Philanthropy goes outside biomedicine for latest lessons
Philanthropic organizations have been a steady source of risk capital for innovative companies in biomedicine, but some examples from outside biomedicine may provide important lessons for both philanthropists and the innovators who woo them for their money, according to a panelist at the Partnering for Cures meeting in New York City this week.
Susan Wolf Ditkoff, a partner with The Bridgespan Group, a New York-based consultancy for nonprofits, said she has worked with hundreds of nonprofits over the past decade and found that a benevolent individual’s best intentions can end up in a series of irreversible disappointments without appropriate goal setting and leadership. “A lot of foundations are led by individuals with these incredibly high aspirations, and that’s why it is so exciting to be near them,” she said. “Then they sprinkle grants throughout the community.”
And then they find there’s more to philanthropy than sprinkling grants. “The big part of the question is, how do you go from these incredibly high aspirations and all the grants you’re sprinkling throughout the community—where’s that connective tissue, the missing middle that ties all that together into a coherent strategy?” she said. “And what does it really take to have a coherent strategy so that all those grants actually do add up to more than the sum of the parts?”
Some of these organizations lack the expertise they need to truly deliver on the promise of risk capital, she said. That may not be a noticeable shortcoming for a strictly fundraising foundation that leaves grant making to a partner organization, but sometimes a foundation aspires to be both and yet lacks the resources, staff expertise and network to do its grant making justice.
Honest self-assessment is a valuable tool for a philanthropic risk capital fund, Ditkoff said. She related the story of a philanthropist who insisted on setting up a Morningstar-like structure for nonprofits — even though Bridgespan advisors warned that others had tried a similar approach and failed. This person went ahead with the plans anyway. “So two years later and millions and millions of dollars later, this person walked away,” she said.
Another pitfall of philanthropic risk capital? “This idea of not falling so in love with an idea that it’s hard for you to hear what the data and what the community is telling you,” she said. Another is raising the bar too high for grantees. She said philanthropists should ask themselves this question: “How much am I imposing on my grantees to get that dollar out of me? Am I setting unrealistic expectations?”
Being successful in philanthropic risk capital is a mindset, she said. “It’s also a whole lot of behaviors that people can learn from others who have done well and badly over the years.”