Why nonprofits are seeking out family foundations to support their work

SAN FRANCISCO — When JB Straubel initially pitched the idea for what would become Tesla, venture capitalists doubted he could succeed until billionaire Elon Musk backed the idea and became CEO of the company. “No one wanted to invest. All the VCs thought: ‘It’s crazy. It’s too high risk. It won’t work.’ He met with Elon and he was the only person who got it immediately,” said Boryana Dineva, executive director of the Straubel Family Foundation and JB Straubel’s wife. Now, Straubel is looking to return the favor through annual awards aimed at supporting others’ ideas to leverage technology to improve society. As more wealthy individuals and families look to give back, many have turned to donor-advised funds and limited liability companies — but the number of foundations that derive their funds from a single family is also on the rise. While Dineva and Straubel are early in their giving journey, they are taking a personalized approach to their philanthropy common to family foundations, which are increasingly drawing interest from nonprofits seeking funding. A recent report from the Open Road Alliance — an organization that supports NGOs through unexpected challenges — points to one reason why this may be the case. Using data from nonprofits that reached out to the alliance for assistance, the report outlines how funders often create obstacles that prevent nonprofits from achieving their goals. In many cases, the organizations were reassured that a change in funder strategy would not affect them, and then found themselves unprepared when it ultimately did. But the report found that this problem does not appear to apply to funding from the growing number of family foundations, which tend to be more flexible than their institutional or government counterparts. “One thing we've seen that we believe contributes to this flexibility is that family foundations are accessible,” Maya Winkelstein, executive director of the Open Road Alliance, said by email. “Their grantees have close relationships with the foundation staff and oftentimes the donor themselves. Because a lot is done in conversation, grantees know who to go to when something goes wrong. They have contact information for often multiple points of contact within the family foundation,” she said. By contrast, larger foundations often rely on automated processes to manage applications and grants. So when something unexpected happens, grantees don't know who to call, Winkelstein explained. While larger foundations may not be able to be as flexible as family foundations, they can still be more accessible — for example by offering contact information to be used in case challenges arise. Many emerging philanthropists, including Dineva and Straubel, are also bringing a learning mindset to their philanthropy. Last month, Global Forest Watch was among the conservation nonprofits that appeared at a pitch event for Battery Powered, a program that aims to provide an easy on-ramp to philanthropy for members of the Battery, an exclusive club in San Francisco. Crystal Davis, director of the forest monitoring system, which is an initiative of the World Resources Institute, said the organization has historically been funded primarily by large foundations, corporations, and government, with few individual donors. But she said that those donors are exactly who Global Forest Watch is now seeking out. “The type of work we do is often about risk-taking with technology, and the more traditional donors aren’t as good at funding that kind of work because their entire funding model is about predetermined variables and theories of change,” she said. It has been a challenge to identify who these philanthropists are and whether they might be interested in the Global Forest Watch mission, Davis said. One list she follows closely is the Giving Pledge, a campaign that asks billionaires to commit more than half their money to philanthropy. But Davis explained that many high and ultra high net worth individuals launch their vehicles for giving without websites, meaning she has to rely on personal introductions. Despite these challenges, Davis is determined to connect with more individual donors because she expects these sources of funding will allow her to talk more honestly about failure, make changes that need to be made, and partner in innovative ways. For the philanthropist’s part, family foundations hold an appeal to those who want more control over their giving than other vehicles allow. A number of factors — including the growing number of firms specializing in advising families on their giving, collectives that provide donors with a sense of community, and online and offline resources for effective philanthropy — are helping to address some of the barriers that may have prevented individuals from setting up family foundations in the past. The model works for Straubel and Dineva because of the flexibility it provides them to explore the field, develop a giving strategy, and allocate grants in the meantime. “My primary focus [is] my work responsibilities at Tesla, and the family foundation structure is a way to start now, yet allow time for discovery before making big decisions,” Straubel told Devex. “Between the two of us, we can lead every functional part of an organization. I am versed in the clean tech field and have a good sense of where the future of sustainable energy is going. Boryana is knowledgeable in all things talent, building a network, implementing relevant performance metrics, and setting up thoughtful and scalable operation,” Straubel said. Their first grantee was Rebecca Hui, founder of Roots Studio, a social enterprise that digitizes the work of creative artists earning less than $1,000 a year. “I appreciate that funders ask me about my model, and theory of change, and impact metrics — but at an early stage, part of it is really just finding alignment about who you are as people and what you believe in, and then having the trust to go along with you on the journey,” Hui told Devex. Dineva connected with Hui on a personal level, in part because of Dineva’s own experience bringing textiles with her from Bulgaria to Germany, Austria, and Russia, and finally the United States, to remind her of her roots. Hui said that Dineva is there for her as a partner as well as a funder. Dineva and Straubel also seek to learn from others as they find their path in philanthropy, for example by engaging with Echoing Green, which provides funding and support to early-stage social entrepreneurs, and recently launched learning partnerships for philanthropists also interested in supporting emerging leaders. Erica Lock, director of stakeholder engagement at Echoing Green said: “They’ve put a lot of thought into every element of the program for early-stage leaders, from selection criteria to individual interventions to building community. “They are also so clearly focused on trying to do what’s right for the field instead of driving funding priorities in a top-down approach. I see them actively investing in research, listening to other experts and partners in the field, and running lean pilots to test and learn in real-time.” Lock described their approach as a learning mindset, which she said makes funders, as well as the nonprofits they support, more effective over time.