The Young and the Generous

Meet the new generation of philanthropists. They’re young, they’re wealthy, and they don’t just write checks. They’re ready to roll up their sleeves, but — in return — they expect tangible results.

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Bill Daugherty is your typical dot-com gazillionaire: He brainstormed a new online business concept with an old friend from Harvard Business School, built it into a profitable venture, and sold it off in time to become exceedingly wealthy by the age of forty.  Now, he’s your typical new philanthropist.

The turning point came about three years ago when his online search and media company, Interactive Search Holdings, changed hands for a reported $500 million in stock and cash. Daugherty’s share of the windfall afforded him the particularly precious luxury of time, and he decided to use it for good. “I was looking around for nonprofit opportunities, and I realized I didn’t want to be somebody who just attended a lot of board meetings,” Daugherty says. “I’m much more of a hands-on person.”

A neighbor in Barrington happened to introduce him to another hands-on innovator, Dennis Littky, co-founder and co-director of the alternative MET schools in Providence, who quickly figured out that Daugherty had something he needed — and it wasn’t just money. “He’d been looking for ten years for a way to incorporate entrepreneurship into the curriculum,” says Daugherty, who also boasted an affiliation with the National Foundation for Teaching Entrepreneurship. “So it was a fortuitous meeting.”

The result was “Entrepreneurship 360,” a class Daugherty designed to give kids a 360-degree look at a business in the early stages. In addition to lending some financial support (he won’t say how much), Daugherty, now forty-three donates two full mornings a week teaching MET students how to flesh out, determine the viability of, and sell their business ideas. The class has proved to be far more than just theory. Last January, with start-up support from several local businesses, former senior Yesenia Mercado’s plan to produce all-natural, passion-fruit-flavored sodas took off as Big Picture Soda. Daugherty left it up to the kids to make the venture profitable, which meant they had to get the product onto store shelves. After bringing in a pro to demonstrate the art of making a pitch, Daugherty watched, amazed, as the accounts started piling up .

Now, Big Picture’s bright blue, red and orange labels appear on the shelves of more than fifty stores in Rhode Island. The fledgling company was profitable in its very first quarter, producing revenues that will flow into a college scholarship fund. Daugherty’s charitable investment — of both time and money — has yielded a sustainable real-world learning laboratory, one he says is transforming self-doubters into savvy salespeople. “Every kid deserves a shot,” he says. “These kids were just waiting for their shot.”

This concept of philanthropy as social investment, or even seed money, underlies the giving habits of a new generation of philanthropists emerging nationally as well as here in Rhode Island. The philosophy isn’t new — it dates to 1889, when steel magnate Andrew Carnegie declared it an obligation of the wealthy to invest in the betterment of their communities. Among today’s fifty-and-younger set of do-gooders, however, the notion has become even more business-like in its approach, with the focus shifting further away from merely pumping money into good causes (in Carnegie’s case, it was libraries) to creating ed-ucational and economic opportunities, and getting to the root of social problems. 

The new philanthropists are strategic about their giving, extremely results-oriented, and unafraid to take on large-scale, even global, challenges. They want to put their own stamp on their philanthropic efforts, and in some cases even make it their life’s work. This more individualistic, hands-on mindset reflects a broader shift in the public’s attitude toward giving.

At the venerable Rhode Island Foundation, the state’s only community foundation with more than a half-billion dollars in assets, gone are the days when most donations came in the form of bequests, the dead donors having entrusted the agency to manage their money appropriately. Today, donors want to see their philanthropy in action, as demonstrated by the soaring popularity of the community foundation’s donor-advised funds, which give donors a say in how their endowment dollars are distributed. Over the past two years, about half of all donations to the foundation were dedicated to donor-advised funds, compared with only 25 percent five years ago.

Up-and-coming donors in their twenties and thirties often don’t even think of philanthropy in monetary terms. Rather, they see it as a place “where they can exercise their public service or political ambitions,” says Ari Matusiak, the Foundation’s former vice president for strategy and community impact, who is himself just thirty. “They think of expressing their commitment through work and volunteerism.”

This is not to say that the old-style philanthropist is obsolete — there just seem to be fewer of them. The state is still heavily reliant upon company CEOs, like Nortek’s Richard Bready, and old-money heirs, like Malcolm and Liz Chace, who repeatedly take leadership roles in supporting arts, health, social service and environmental organizations. Yet the stalwart local companies and families of wealth that were once reliable breeding grounds for this benefactor style of philanthropy are largely gone. Fewer people of newer wealth have close ties locally, and thus, fewer are stepping up to become the new stewards to Rhode Island.  

The shifting corporate landscape in particular has heightened competition among the roughly 1,500 nonprofit charitable organizations actively engaged in fundraising in the state. While the state’s nonprofit sector swelled about 70 percent between 1990 and 2000, they are chasing fewer and fewer corporate dollars, traditionally a primary source of support. “We’re not attracting many new corporate entities here in New England, and there’s been a lot of consolidation,” notes Anthony Maione, president and chief executive of the United Way of Rhode Island.

The drop-off in the number of corporations rooted in Rhode Island, a more transient population whose loyalties may very likely lie in Seattle or Liberia, declining support from the federal government, and an increased concentration of wealth among a privileged few, have, together, made the fundraising climate much more challenging — and put added pressure on the major donors who remain. Shawn Buckless, the owner of Lincoln-based Fund Consultants, sees it in the capital campaigns his firm manages for nonprofit organizations. The old “80/20 rule,” which dictates that 80 percent of the money raised will come from 20 percent of donors with deep pockets, no longer applies. Now, Buckless says, it’s a “90/10” paradigm and, if the current trends continue, the breakdown could soon read 95/5.

The state’s largest fundraising organizations have responded to the shifting terrain by practicing a more proactive “new” philanthropy themselves. The ninety-one-year-old Rhode Island Foundation, which has traditionally doled out grants to community organizations in a low-key, dignified fashion, burst onto the political scene three years ago when they teamed with the United Way of Rhode Island and Rhode Island Housing to boost support for a major affordable housing initiative (Housing Works RI). The effort invited grassroots participation, sending volunteers out into communities and putting them at polling places on Election Day, while also employing a sophisticated media and lobbying campaign. Ultimately, the groups’ pooled investment leveraged a $50 million outcome, the amount approved by voters in last fall’s affordable housing bond referendum.

That campaign “changed philanthropy in Rhode Island permanently,” says Ronald Gallo, the foundation’s president and CEO. Both the Foundation and the United Way are becoming more strategic about where they direct their funds — essentially looking for how best to leverage their dollars, and to address problems at their roots — and encouraging greater collaboration (rather than competition and duplication) among smaller nonprofits. 

This is the way entrepreneurs think, and it’s the way nonprofits will have to think if they are to survive in an age that increasingly equates financial donations with venture capital. “It’s not just about writing a check anymore, and that’s a very healthy trend,” says Daugherty.