The role of innovation

Philanthropic organisations, foundations and individuals have taken a lead in catalysing giving, pushing the boundaries of philanthropy to attract new donors through innovative products, services and giving vehicles, with notable success.

A paper published by the Giving Campaign (July 2002) states that 40% of new funding in the US was the result of innovative giving vehicles.

In the last few years we have seen an explosion of new ways to give in the UK. Matched funding, social enterprise, venture philanthropy, social impact bonds, impact investing, donor advised funds, giving circles and online giving vehicles are just some of the new entrepreneurial models being embraced by donors.

The innovation is a response to new demands from donors. Andrew Haigh, a managing partner at Coutts & Co which has just announced funding for five subsidised places for social entrepreneurs on the Cranfield School of Management’s Business Growth and Development Programme (BGP), says, “We chose to support social enterprise because we work with some 20,000 mainstream entrepreneurs and they’re more interested in social enterprise than in traditional charitable giving. They don’t like sitting in rooms looking at grant applications and then simply signing cheques.”

Matched funding is an alternative to cheque-writing that is raising millions in minutes. Championed in the UK by philanthropist Alec Reed (pictured left) through his foundation website The Big Give (though pioneered by the UK government with its matched funding scheme for universities), it raised £2m for more than 200 charities in just 45 minutes in 2008, picking up the Third Sector Excellence Award for Innovation. Its 2009 event outstripped its £6m target, raising £8.5m.

It has announced a £20m target for its 2010 Christmas Challenge Fund and the first confirmed sponsor is Arts & Business which has invested £350,000 as a catalyst fund with the aim of raising £3m for arts organisations. Oxford University’s matched funding appeal raised $100m (£66m) in a year and the national disability charity Scope has just launched a venture philanthropy investment model which combines donations, tax breaks, soft loans, matched funding and commercial loans so that each £1,750 donated will create a value to the charity of £18,000.

Though there is an absence of robust research, there is anecdotal evidence that innovation and neater packaging of products – in short better product marketing – attracts new donors.

Tris Lumley, head of strategy at New Philanthropy Capital, hesitates to use the word ‘commoditisation’ in relation to philanthropy but says “philanthropists and funders are demanding more ‘off the shelf products’, that show a clear return on investment.”

Joe Saxton, of non-profit research consultancy nfpSynergy, adds, “Productising philanthropy is always going to help people. The more that we can package giving so that people know that makes them a generous person the better. That's why the best fundraisers are very transparent about what gift buys what naming rights or public praise. We are poor at productising in the UK while the Americans are very good.”

Saxton suggests a radical idea for the UK; a ‘pizza menu’ approach to philanthropy naming, “I’d like to see a list of naming opportunities, arranged by value, allowing philanthropists to more easily choose what they could support.”

As David Puttnam's recent outburst against 'tacky' naming opportunities shows, it wouldn't be to everyone's taste. However time is one of the major ‘costs’ of philanthropy –  so repackaging giving to provide more ‘off the peg’ solutions alongside a traditional bespoke approach could suit some, says Lumley.

Entrepreneurial philanthropists wanting alternatives to cheque-writing are driving innovation in the philanthropic marketplace – impact investing, matched funding and venture philanthropy are some of the new, measurable and increasingly acceptable ways to ‘do’ philanthropy. The hope is they may harness philanthropy as a powerhouse for social change.