Some new directions in charitable giving

Here are some thoughts I have about setting up a totally new structure for charitable giving.

• The mission is starting with a $100M endowment, create and run a "value-added" charitable foundation that changes the world in a positive way by either solving important problems that have global ramifications or leading the way by setting an example of how something can be done. A secondary goal is to show what can be done with a modest amount of capital that is carefully deployed. By "value added" we mean more than just a funnelling of funds to worthy causes. We will lead in new and innovative ways. And we will make decisions quickly (within 6 weeks).  The key ideas are:
  • solving big issues with global impact
  • speed of decision making
  • leverage of capital (such as startup investment and running a charitable buinsess that generates funds to invest in other charities)
  • value added beyond just money (such as helping scientists we support with funding, collaboration, business advice, incubator space, sponsoring conferences, etc.).
• The foundation would have several different divisions:
  • venture capital (such as what we've done with Targesome)
  • charitable donations (similar to to Howard Hughes Medical Institute in sponsoring people for several years, rather than projects)
  • charitable businesses (that help charities and raise money for our donations and investments, such as the charity match website)
  • management of other people's funds
• One division of the foundation as a venture capital company where partners are compensated like regular VCs (measured on  return on investment), but instead of being restricted to a specific industry (such as high tech or medicine), the restriction is: investing in areas which provide a high level of global charitable impact (such as curing cancer). 90% of any  capital gains (on startup investments of charitable, but for-profit companies) is returned to the foundation and used for other VC grants and donations, and 10% is split amongst the partners. So partners can make as much money as VC companies. That means, we can attract top talent to evaluate investments and help provide business advice while also contributing to society in a very positive way.
• We will make it easy for companies like Targesome by providing an incubator (admin, legal, payroll, help setup their website, PR consulting, etc.) support until the science is finished and the company can be spun out into it's own space with it's own admin staff. So projects like Targesome could get started immediately and easily. We invest and get an equity investment, and provide space and facilities.
• We require all our investments to collaborate and share results with other groups. This is unusual from a scientific view (where people are highly competitive) and from an investment view (since others can leapfrog), but makes total sense if you are more concerned about solving the problem [while this would be a great goal, unfortunately, it conflicts with the return on investment objective and would negatively impact the ability for the company to get future rounds of financing so unless we can think of a way to do this, unfortunately, i think this must be dropped)
• We do both investments in startup companies (ie, the "with upside" donations), as well as sponsoring scientists (similar to HHMI). If we sponsor scientists, we will get rights to patents (we have to structure this carefully) so we get more money to throw at doing good things. MIT, for example, has done a great job monetizing intellectual property.
• We will professionally manage other people's charitable funds of $1M or more endowment who have a cause that fits within our mission, but neither the time or expertise to devote to give wisely (see www.giveback.org for an organization that does only this). One nice aspect of this is that a donor can easily pull out his endowment funds at any time if he is unsatisfied and transfer to another supporting org or donor advised fund. So all the donor loses is time (subject to our investment returns which could be a big gain or loss). And a donor can contribute only a portion of their funds to this, e.g., leave 90% in your existing foundation and transfer 10% here. Need to decide whether each donor can decide each issue independently or treat it as a single limited partner pool (I prefer the latter). Note: if donor's funds go into the VC pool, do we cash him out at his pay in price and allocate the stock to the other donors, or return the stock instead of cash
• We are unlike a VC firm in that:
  • we evaluate only plans that have a global impact charitable goal
  • limited partners aren't getting rich, our non-profit foundation is, so the better we do, the more money is available for other charitable endeavors
  • we help a company write their business plan (many VCs do this)
  • we help a company get started with space, etc. (some VCs do this)
  • we invest in non-profits and for-profits: as equity (for profit) or straight grants (non profits)
  • we may focus in areas that VCs typically avoid or are currently out of favor, e.g., medical investments
  • we raise money from donations and from our own activities (VC, and charity match project for example) as well as endowment
  • we do fewer deals (since we don't have a lot of capital to throw around)
• We are unlike traditional institutions like American Cancer Society (ACS) because:
  • there is upside in our donations if we invest equity
  • we fund scientists with a set of goals, not specific projects
  • we have an incubator to help ideas get launched
  • we require collaboration and going public with info
  • you get a funding answer in days
  • we can provide assistance even if outside the incubator (regulatory advice, etc.)
  • we fund a wide range of REALLY COOL STUFF! anything with charitable global impact and a high probability of "breakthrough" is what we do, especially the stuff that is "unfundable" through traditional channels
  • our decisions are not made via committees because committees are conservative and don't have the time to personally meet the recipient; we use committees to help us do dilligence, but the final decision is made by one person
  • we have a wider view of success (cure or ROI); so there should also be a financial reward to a company that cures cancer, but may go out of business
  • we require collaboration (once the idea is protected) [probably have to drop this]
  • we own the IP (a bit tricky to do, but can be done)
• we invest equity (ACS couldn't have invested in targesome)!
• we seek ways (such as charity match website) for generating revenues ourselves
• we organize a conference every 6 months where our funded organizations can cross pollinate by describing their work (and we invite people outside our own organizations too to spread the impact of the research, e.g., other cancer researchers, etc.)

• Examples of the type of breakthrough donations we are looking at now:
  • Cancer cure (targesome)
  • Arthritis cure (weight bearing cartilage regrowth!)
  • Ligament tear repair by having the body do it (this is really incredible!)
  • Gene therapy breakthrough
  • Diabetes treatment to stop diabetes before it starts
  • A treatment for macular degeneration that reverses the effects
  • A replacement for paint (e.g., house, car) that is environmentally friendly rather than toxic
• Issues:
  • Size of our staff? 20 people max?

• Staffing:
  • CEO
  • charitymatch project (10 people)
    • project lead
    • a documenation person who can also assist with the other websites (Targesome) as well as our own site promoting cross communication between our donees and the medical community, etc.
    • other product marketing, marcom, engineering, qa staff
  • venture capitalist: to run the incubator, sit on boards, negotiate deal terms, help our investments
  • political activist
  • fundraiser (to help out causes who lack sufficient development resources such as spacewatch)
  • admin assistant
  • MD to evaluate grants and coordinate reviews by review board and summarize recomendation
  • research assistant to help in evaluating non-medical grants

Links
Steve Kirsch home page
Kirsch charitable giving home page