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Challenging The Big Funders: Philanthropy Startup Targets Billionaires And Their Giving

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At the top end, philanthropy is a disproportionate business. The largest funders, the big foundations, the massive fortunes and their grant officers enjoy a position of power over nonprofits and social entrepreneurs that's similar - if not more dominant - to the venture capital and startup equation. And while that's not likely to change any time soon, one new player on the U.S. philanthropy scene is aiming to level the playing field just a bit, with reporting on how foundations give their money away - and ratings on how well (or poorly) they do so.

Inside Philanthropy is the brainchild of David Callahan, co-founder of the progressive think tank Demos and author of The Cheating Culture. The site provides news on big philanthropy and giving trends, in-depth profiles of major donors in several key sectors (like tech givers, Wall Street donors, and supporters of big education and healthcare causes), and a new ratings system for foundation program officers - which rates their performance, not the nonprofits they fund.

The audacious goal that may have fundraisers nodding their heads in agreement: "speak truth to money."

A serial social entrepreneur himself, Callahan is convinced that the huge fortunes still mainly on the sidelines of American philanthropy will change the size of the pot available to nonprofits and social entrepreneurs in coming years. "The philanthropy we've seen in recent years is nothing compared to what's coming," he says.

Inside Philanthropy, still in its early stages, is positioning itself to become an important source of information to the fundraising side - a place Callahan (who also wrote Fortunes of Change: The Rise of the Liberal Rich and the Remaking of America) understands through his years of fundraising for Demos. As foundations and major philanthropists - especially the latest generation of younger, activist donors - demand ever higher levels of reporting, transparency, and demonstrable "impact" in their grant-making, the playing field is wide open on the other side. Who rates the grantmakers? How good are big-time program officers, anyway? Do the billionaires really know how to change the world? Are big fortunes and their foundations any smarter and more effective than the rest of us?

Callahan and his team are looking for the answers, and providing a service to nonprofits; the site works on a subscription model. We sat down with Callahan for an interview to discuss the goals of Inside Philanthropy and the playing field.

[Disclosure: David consulted with me early on in his planning process for Inside Philanthropy, and I provided some advice and ideas to the startup. The arrangement was informal and collegial, and there was no financial involvement.]

Tom Watson: You launched Inside Philanthropy as a semi-outsider to the world of organized, "big" philanthropy - though you certainly had some experience on the grant-seeking side of things. What have you learned so far? What don't most people understand about big foundations and the boldface names of American philanthropy?

David Callahan: I'm continually blown away by the sheer amount of money waiting in the wings and how even major philanthropists like George Soros and Pierre Omidyar have barely scratched the surface in giving away their fortunes. Bill Gates is a great example. He's given away more money than anyone, but he keeps getting richer is now sitting on $79 billion. The philanthropy we've seen in recent years is nothing compared to what's coming.

Watson: One feature of Inside Philanthropy is the ratings system for foundation grant officers. I haven't seen this before, and I'd like to hear about what you've gleaned about how grant-seekers rate professional grant-makers? Any surprises?

Callahan: Given that everyone from dentists to dry cleaners get reviewed on websites like Yelp these days, the only wonder is that foundations had yet to be touched by this form of crowdsourcing before we came along. It's yet one more way that philanthropy has been insulated by the forces "disrupting" every other sector. That said, people have been pretty reluctant to write candid reviews of funders, no matter how many times we tell them they can anonymously "speak truth to money." You're not afraid of losing a grant if you dis your dry cleaner; people are more skittish here.

Watson: Can the traditional and stubborn unequal relationship between those two camps - those who have the money, and those who need it - be somewhat equalized in the philanthropic shark tank?

Callahan: Whoever holds the checkbook will always have more power, no matters what happens. But crowdsourced feedback and much closer media scrutiny can help foster a more humble and responsive philanthropic sector. To date, funders have largely had a free pass, with nobody really looking over the shoulder and zinging them when they treat grantees badly or invest in stupid stuff. That's got to change, like it's changed in every other sector in U.S. society, and this is a big part of our mission.

Watson: In some of the profiles your team creates of major philanthropists, the Buffett-Gates Giving Pledge comes up quite a bit, but I think you'll agree results so far - actual giving results, not pledges - is somewhat uneven. Having now profiled dozens of the top philanthropic fortunes, any thoughts on the Pledge and its efficacy?

Callahan: The Giving Pledge is mainly symbolic and I don't fret much about who hasn't signed on or whether those who have are ponying up yet. Most large fortunes are destined for philanthropy either way. Why? Because you can't really give away five or ten (or forty) billion dollars to your kids and, as well, many of these folks shudder at the thought of the IRS grabbing a big chunk through estate taxes. With or without more people signing the Giving Pledge, an avalanche of money is coming. The Forbes 400 has a combined net worth of $2 trillion and an average age of 65. Things will get very interesting over the next few decades. That's especially true since discretionary government spending is going to be falling even as unprecedented philanthropic resources come on the scene.

Watson: It strikes me that so much of the commentary on giving today focuses on technology, crowd funding, social networks, grassroots giving, mobile philanthropy, new models and the like - yet you're using a website and database to put a little more sunshine (for a reasonable fee from those who can use the data) on the old school stuff, the staffed foundations, the formal world of giving. I guess that's because it's where the biggest pile of money is - but I assume you're also attracted by the story there?

Callahan: Yup, we're fascinated by the big money. And we're especially focused on tracking the emerging billionaire philanthropists who'll be creating foundations bigger than Ford and Rockefeller. Already you can see the philanthropic pecking order getting turned upside down by new money. That's just a hint at things to come.

Watson: Who's the most mysterious billionaire you've come across so far?

Callahan: The whole Mars family is a big black hole to us right now. Together, they have $60 billion and yet very little track record of giving. Where's all that candy money going to end up? We'll be watching.