#### How to do philanthropy? Questions that need to be answered: - **Feels very transactional**. It feels like you've given the money and it disappears. There's no feedback on what your money specifically enabled. - **Knowing impact is difficult**. Generally, when money is pooled from multiple donors, it seems like the impact of your money gets diluted. - **Doubts of efficiency of spending**. Possibility of wastage of money is much more in non-profits than for-profits (which have an obligation to return the money). There are three broad approaches to overcome these limitations: - **Start a non-profit yourself**. If you've started it, you control its efficiency, impact is easily known and as you'll be building an institution, it wouldn't feel transactional. - With the money you have available for impact each year, you can use it as a founding grant for starting a new non-profit initiative every year. Hire a founding team for it and sit on board of directors after the management team becomes self-sufficient. - Although, it should be noted that non-profits generally have difficulty hiring talented people, as they're constrained by how much money can they pay to their hires. - **Give zero or low interest loans v/s donation**. The obligation to pay back becomes a forcing function for efficiency and the obligation creates a line of communication which prevents the engagement from becoming one-time, transactional thing. - The difficulty though is that there would be some types of non-profits with no obvious way of making revenue (e.g. wild life suffering elimination). So, does a long term obligation to return money make sense for them? - **Support specific projects and get actively involved**. If you earmark your money for a co-developed project and have a clear roadmap for your involvement towards impact, then it wouldn't feel transactional, you'll get to know its impact and will have a clear idea about how efficiently money is being spent. - This option is almost like starting your own non-profit, but here you have a ready team and have a bounded project (unlike a new non-profit which exists for a much longer time) #### If a different non-profit, what types of non-profits can you support? According to [this excellent article on what's wrong with non-profits](https://suegardner.org/2013/10/20/whats-really-wrong-with-nonprofits-and-how-we-can-fix-it/): >A major structural flaw of many nonprofits is that their revenue is decoupled from mission work, which pushes them to focus on providing a positive donor experience often at the expense of doing their core work. Which means not all non-profits are created equal. There's tendency of non-profits to look well-managed and professional to donors because they're dependent on donor positive impressions. But that might happen at the expense of effectiveness. Hence, **always evaluate a non-profit like you'd evaluate a for-profit: by its impact rather than appearances**. #### If your own non-profit, how to make it successful https://ssir.org/articles/entry/how_nonprofits_get_really_big# >Since 1970, more than 200,000 nonprofits have opened in the U.S., but only 144 of them have reached $50 million in annual revenue. Most of the members of this elite group got big by doing two things. They raised the bulk of their money from a single type of funder such as corporations or government – and not, as conventional wisdom would recommend, by going after diverse sources of funding. Just as importantly, these nonprofits created professional organizations that were tailored to the needs of their primary funding sources. >Further, the way funding flows to organizations this large is neither completely random nor illogical. On the contrary, we identified three important practices common among nonprofits that succeeded in building large-scale funding models: (1) They developed funding in one concentrated source rather than across diverse sources; (2) they found a funding source that was a natural match to their mission and beneficiaries; and (3) they built a professional organization and structure around this funding model. >Although most relied on a single source for the bulk of their funding, they did not rely on a single payer. #### Summing up **To summarize, when it comes to philanthropy, only support the following:** - Your own non-profit's projects - Another non-profit with demonstrated real-world impact (commensurate to what a for-profit startup would have done with an equal annual budget) - Specific project at some other non-profit with my active involvement - Zero interest loans