Tech Capital Partners Blog

In my last post, I discussed strategy for charitable giving and promised to add some thoughts on how you can be very strategic about it.

1. Philanthropic giving is much like venture capital investing. When we invest in a company we make sure the business has enough money to cover its basic operating costs but also ensure it has some extra funds in order to try new initiatives. I think you should take the same approach to your charitable contributions. A percentage of your giving should be done with no strings attached and should be to allow organizations to cover their basic overhead costs. If a charity can’t pay the rent, pay its staff and turn on the lights it can’t do its basic job.  On the other hand, we also need to ensure charitable organizations have adequate funds to be able to try new innovative ideas. Again, this is not unlike venture investing. In a recent transaction a company came to us looking for $1 million in financing we decided to invest $2 million because we knew giving the company $1 million meant they would not have the ability to take risks and make mistakes. Shouldn’t we take the same approach to philanthropic investing? It is impossible to innovate without making mistakes and taking risks. This is clearly acknowledged in the business world yet we don’t give our non-profit leaders the same flexibility. Far too often CEOs and Executive Directors of charitable organizations live in fear of making mistakes because they simply don’t have the financial resources to take risks. I encourage you to allocate some portion of your charitable giving to funding innovative ideas. In some cases the ideas won’t pan out but unless we invest in these opportunities we will not give the leadership at our non-profit organizations the resources to “change the world”.
2. Tied to idea #1 is the notion of supporting strong leadership teams at organizations you are assisting financially. In the venture world we know that most management teams are prepared to trade off some cash compensation for equity but we never go out looking to hire the most inexpensive management team we can find. Often this is not the case in the non-profit world. Too many boards pride themselves on keeping CEO and ED salaries very low. I am an adamant opponent of this strategy and truly believe “you get what you pay for”. This doesn’t mean that organizations have to pay through the nose but it does mean that minimizing management salaries shouldn’t be a goal. Several of the charitable organizations where I have been board chair have significantly increased compensation for the head staff person and in all cases the organization has moved to the “next level” as they have been able to attract outstanding candidates. I encourage you to get involved with the organizations you are supporting financially by letting them know it is okay to use your contributions to compensate the staff team appropriately.

We all want to live and work in a healthy vibrant community. In order for this to occur we all have a role to play in supporting our non-profit and charitable entities. As we approach a new year, I hope you will take some time to think strategically about what role you will play in supporting these organizations in 2010.

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