How to attract a next-gen philanthropist

As philanthropists and charitable foundations make more of a mark on development finance, development organizations are looking for clues about how to engage an emerging group of young donors in global giving.

One thing’s for certain: The next generation of philanthropists will have the resources to make a serious impact.

More than $59 trillion will pass into the hands of the next generation by 2050, and this new crop of wealthy individuals — technology entrepreneurs, heirs to family fortunes and real estate wunderkinds — will control between $20 trillion and $30 trillion in charitable giving.

So how will the affluent do good?

“The worst thing for them is the classic campaign to raise money for the local United Way with the big thermometer,” said Michael Moody, the Frey Foundation Chair for Family Foundations and Philanthropy at the Johnson Center for Philanthropy. “They don’t want to be a line on that thermometer.”

Instead, the next generation is looking for ways to reinvent charity and move away from the traditional routes of writing checks and funding nonprofits.

“They’re extremely hands-on in their giving, and they believe in giving time and talent, not just treasure,” Moody said.

But combine the desire for hands-on giving with the most tech-savvy and globally connected generation and the result is not what you might expect. While young philanthropists are likely to be more engaged, give more, give earlier in their lives and give both money and expertise, next-gen wealth has not yet found a clear path toward international giving.

The onus is on the development community to cater to a different brand of philanthropy — one that is more hands-on, and involves not just generosity but also business-savvy.

“Entrepreneurs act like entrepreneurs,” Alexandre Mars told Devex.

Mars is himself a philanthropist and serial entrepreneur, as well as the founder of the relatively new Epic Foundation, which “bridges the gap between a new generation of donors and organizations supporting children and youth globally” according to its website.

“They want a selection, they want choices,” Mars said. “They want to trust what they’re giving to and they want to have the tools [to decide].”

For development organizations, this means a rethink in how client relationships are built. And above all, Mars said, you have to think like an entrepreneur.

These young donors’ intelligence can be a benefit to the business of development. Organizations will no longer need to rely so heavily on traditional communications materials to convey impact, and one way to bridge the gap between old and new modes of giving is to bring young philanthropists into the process.

The global giving paradox

The trouble is, the next generation is not significantly more globally minded in its giving than previous generations, despite being more informed about the global state of affairs, according to a Johnson Center for Philanthropy report called “#NextGenDonors: Respecting Legacy, Revolutionizing Philanthropy.”

“The next generation will likely know more about hunger in South Sudan than they know about hunger in South Philly,” Moody said.

But knowing more about global issues does not translate to giving to them. Young philanthropists want a hands-on experience, which is more difficult with global causes.

It’s a paradox that the international development community is only beginning to tackle through mechanisms like impact investing.

Impact investing allows investors to interact with a business model or idea, rather than just write checks to individuals or causes. Still, the challenge is one that Moody and other next-gen philanthropy experts say requires more creativity from the international development community.

“Those international development organizations that can find a way to solve that puzzle — to unlock international donations through a higher-impact giving experience — can engage scores of these potential donors who want to get involved internationally,” Moody said.

Balancing an interactive giving experience with a global mindset is a tricky endeavor, though tapping into the expertise — and not just the generosity — of the young, business and tech-savvy elite could hold the answer.

Time, talent and treasure

Young philanthropists want to erase the line between their professional and charitable selves.

“The least-impactful form of giving for the next generation is waiting until they’ve had a career and made their money and retired to write checks,” Moody said.

Bill Gates, Microsoft co-founder turned philanthropic powerhouse, may have initiated the paradigm shift. Gates left Microsoft at 52, with the stated aim not of retiring but of refocusing his energy and expertise on philanthropy. His causes: global health, tech startups and tech activism.

“If you think about it, this generation grew up in a world where those boundaries between work and life have been more fluid than in past generations,” Moody said.

And just as the new generation hopes to combine expertise with giving, they also hope to spend — or invest — with charitable as well as financial returns.

Unlike the philanthropist-professional, the consumer-philanthropist exists across socio-economic boundaries, Moody said. The popularity of charitable business models — like Toms Shoes, for example, which gives a pair of shoes to those in need for every pair purchased — is growing.

“Young philanthropists don’t want to split their life as a philanthropist and their life as a consumer, or as a businessperson, parent or student,” Mars told Devex. “Blurring those selves is a positive way of doing good in all parts of your life,” he said.

The Epic Foundation plans to address this desire for hands-on engagement by using philanthropic trips or missions  — with the purpose of scoping out investments — to engage young donors more directly with global causes and their individual impact, Mars said.

Consumer decisions are increasingly based not just on price or what’s fashionable in the marketplace but on what will simultaneously allow consumers to do some social good, Mars explained.

Modeling a charitable platform after this movement, Moody agreed, will bring the trend into the philanthropic space.

The impact experience

While the preoccupation of young donors with the hands-on experience might present a challenge for international causes, impact investment ventures or microfinance organizations like Kiva are striking the balance, according to a Nexus report called the “Global Campaign for a Culture of Philanthropy.”

The combination of personalized giving with a global platform, along with an investment-savvy delivery model, is attractive to young entrepreneurs and donors who are reportedly more willing to take chances with their giving.

“If the potential for higher impact is there, young philanthropists are more likely to take risks,” Moody said.

Peer-oriented giving and investment is a fairly new phenomenon on the micro level, but the model, which brings together a small group of investor or donor peers to invest collectively in a particular community’s development needs. This type of small-scale resource pooling to provide grants or loans with a financial return is gaining popularity among the young and wealthy set but the impact and potential for growth has not yet been demonstrated.

International development organizations hoping to tap into this next generation of wealth will need to learn from the sectors they come from and seek out new ways of engagement that will engage in an experiential way both sides of the young donor — the do-gooder as well as the entrepreneur.

Want to learn more? Check out the Youth Will website and tweet #YouthWill.

Youth Will is an online conversation hosted by Devex in partnership with Chemonics, The Commonwealth Secretariat, The MasterCard Foundation and UN-Habitat to explore the power that youth around the globe hold to change their own futures and those of their peers.