‘Big bet’ philanthropy is smart bet philanthropy

It’s less about the dollar amount than about investing in organizations at a catalytic moment, giving entrepreneurs unrestricted and general operating support along with appropriate oversight to grow, and helping them leverage additional resources from other philanthropies, corporations and governments with an eye towards sustainability. That is, we use a business investment lens.

There has been much talk in the field about ‘big bet’ philanthropy, putting large sums of money into high-risk and potentially high-reward initiatives. In the last ten years, PSF has found that some of its most successful bets are less about the dollar amount than about investing in an organization at the right moment, giving entrepreneurs unrestricted and general operating support to grow, providing appropriate oversight and helping them leverage additional resources from other philanthropies, corporations or government funders. To do this, The Pershing Square Foundation invests in change makers from the lens of a business investor. This kind of ‘smart bet’ philanthropy often involves incremental learning and growth.

Get in early (timing matters)
We have attempted to support entrepreneurs at a catalytic or transformative moment in the life of the organization, typically at an early stage, to give them what Amy Bach at Measures for Justice has called the “rocket fuel” necessary to grow to the next stage.

Supply funds that are large relative to the size of the organization
Being ‘bold’ doesn’t necessarily require large amounts of money in absolute terms. At PSF, we have taken bets with initial funding that are large relative to the size of the organization. In 2008, for example, we made a first grant of $500,000 to One Acre Fund, which was then an organization with an operating budget of $1 million a year, focused on the needs of smallholder farmers in Kenya. In 2010, we supplied $1 million in support to Living Goods, then a $3 million organization. The following year, in 2011, we provided Social Finance, then a $1.5 million organization, with an additional $1.5 million in operating support. This pattern has been true for a number of successful organizations in our portfolio including myAgro, Measures for Justice, CareMessage, and Watsi.

Give grantees run room – and trust
Although we try to work closely with grantees throughout the funding lifecycle, financial support typically takes the form of unrestricted growth capital for general operating needs. We have learned from our grantees that they appreciate this trust and freedom as it allows them to invest in systems, infrastructure, talent, and innovation – their organizations’ needs as they determine what those are. Furthermore, our general operating support is typically multiyear, to help ensure that grantees can focus on building their businesses, rather than scrambling to fundraise.

Incremental learning and growth
“Multi-year” does not mean, however, that the entire financial commitment is or should be made up front. Our most successful partnerships have evolved over time, as we learn alongside our grantees, what works and what requires course correction. This typically means smaller ‘get to know you’ grants followed by larger commitments. The instances where we have made large, well-intentioned, but sometimes unconditional and full commitments up front, often in fields we were new to, have been less successful.

Sustainability and leverage
Although we often fund organizations over several years, we intend and encourage them to identify new and additional sources of revenue to sustain their operations and continued growth. Most organizations in PSF’s portfolio go on to leverage our early investment with internal sources of revenue and new resources from other philanthropies, companies, or government sources.