Tech entrepreneurs bring new approaches, challenges to philanthropy

Philanthropists from the tech industry are shaking up the philanthropic sector with fresh approaches to giving that prioritize data and transparency. While many of their predecessors set up large foundations, this new wave of megadonors is coming up with novel ways to direct their money toward social impact.

Eight of the world’s 10 richest people come from the tech industry, and many of them bring an entrepreneurial mindset to their giving, typically influenced more by evidence than emotion.

Amid the rising number of tech donors turning their attention to global development causes, which often see more impact for every dollar invested, Devex spoke with experts about what drives tech donors who are pivoting from making money to giving it away.

Turning to ‘trust-based philanthropy’

A few trends and ideologies have emerged among tech-oriented philanthropists that are now “battling for supremacy,” said Stephanie Ellis-Smith, a philanthropy adviser and co-founder at Giving Gap, which helps connect donors to Black-led nonprofits.

The first is the idea that people who have made significant wealth from tech have found “the winning formula for success,” she said. As a result, they feel like everything they touch will also turn to gold, she added.

“This group of tech philanthropists tend to be hands-on, deadeye-focused on impact, and want a quantifiable [return on investment],” Ellis-Smith said. “And to ensure they get those things, they apply startup tech principles to the sector, often with disastrous results.”

As an example, she highlighted efforts by Mark Zuckerberg — the CEO at Meta Platforms Inc., formerly known as Facebook — and wife Priscilla Chan to overhaul the public school system in Newark, New Jersey, as an “infamous experiment.” The couple set out to improve the city’s public schools but has been criticized for “parachuting” in and failing to engage with the local community.

Ellis-Smith also cited the Bill & Melinda Gates Foundation as an early leader in the trend of donor involvement and guidance, strong metrics, and logic modeling applied to outcomes. This style of giving is not as popular as it was in the early days of tech, but it is still “going strong, to be sure,” she said.

Meanwhile, Twitter co-founder Jack Dorsey and MacKenzie Scott, ex-wife of Amazon founder Jeff Bezos, represent “trust-based philanthropy” — a second school of thought gaining popularity among the tech crowd, according to Ellis-Smith. She said these donors want to give money and then get out of the way, recognizing that they lack experience with the racial justice, climate change, and other intractable issues that they are funding.

“This community-centric way of giving decenters the donor and encourages the philanthropist to be but one of many players in the social sector ecosystem,” Ellis-Smith said. “It recognizes the lived experience and the intrinsic needs of nonprofits doing the difficult work on the ground and the fact they do not need to be taken off their task to appease the egos of donors.”

Dorsey and Scott have largely eschewed the trappings of traditional philanthropy. Dorsey has created a public spreadsheet that tracks his donations, while Scott has announced her gifts via Medium posts. These fresh approaches have often received plaudits. However, Scott faced some criticism after a recent post announcing that she would no longer post donation amounts or other details. She has since said she will create a website that includes such information.

Sometimes, tech donors overestimate how valuable their skills may be for nonprofits, said Anna-Marie Harling, a managing director at philanthropic collaborative Co-Impact, which focuses on systems change.

“Where I feel there are sometimes challenges is this idea of ‘I built a very successful business, so I’m going to be a really great asset to support this organization, because I can bring all my business-building experience,’” she said.

Tech donors who understand the limits of that approach may see value in joining a collaborative like Co-Impact, which provides a “safe space” to learn by doing alongside peers, Harling said. She acknowledged how, for many nonprofits, these tech donors remain out of reach, without websites or public points of contact.

“The role of the trusted adviser is really important,” Harling said. “Most donors we engage with have a trusted person helping them work out what they want to do in their philanthropy.”

She noted how important it is for nonprofits to understand who is influencing tech donors in their giving journey and to leverage those networks.

Taking an interest in risky bets

Compared with their peers in philanthropy, entrepreneurs who made their money in the tech industry tend to focus less on wealth preservation and more on wealth activation, said Nick Tedesco, the president and CEO at the National Center for Family Philanthropy.

“We certainly see tech donors are willing to give more and give now,” he said, citing Tegan and Brian Acton as an example. The couple built their philanthropic network after the multibillion-dollar sale of WhatsApp, which Brian Acton co-founded. “These first-generation wealth creators are not part of multigenerational wealth constructs where wealth is the norm and preservation of capital is the set point.”

These entrepreneurs who place less value on holding on to massive amounts of wealth often prefer to put it to work to solve problems, Tedesco added.

Tech entrepreneurs — many of whom become for-profit investors — are often prepared to make risky bets with their philanthropy that can yield outsize returns, said Danielle Gram, managing director at Founders Pledge, which asks entrepreneurs whose companies have an exit or liquidity event to donate a percentage of their personal proceeds to nonprofits of their choosing.

“They tend to be more willing to seed new ideas, engage in long-term strategies which change public policy, and fund areas of research and work which are heavily neglected by the public, relative to their importance,” she said.

For example, tech founders in the Founders Pledge community have started for-profit companies and nonprofit efforts to combat climate change, mitigate the risks of artificial intelligence, and prevent future pandemics, Gram said.

Adopting data-driven approaches

Tech-oriented philanthropists are less inclined to “meddle” in nonprofits’ decision-making when presented with solid data, according to Neil Buddy Shah, managing director of the charity assessment and grant-making organization GiveWell.

For example, GiveWell takes a cost-effective approach and collects data to show that the charities it recommends have the most impact per dollar. It posts its methodology for identifying philanthropic opportunities and research on its website for the sake of transparency.

That approach appeals to donors from the tech industry and to self-described “effective altruists,” who emphasize the use of evidence to guide more effective grant-making. This resonates among some tech donors, such as Cari Tuna and Dustin Moskovitz, the billionaire couple behind Open Philanthropy who have spread the idea to other billionaires through networks like the Giving Pledge.

“I think one of the interesting things is the extent to which there’s now a much larger number of donors who are writing large checks — so six-, seven-, eight-figure checks per year — with pretty minimal desire to provide input,” Shah told Devex. “A lot of people understand the approach, they like the approach, and [they] are happy to write large checks without setting up their own foundations or feeling the need to be weighing in.”

GiveWell raised more than $500 million last year and expects to distribute as much as $1 billion annually by 2025. The bulk of that funding comes from Open Philanthropy.

Anecdotally, Shah said he is also seeing donors move away from attaching their names to gifts and foundations — a trend that marked much of the large-scale philanthropy of the 20th century. A significant number of donors care more about the impact that they are generating, he said.

How nonprofits are tapping into tech money

Malaria Consortium, a humanitarian aid group aiming to prevent the spread of malaria in Africa and Asia, is among the nonprofits that have benefited the most from an evidence-based approach. GiveWell has consistently ranked the consortium among its top evidence-based and cost-effective charities. According to Forbes, Malaria Consortium received $51.2 million in 2021 from Moskovitz and Tuna’s Good Ventures foundation, by way of Open Philanthropy.

Malaria Consortium’s scientific, data-driven style of addressing malaria prevention aligns with the thinking of many tech philanthropists, said Chief Executive Charles Nelson.

“The scale that they have been able to bring means we’ve been able to do scale intervention,” he said. “Before, somebody would give you $100,000 — and that’s great, but it’s limiting. And what we won’t do is promise public health intervention until we can deliver it.”

Larger grants provide the consortium with stability and ensure it can deliver drugs, mosquito nets, and other interventions to communities, according to Nelson. He said he hopes the growing popularity of trust-based philanthropy results in nonprofits receiving more unrestricted grants so they can pivot based on evolving needs.

Further, working with tech philanthropists often requires a skill set that is different from those needed in most fundraising operations with bilateral donors.

“A lot of global development organizations have to think through whether they’re going to develop the unique skills and capacities to work with donors, especially tech donors, and many of them underestimate the task,” said Alexa Cortes Culwell, co-founder and managing director at Open Impact, which works with donors to invest in social impact causes.

These individuals want to see a clear pitch, in language and frameworks they understand, from someone who values their advice and will keep them in the loop as a thought partner and an investor.