanding a “portfolio approach” to help individual donors — big and small — be more effective funders. The portfolio strategy encourages donors to zoom out from a narrow focus on selecting one or two of their favorite organizations, and instead make a donation to a strategic, curated portfolio of aligned organizations advancing a specific issue, cause, population or place. The model offers plenty of benefits for both donors and nonprofit organizations.
Consulting firms have long helped donors create portfolios of grants to increase their impact, while funding intermediaries like New Profit, NEO, and Proteus have offered a way for individual donors to invest in portfolio strategies for driving social change. Other examples include the Center for Disaster Philanthropy Recovery Funds and place-based groups like the Tipping Point Community in San Francisco, as well as approach and population-based efforts such as the Effective Altruism funds and Emergent Fund.
Still, most donors aren’t getting the help they need to be more intentional and strategic in their giving decisions. Jennifer Alcorn of the Gates Foundation told me that while there is growing demand from donors for more holistic approaches to giving,
“We see a supply issue within the sector, specifically for everyday donors. There is a greater proliferation of supply for serving ultra-high net worth donors with Blue Meridian, Co-Impact, and other collaboratives coming into the market.”
Too often, donors of more modest means are left to figure things out for themselves.
Real challenges for donors
When I hear from donors looking for guidance around their philanthropy, we always end up making a Netflix analogy — “there are just so many choices, how do we navigate this and make a good selection?” With more than 1.5 million nonprofit organizations in the U.S. and a never-ending onslaught of fundraising appeals, it’s understandable that donors feel overwhelmed. Behavioral scientists call this “choice overload,” and groups like Ideas42 are examining its effects in the philanthropic sector.
Ideas42 found in a recent report that “[h]aving so many organizations working for the public good is clearly valuable; however, this level of choice makes it challenging for donors to find and support the organizations most closely aligned with the impact they wish to make with their dollars. The presence of too many options — without a way to meaningfully differentiate between them — can lead people to make poor decisions, or fail to choose at all.”
Many donors are eager to ensure their donations will have a meaningful and measurable impact on the causes they care about. Yet donors have often been unwilling to gather or interpret the pertinent or comparative information to inform their giving decisions. Sarah Welch of Ideas42 told me that the behavioral challenge is complicated in the nonprofit space “because there is not a universally accepted way to evaluate an organization’s effectiveness.” Research on effectiveness can be onerous for donors to conduct and donors may overemphasize the wrong data, like overhead expenses. One donor survey found that while 85 percent of donors care about organizational effectiveness, only 3 percent compared performance across organizations before making a donation.
There are many models of the portfolio approach, as the Raikes Foundation documented in its 2018 report. It is also the norm for institutional philanthropy where program officers closely study issues, build a theory of change, and examine the landscape to ensure philanthropic resources have a deep impact. That’s sophisticated, time-consuming work, benefiting from issue expertise, strong relationships in the field, and applying lessons learned over years of working on a specific issue. What if those strategic insights were easily shared with individual donors hungry to be more effective in their giving?
Amplifunds, an early-stage social enterprise, is doing just that by working with program officers to post a number of issues-based portfolios on its site. The platform includes portfolios from grantmakers at the Robin Hood Foundation, Jessie Smith Noyes Foundation, and Grassroots International, among others. The portfolio’s curators provide donors with details about the organizations and the funding strategy linking these groups. Emily Rasmussen, the CEO at Amplifunds, told me “our goal is to make effective giving easy and accessible for everyone.”
She explained part of the vision for creating Amplifunds was to solve the challenges donors faced around lacking the resources to make smart, informed giving decisions. Echoing research in the field, Rasmussen said, “We found in talking to donors they often knew what causes they were passionate about, but didn’t know how to translate that into a specific organization or strategy.”
Because there wasn’t an obvious tech solution, Amplifunds instead sought to unlock the deep, issue -specific knowledge from professional grantmakers that was otherwise not widely shared. Rasmussen told me inviting program officers to curate the portfolios “put a human face on an issue. We saw program officers as a critical linchpin to help donors translate their passion into action.”
Kolu Zigbi, a program director at Jessie Smith Noyes Foundation, was invited by Amplifunds to curate a food justice portfolio. According to Zigbi, a principal benefit of this model is that “it allows donors to break through the problem of proximity. You know only what is close to you.” For her Amplifunds portfolio, Zigbi focused on coalitions and networks of grassroots organizations that individual donors might not otherwise know. Having worked with and funded these groups for years, Zigbi also saw this as an opportunity to bring in new donors that could diversify their funding sources. Finally, Zigbi noted that this model allowed individual donors to “support a larger strategy — like a movement-building portfolio. Instead of funding a single organization of change, donors are supporting an ecosystem of change.”
It’s not just professional grantmakers curating these portfolios. In May 2018, Amanda Litman, co-founder and executive director, Run for Something, and Jess Morales Rocketto, political director of National Domestic Workers Alliance and chair of Families Belong Together, started a fundraising page on ActBlue to support 14 organizations responding to the Trump Administration’s policy of separating undocumented immigrant children from their parents at the U.S. border. The portfolio included recognizable organizations like the ACLU and United We Dream, but also significantly smaller frontline organizations on the border, like La Union del Pueblo Entero and Fuerza Del Valle. Morales Rocketto told me, “there was some signaling there. I knew people would recognize the ACLU and that would help them donate to the other groups, as well.”
The portfolio went viral and has raised more than $4.14 million from 44,000 contributions. Morales Rocketto said “Because of social media, people are looking to take action immediately. Typically, foundations don’t work like that, but we can create a new class of rapid-response donors.” The page was widely circulated on social media, earning endorsements from Hillary Clinton and other political leaders who even emailed the fundraising page to their lists of millions of supporters.
In building the portfolio, Morales Rocketto explained she “focused on groups doing critical work that needed the money in this crisis. We intentionally combined direct service providers and grassroots advocacy organizations. Some of the organizations were doing all the work, but had no real funding. It made a big difference and even kept the doors open at one organization.” There are real benefits for nonprofit grantees, too. These donations don’t require significant new investments in fundraising or reporting functions and can come quickly, providing flexible, general operating support critical for many frontline organizations and grassroots advocacy organizations that historically only receive a small share of charitable dollars.
Morales Rocketto purposely chose ActBlue, “because it helped make the connection between political donors and nonprofit advocacy work. Millions of Democratic donors use ActBlue and know that it works.” Using ActBlue also took friction out of the transaction, as donors not only knew and trusted the site, but many had existing accounts, allowing them to complete a donation in a single click.
In my interviews, there was a consensus view that this approach is an opportunity to grow charitable giving by individuals, not a strategy to replace donors supporting their favorite nonprofits. And there is some evidence of a “giving gap,” as Ideas42 noted in its report: “When it comes to giving, even a small gap between donors’ intentions and actions can collectively mean the loss of billions of dollars for social causes.”
As the model is tested, there are important questions to investigate: How can this approach be applied within the $110 billion donor-advised fund space and workplace giving platforms? What is the balance of information needed to inform and persuade donors without overwhelming them? What are the power dynamics — who is “expert” and gets decision making power in curating these portfolios? How can nonprofit grantees engage with donors who support them through a portfolio without over-intermediation? How can this model leverage the power of crowdfunding and digital fundraising to scale?
What is perhaps most compelling about these examples and the model overall is its ability to address directly both the documented behavior barriers and unmet desires of donors looking to be more effective. The portfolio approach can increase donors’ generosity and be more personally rewarding, as they have greater confidence in supporting meaningful, effective work. As Gillis from the Raikes Foundation said, “Donors either need to lean in to learn, which takes time and can be a real barrier … [or] donors need to be more comfortable with the idea that they can be high-impact donors with a passive approach, relying on someone else’s due diligence.”