Charting the Learning Journey of New Donors

Heather McLeod Grant and Kate Wilkinson

In The Giving Journey: Guiding New Donors to Actualized Philanthropy, our new report at Open Impact, we look into the mindsets and motivations of new ultra-high-net-worth donors. Specifically, we wanted to know: why do Silicon Valley’s “new donors” give? What barriers get in their way? And how can philanthropy experts, foundations, and nonprofits help address these obstacles so that donors can give more — and more effectively?

To answer these questions, we conducted interviews and small-group conversations with more than 50 ultra-wealthy individuals (those with self-created net worth over $10 million) based in the Bay Area. The interviewees were anonymous in order to encourage candid conversations about their giving.

In our discussions, we asked a range of questions designed to get at both the why and the how of these donors’ philanthropy. When prompted to tell us about their motives for giving, many donors told us more about their lives, their values, their careers, and the experiences that shaped what they care about most. The more conversations we had, the more the “journey” metaphor became an apt way of demonstrating how these donors think about their philanthropy.

Talking about philanthropy opened a door for people to reflect broadly on money, meaning, and their deeper purpose in life — answers to the why questions. As donors considered these questions and acted on them over time, their giving became more “actualized,” meaning intentional, strategic, and psychologically rewarding for the donors themselves. Our key finding is that the path to this actualized philanthropy is quite similar for all donors, regardless of their income, interests, or varied experiences. It can be represented in five stages:

  1. Formative Experiences: We found that donors’ philanthropy is very much informed by who they are as individuals and what they care about most deeply. This, in turn, is shaped by their family, faith, and early formative experiences such as learning about poverty, volunteering in school, or enjoying solving problems.
  2. The Wealth Event and Pause: After coming into significant wealth, most of these individuals don’t start giving right away, even though they might set aside assets in a donor-advised fund (DAF) or pledge to give away their fortune. Rather, they typically pause before beginning to actively give. Many are still busy with their careers, families, and the responsibilities of managing new wealth. They are also overwhelmed by the learning curve that philanthropy can present and don’t always know where to turn to learn how to be effective.
  3. Getting Unstuck: When new donors do finally begin giving, most start within their comfort zone and donate to what is already familiar: their children’s school, their religious house of worship, or their alma mater. Additionally, most donors start small. No matter their total net worth, almost everyone we interviewed began by making relatively small gifts of about $5,000 to $10,000. It’s helpful to understand that this is a developmental stage — donors make small bets in order to learn, reflect, and grow.
  4. Ramping Up: As these donors ramp up and begin to reflect more on their motives and intentions, they move from reactive check writing to more proactive and strategic giving — and often donate in larger amounts. Most donors said that figuring out the why behind their giving was crucial, as that became the catalyst that helped shape their approach. Finding a philanthropy mentor (an expert or friend with more giving experience), getting involved with nonprofits, or joining a giving circle can all be helpful catalysts in answering and acting on those why questions.
  5. Actualized Philanthropy: By the time a donor has moved through this journey — which can span a decade or more — they’ve answered the why question, which makes them more actualized, self-aware, and strategic in their giving. One important milestone is making a big gift (typically of $100,000 or more), which often signals a high potential donor’s commitment to bigger bets and their specific interests. Getting here is the ultimate virtuous cycle, because when donors are more actualized, they feel more fulfillment and give more strategically. This matters, since nonprofits get the highest and best social and financial capital from philanthropists like these.

Our findings about this five-stage path give rise to a number of important questions.

Why is the inner journey of philanthropy so important for new donors?

The outer journey of philanthropy is straightforward and has been explored in research and literature — it’s what has been called “strategic philanthropy.” It involves very practical questions like: How much of my wealth should I give away? Which vehicle should I use: should I start a foundation or use a donor-advised fund, or set up an LLC? What issues should be in my portfolio? What are the best nonprofits to fund within a particular issue area? While straightforward, initially these questions can seem overwhelming, and donors might delay their giving because it’s so complicated and requires so many decisions.

We argue that if these donors first understand their why — their deeper motivations for giving and how philanthropy can play a part in their own emotional/ spiritual/ leadership development — then the how questions become stepping stones rather than obstacles. When donors understand how philanthropy contributes to developing meaning, they are more likely to give it their time, energy, and focus.  Ultimately donors need to address both the why and the how of their giving.

What impact can this type of thinking have for donors in giving locally?

We see local giving as an important piece of a donor’s philanthropic portfolio, alongside giving to other issues and regions. Actualized philanthropy is about engaging with your inner purpose in order to become more empathetic, generous, and outer-directed. Often, engaging with peers, meeting those who benefit from funding, and developing relationships with nonprofit leaders can “turbocharge” that internal journey.  Because local organizations have a geographic advantage in that regard, we believe partnerships with them present an opportunity for new donors to learn from others, build connections, and address local needs.

What can foundation leaders, board members, and donors who have already started a foundation take away from these findings?

We believe that foundation leaders, board members, and established donors have an important role to play in continuing to promote effective philanthropy and a spirit of generosity. In many ways, these individuals have deep knowledge of both the how and the why of giving, and should be sharing their journeys and insights with individuals just starting out. In all our interviews, emerging donors spoke about the influence wielded by mentors and advisors who were further along in their philanthropy. More established philanthropists and philanthropoids can step into a role as coaches and be critical guides to new donors as they start their giving journey.

Heather McLeod Grant is the co-founder of Open Impact and a social entrepreneur, author, and consultant with 25 years of experience in social change. Follow her on Twitter at @hmcgrant.

Kate Wilkinson focuses on strategy and local philanthropy at Open Impact.

donors, individual donors, learning, philanthropy
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