Business entrepreneurs turned impact philanthropists
How will we know when the Impact Revolution has really taken off? One encouraging indication is how philanthropic foundations are embracing the idea of impact and harnessing the full potential of their assets to create positive change. A whole new crop of foundations, led by individuals who have achieved great success in business, are the primary drivers of a new philanthropic model focused on sustainable, long-term funding rather than short-term grant-giving. They look at outcomes rather than the activities of service providers, encouraging innovation and striving to make the best use of their philanthropic resources to create the biggest positive impact.
The Omidyar Network
Some of the world’s most successful entrepreneurs are the innovators behind the new generation of philanthropic organizations using business principles to achieve the greatest good.
Frustrated with the limitations of traditional philanthropy, eBay founder Pierre Omidyar and his wife Pamela established the Omidyar Network, a hybrid organization comprised of both a foundation and an impact investing firm, which has become one of the biggest players changing how the sector acts. The Networks acts as a philanthropic investment firm, engaging in both grant-making and impact investing with the goal of creating opportunities for disadvantaged people around the world.
Since its founding in 2003, around half of Omidyar’s $1.5 billion total commitment has gone to non-profit grants, and the other half has gone to profit-with-purpose investments. In addition to putting its philanthropic dollars towards impact, Omidyar also believes in embracing risk and has dedicated 10 percent of its spending to experiments and learning initiatives.
The Omidyar Network has also been one of the largest supporters of the impact investing sector. Its former CEO, Matt Bannick, represented the US on the G8 Social Impact Investment Taskforce and greatly supported the effort of its US National Advisory Board as well as Social Finance US, the GSG and the Education Outcomes Fund for Africa and the Middle East. His successor, Mike Kubzansky, is very committed to efforts to embrace impact capitalism. Together with the Skoll Foundation, which was set up in 1999 by Jeff Skoll, the former CEO of eBay, Omidyar has been the most prominent organizations supporting the growth of impact investment.
The Skoll Foundation
Like the Omidyar Network, the Skoll Foundation aims to achieve systemic change on a global scale through the power of innovation and entrepreneurship—hallmarks of the new model of impact philanthropy. As well as believing that social entrepreneurs are best situated to solve some of the world’s biggest problems, Jeff Skoll promotes long-term funding to support these entrepreneurs and help them scale their innovations.
Skoll allocates its grant and PRI money within an explicit outcome framework. In addition, its endowment is invested for impact through Skoll’s investment management firm, Capricorn Investment Group—a certified B Corp. organization. Committed to ensuring both its grant and investment dollars are making a difference, the Skoll Foundation encouraged Capricorn to utilize impact investing as a way to align its investments with the foundation’s mission.
The Bill and Melinda Gates Foundation
The largest foundation in the world, The Bill and Melinda Gates Foundation, has brought business methods to philanthropy with an endowment of about $45 billion and takes an outcome-oriented approach to grant-making. Instead of asking grantees to report on their activities, they look for ways to measure results.
The Gates Foundation doesn’t just make grants. Through its Strategic Investment Fund (SIF), set up in 2009, it also makes low-interest loans, equity investments and provides volume guarantees for for-profit companies aiming at big problems. It uses these tools to leverage the power of private-sector innovation, using different approaches to tackle various issues at scale.
For example, in an effort to help women worldwide gain access to affordable contraception, the foundation guaranteed $120 million in sales of contraceptive implants – one of the most effective and user-friendly forms of birth control on the market. The guarantee ensured a viable market for manufacturers Bayer and Merck & Co, and in exchange, the manufacturers agreed to lower the price of the implants. Thanks to this effort, more than 42 million implants have been distributed in some of the world’s poorest countries.
When it comes to equity investments, Gates targets early-stage biotech companies. As an early-stage investor, it has the power to influence investee companies. In this way, it can ensure that scientific and technological advances are applied to diseases affecting the world’s poorest populations. This includes ensuring that the products and tools developed by investee companies are affordable for impoverished populations.
So far, the foundation has made around 40 such investments totaling $700 million, including those in CureVac, which develops vaccines against cancer and infectious diseases, Vir Biotechnology, which develops immune programming technology, and Intarcia Therapeutics, which is working to transform the management of chronic diseases like diabetes and HIV through new drug delivery technology.
The Chan Zuckerberg Initiative (CZI)
One of the most promising new family foundations is the Chan Zuckerberg Initiative (CZI).
In 2015, Facebook founder Mark Zuckerberg and his wife Priscilla Chan announced that they would direct 99 percent of their $45 billion net worth into CZI, prioritizing impact investments focused on personalized learning, curing disease, and community building.
Chan and Zuckerberg have taken an unconventional approach to philanthropy. They set up CZI as a Limited Liability Corporation (LLC) rather than a traditional foundation, which means they are not limited by the regulations foundations must abide by. CZI can make money by investing in impact initiatives and can then re-invest that money into other impact organizations. CZI also has the flexibility to experiment with outcome funding and pay-for-success approaches.
Newer organizations like The Omidyar Network and CZI are now being joined by some long-established foundations willing to experiment with new philanthropic models. For example, the MacArthur Foundation is now leading an effort to scale the funding of charitable organizations by attracting impact investment through what it calls ‘catalytic capital.’ This means providing funding from its grant money at concessionary terms to attract outside capital from investors.
Together, long-established philanthropists and newer impact philanthropists will continue to lead the us into a new era of philanthropy. The next step is to convince government to play a role in developing new solutions to our biggest problems. To learn more about the intricacies of Impact Philanthropy, pick up a copy of IMPACT: Reshaping Capitalism to Drive Real Change and join the Impact Revolution.
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