by Antonia Ruffell
Five tips for effective giving
Mega gifts to charity from billionaire founders tend to grab the headlines, but we don’t see much commentary about major donors who are giving at more modest levels. Yet donors who make annual gifts of $10,000, $25,000 or even $50,000 to charities play an important role in Australia’s social purpose sector.
These types of donors are emerging as an increasingly powerful force in philanthropy, driven by the tech boom which has created many wealthy founders and execs. For every billionaire, there are hundreds more who are experiencing or expecting a rapid wealth increase and are ready to start giving today. They want to understand how to give $10,000 effectively now, ensuring they are well prepared when they are in position to give much more.
These new tech givers are generally self-directed, without staff to run their giving programs. They may set up a foundation with $1 million and start off by giving $50k annually in their early years. They do research and make their own giving decisions but can feel uncertain, overwhelmed and unsure where to start.
With over 24,000 charities eligible to receive tax-deductible gifts, overwhelm is a real issue for many givers, but it can also be an excuse. People can be disorganised with their charitable giving, even with the best intentions. They make ad hoc donations – or worry that ‘there’s too many charities’ and ‘I don’t know where to start.’
Successful philanthropists – at any level – have dedicated some time to thinking things through. They understand where they sit on the charitable giving spectrum and how their capital is best deployed.
Here are my observations on the qualities impactful major donors share and some tips for new donors to help them get the most from their philanthropy.
1. A modest amount can have a transformational impact on smaller charities
Effective donors take an approach most suited to the scale of their giving and understand that money can play a range of roles in non-profits at various stages.
With the top charities accounting for approximately 18% of the sector’s total donations and bequests revenue, it can make sense to look beyond the larger players to have a bigger impact on an organisation. The recent Australian Charities Report shows that 65 per cent of charities are small, with annual revenue under $250,000, and most run very leanly with few or no paid staff.
Donors can look for smaller or early-stage charities where their donation has an outsized impact and find opportunities in alignment with the level of funding they can commit. A smaller charity will be out there that aligns with every value or preferred cause.
Orange Sky Australia, the world’s first free mobile laundry service for people experiencing homelessness, is an organisation that relied on donations in its early days. It was an idea founded in a Brisbane garage by two 20-year-old mates, Nic Marchesi and Lucas Patchett. In late 2014, they installed a couple of washing machines and dryers in the back of their old van and visited parks around Brisbane to wash and dry clothes for free.
Philanthropy played a critical role in launching and expanding the initiative, with some of its biggest innovations supported by philanthropic gifts. Nic comments, “We were at a health conference in Sydney that opened our eyes to the problems with scabies and rheumatic heart disease in Australia – issues that can be attributed to lack of access to health hardware like washing machines. The next week we met with a donor, and they said, “What’s next?”. We said, “We want to build a truck for remote communities.” Now, 26% of our services run in the most remote locations in Australia. We wouldn’t have been able to get it up so quickly without that donation.”
What started as an idea to improve hygiene standards and restore dignity to people has evolved into something much bigger and more powerful. To date, Orange Sky has provided Australians doing it tough with over 1.9 million kilograms of free laundry, 20,000 showers and 330,000 hours of genuine and non-judgemental conversation across 36 service locations. Check out their inspiring story.
2. Philanthropy plays a different role to government
Philanthropy is a small part of overall funding in the charitable sector. ACNC data shows that just 7% of charity revenue comes from donations and bequests, with most of the revenue coming from government and the provision of services.
It helps to think about the unique role that philanthropic funding can play. Philanthropy allows charities to experiment with innovative approaches and take risks that government agencies might hesitate to undertake. They can fund pilot projects, provide additional resources, support research and development, and test new models.
Jarrod Wheatley learnt this unique power of philanthropy when he launched Professional Individual Care (PIC) in 2014, with a vision to reform the out-of-home care system for children and young people. PIC supports children who have frequently moved around foster care and group homes, some with more than 50 previous foster homes. PIC places these children in the home of a professional therapeutic carer who understands complex trauma and provides tailored care, therapeutic intervention, and the opportunity for the young person to have a real relationship.
Jarrod was working in Germany when he learnt about the model. On returning to Australia, there was a lot of regulatory paperwork, including accreditation and funding approvals to work through, and it took an additional two years before PIC’s operations commenced. It was quite a journey – and the support of some visionary funders made it possible to get the early program off the ground. The pilot was shown to be a success and has now been picked up and funded by the NSW Government.
Jarrod reflects, “The most important donation I ever received was for $10,000. It came at a critical time; not only did it allow me to keep working on the startup, but it also gave me the feeling others believed in it and supported me. Powerful stuff. We were 100% funded by philanthropists for the first 2.5 years, and now donations only make up a few per cent of our turnover. Those early donations got us to where we needed to be. Now we can operate from government funding, only using donations for things like aftercare for young people post-18 years where government funding isn’t sufficient.”
3. Untied funding is utopia – but project–placed funding has its place too
There is a trend in philanthropy – spearheaded by US-based Mackenzie Scott with Yield Giving – towards untied, unrestricted, multi-year funding – and there’s no doubt that this is utopia for charities. This kind of funding trusts the charity to use the money in the best way they see fit, which could include capacity building rather than it being linked to a particular program.
However, unrestricted funding isn’t always the best approach. Charities say that receiving unrestricted funding as an initial gift does not allow them to have a conversation with a giver about what they care about, which can help them to target future requests better. For funders, it involves extensive research and follow-up across the whole leadership and organisation, which isn’t realistic for smaller givers.
Many effective major donors focus on project-based funding. It may be an old-school approach – but it works. Restricted funding can be powerful and fill needs that aren’t met otherwise. However, a focussed intervention for a specific project can be a huge plus for a charity – and the donor gets a tangible sense of how their money makes a difference.
The Funding Network has used this approach to significant effect – coaching small charities to pitch a project to a room full of funders. See Roots of Change for examples of how funding for individual projects has impacted grassroots organisations. There are some powerful examples, like Fighting Chance, which provides entrepreneurial solutions to long-term disability problems, The Social Outfit, a fashion label providing training and employment for refugees (for full disclosure, I am a previous board member); and Anika Legal, a free online legal service for renters – all of which have gone on to achieve amazing things.
4. Good givers are realistic about what they need
Knowing a gift’s impact on a charity is motivating and reinforces a commitment to giving. It is okay to ask a charity for a personalised proposal or progress report. But personalised reports take time and energy and distract charities from their main game. Good givers remember that any requests should be proportionate to the size and type of grant they give or plan to give. Sometimes a quick call with the charity or a simple one-pager will suffice.
5. Research and relationships make giving easier
Even without staff to do research and make recommendations for them, many major givers are just as thoughtful, intentional, and creative as the most established philanthropic institutions.
Knowing where to focus can be tough, but doing some self-reflection pays off. For those seeking structure to help map their values and interests, Philanthropy Australia’s Guide to Giving, Australian Philanthropic Services’ values list, the Rockefeller Philanthropy Roadmap and the Perpetual Philanthropy Toolkit are helpful step-by-step guides.
Effective givers rely on collaboration, continuous learning, and advice to help them make good decisions. They talk to charities, do their own due diligence (this NPC Guide to Charity Analysis provides a useful framework), connect with other donors, and piggyback on due diligence done by more experienced and better-resourced funders. Groups like Philanthropy Australia, StartGiving, the Australian Environmental Grantmakers Network, The Life You Can Save, and the Australian International Development Network can help connect people around causes and each other.
And, finally, these donors give. They think things through, but they don’t worry if their donation is too small, their approach could be better, or the charity isn’t the only one. They put their hand in their pocket, commit and start giving.