Launching Your Own Major Project

Written for emerging and established philanthropists, this guide aims to spark
a donor’s sense of the possible—as well as the practical. It offers case histories and key questions as donors weigh the costs, benefits and risks of launching a major project.

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Introduction

Once upon a time, last century, donors gave mostly to existing programs at existing charitable organizations. Many waited to be asked before they made a gift.

In the 21st century, donors are more proactive. They often become the authors of their philanthropic work, beginning with an idea or an issue important to them and launching a specially designed effort to achieve their goals.

Philanthropic entrepreneurs thrive when building a new program or organization, or making a lead gift in a campaign they champion. But there are also funders who catalyze significant new projects without becoming donor-operators or becoming public spokespeople for their cause. In this sense, the key to a successful major project is largely dependent on the depth of a donor’s engagement.

This guide is part of the Philanthropy Roadmap series. Written for emerging and established philanthropists, it aims to spark a donor’s sense of the possible—as well as the practical. It offers case histories and key questions as donors weigh the costs, benefits and risks of launching a major project.

What is a Major Project?

What is a Major Project?

What makes a project “major” lies primarily in the eye of the donor. So let’s start with a caveat: any attempt at denotation here should be seen as illustrative, rather than prescriptive. Here are the parameters we used for this guide:

A major project is one in which the philanthropist is a lead donor or has given – or is investing – $500,000 or more.
Perhaps more important than the dollar amount of the gift is the strong sense of “ownership” donors usually have about their major projects. Significant, often personal, engagement is the rule rather than the exception.

Donors thinking about launching a major project would be well-served to think hard before diving in head-first. Here are some key questions to consider up front, such as:

What motivates me to do this?

Are there alternative options to launching the project, such as providing more funding to an organization doing similar things, or making a grant designated for this project to be run by an existing nonprofit? 

How much time and money am I truly willing to commit to this?

What is my timeframe for my commitment – do I have an exit strategy? 

What outcomes do I expect? 

And, as you answer those questions:

What is my vehicle for giving? 

Why Give in a "Major" Way?

Why Give in a “Major” Way?

Many people think philanthropy starts with a significant social or environmental need in the world. They are wrong. Philanthropy starts in the mind and the heart of the philanthropist.

In fact, commitment and sustainability in giving usually come only after a donor has identified her values and motivations.

A philanthropist’s clarity of purpose, therefore, plays a triple role: the giving operation becomes more effective, grantees find it easier to locate appropriate funding sources and philanthropic peers find it easier to network and collaborate.

This brings us to the “why” question. When it comes to major projects, this question sets the agenda, allowing donors to personalize the evolution of their philanthropic game plan. These questions may help you as you consider the reasons why you might support a major project.

Will your giving demonstrate leadership in calling attention to an issue or a certain approach to a problem? 

How clear are you on what you want to achieve and how you want to achieve it? 

What information do you need to find greater clarity? 

How your entry into this field impact other organizations and donors in this space? 

What balance should you strike between investing in key organizations and capacity building in the field? 

Is there anything out there that fulfills your vision or could be adapted to fulfill your vision?

Are you motivated, in party, by the opportunity to bring your own talents and know-how to bear on this project?
If so, how would you best augment a gift or investment? Through your financial acumen? Management ability? Community knowledge? Understanding of the problem? Your energy or passion? Identifying the ways in which you might contribute your time and expertise can offer insights into the source and the depth of your interest in the project.

How does the major project fit into your overall giving strategy? 

What role will you take? Will you be a public exponent, a networker among peers or a quiet partner? 

How long will this project last? How long will your giving role last?
(For more information on this, see our guide on Setting Your Time Horizon.)

Will you want to build an organization to support this project or would it be better to use existing infrastructure and services? 

Have you asked yourself what would be a deal breaker?
What if a very similar program is already in existence? What if other philanthropists have tried similar approaches and failed? While apparently negative, often this thinking has positive ramifications. Questions beget other questions. If similar programs failed, why weren’t they successful? How could they be changed to learn from past efforts? Such exploration can clarify your thinking and reveal new opportunities.

Your Philanthropy Roadmap

Your Philanthropy Roadmap

Finding the right major project always starts with you, the donor.

The title guide of this series, Your Philanthropy Roadmap, can be a useful planning tool for philanthropists who want identify their goals for giving and clarify their approach. The Roadmap focuses on five key questions:

  1. Why are you giving?
  2. What do you want to achieve?
  3. How do you think change will happen?
  4. How will you assess progress?
  5. Who will join you?

The How: Many Options

The How: Many Options

When it comes to major projects, the possibilities are myriad. Here is a list —suggestive rather than exhaustive —to start you thinking about the range of options:

A new 501(c)(3) nonprofit public charity

Some donors not only want to fund a project, they want to build the infrastructure that will keep it functioning. A 501(c)(3) is the garden variety nonprofit which must be “organized and operated exclusively” for charitable purposes and needs funds from other donors to achieve its tax-exempt status. As with creating a foundation, there are significant legal and organizational benchmarks to be met, not the least of which is forming a board.

A new project at an existing nonprofit

Many philanthropists want to empower an existing charitable organization —that they know and trust —to start a new project. The project will often use at least some existing infra – structure and management and will leverage the nonprofit’s reputation. This can save time and money. It can also limit the range of the project because the donor will depend on the existing nonprofit —its staff and board —to execute the idea.

A new private foundation

This is a common step for philanthropists, but requires significant input. Donors must make decisions on purpose, structure, management, governance and grantmaking. A new private foundation is indeed a major project all by itself. It can only succeed in reflecting a donor’s values and fulfilling a donor’s goals if the donor leaves a personal imprint on its DNA.

A new operating foundation

This kind of foundation is designed to carry out certain charitable activities beyond grantmaking. The IRS defines it this way: an operating foundation “spends at least 85 percent of its adjusted net income or its minimum investment return, whichever is less, directly for the active conduct of its exempt activities.” In other words, this is a 501(c)(3) nonprofit which is classed as a private foundation, and it spends most of its money on providing a service or conducting research or directly carrying out some other charitable program. Operating foundations may develop museums, libraries, zoos and research facilities.

Fiscal sponsorship at an umbrella organization

This option can give more freedom and control to the donor than trying to start a project with an existing charitable organization. An umbrella 501(c)(3) organization provides an operating platform, human resources, finance and a tax-deductible place to make supporting gifts. Donors do not control the fiduciary board that runs the entity, but they can guide where grants go and make decisions on staff and strategy. It’s a low-overhead option because the donor does not have to create a new 501(c)(3). (See the case history on Oceans 5 on page 22.) This approach suits shorter-term projects, but ongoing, legacy projects may benefit from a standalone legal structure.

A lead gift or a naming opportunity

Though these gifts seem very familiar to philanthropists, they present their own set of benefits and challenges. (See our guide Major Gifts and Naming Opportunities.)

An impact investment in a social enterprise

This new wave of philanthropic activity seeks to create impact through market forces and a privately owned or nonprofit organization. The risk management of such an investment is of primary concern. Tax ramifications will be different for a charitable donation. And donors should factor into their plans a time horizon appropriate for their investment, which may require many years to mature.

A philanthropic prize

These prizes are designed to spur competition to solve a technical, social or community problem. They can reap publicity, cut costs and engage a wide field of experts to innovate on a particular issue. A McKinsey & Company study found competitions that offered $100,000 or more in prize money have gained in popularity, tripling in aggregate value to $375 million in the ten years to 2009. The same study recommended that these prizes are most effective when three conditions are present: “a clear objective (for example, one that is measurable and achievable within a reasonable time frame), the availability of a relatively large population of potential problem solvers, and a willingness on the part of participants to bear some of the costs and risks.”

Risk Awareness

Risk Awareness

Any gift or investment carries some risk. But major projects, which are ambitious by nature, can hold a greater downside exposure. Additional donors may not be found to complete a university building. Income may not be adequate to sustain a social enterprise. An innovative program may simply fail to fire with its target population.

For philanthropists, the risk is not just financial. A donor’s reputation is also on the line. And the risk to reputation is not just philanthropic but professional. A high-profile role in a failed project can impact public standing and confidence in a donor’s judgment and professional prowess. Giving or investing in a private way can ameliorate this risk, but also nullifies the power that can come when a philanthropist stands up publicly for a project she believes in. (It’s worth noting that the risk also extends to the grantee in any major project.)

Yet, risk awareness is not meant to freeze the will of the philanthropic entrepreneur. Instead, it can be liberating— helping you avoid charitable dead-ends while reminding you that philanthropy relies on courage as well as generosity. Here, due diligence plays just as important a role in major projects as it does in any other aspect of giving.

If you plan to launch a new project with an existing organization, the best way to get to know the operation is by building a direct relationship with its leadership. Transparency and sound financial management are the result of conscious direction. Talking to other donors and those who use the nonprofit services can also give personal insight into how they run the operation and how they manage their finances. Examining an organization’s financial statements is also an important part of risk assessment. This task can be delegated to professionals, of course. Once a nonprofit’s budget and tax returns have been examined, key questions can be answered:

Does revenue match expenses?

Is the organization growing or shrinking?

How does it spend money or particular projects of interest?

Whether you are launching a project with an existing organization or creating a new one, it’s fair to ask for—or create— a business or strategic plan. When evaluating or developing that plan, it’s advisable to talk to experts in pertinent issue areas and review the quality of the concept and strategy. And of course, donors will want to examine any impediments to achieving financial sustainability for the project. A good understanding of a project’s finances—including plans for fundraising and/ or income generation—will give donors insight into a project’s ability to grow or remain solvent.

Throughout your process of considering taking on a major project, it’s worth including two questions in any risk assessment:

Could this approach be better than existing ones?

Does the approach have the potential to succeed? 

First Steps

First Steps

Much of the thought that a donor puts into a major project focuses on how the gift will be structured and how the project will be carried out.

Philanthropists must consider issues like budget, governance and staffing. And that is just for the giving vehicle. A host of other “how” questions surround the project itself and what structure and operational approach will best produce the desired results.

The prospect can seem daunting. But it needn’t be.

Three ideas can ease your mind even as they help you take the first steps in the process.

You don’t have to do it on your own.

Advisors both personal and professional can help you evaluate your options—and research scenarios—before you commit to a course of action. Partners can also be part of your planning whether they come from nonprofits, philanthropic peers, government, business or the community.

You don’t have to do it all at once.

A staged approach with built-in opportunities to re-think and adjust the plan can be very helpful. Informed flexibility is a hallmark of effective giving.

You can change your mind.

One way to think about these first steps is to say you will commit a relatively small amount of money to make sure you can make an informed and insightful decision about a gift of a much larger amount.

Beyond these ideas, determining the “how” of a major gift will evolve in different ways for every donor. Yet, it is still possible to trace a framework that defines the experience of many proactive donors:

Research

Develop a plan

Involve peers, supporters and stakeholders 

Be flexible and willing to learn

Use your own expertise but…

Recognize where you need help and get it 

Would it be best to take on staff or should I stick with contractors? How can I get other funders or investors to join me? Is it possible to build capacity and achieve impact at the same time? Is this project sustainable? How will I measure the effectiveness of the gift?

As most philanthropists know, the questions never stop. But it’s also worth noting that these questions are not only the best way to start your involvement in a potential major project, they are also the best way to ensure your giving is fulfilling.

To borrow from Socrates, “the unexamined gift is not worth giving.”

The best philanthropy is constantly in search for finalities—a search for cause, an attempt to cure the evils at their source. - John D. Rockefeller, Sr.

Moving Forward

Moving Forward

John D. Rockefeller’s major projects can appear remarkably ambitious from a 21st century perspective. Seeking a ‘cure’ by addressing the root causes for poverty, ignorance, racism and disease seems beyond ‘major’ and verging on the quixotic.

Yet, he set an example of thoughtful, effective and bold giving that many philanthropists have followed. The results include not only the Rockefeller Foundation, but the University of Chicago, Spelman College, Johns Hopkins School of Public Health and Rockefeller University. His strategy for major projects: balance the aspirational with the rational.

Large, high-budget projects require significant philanthropic consideration and preparation. But they also depend on inspiration and perseverance. Donors should not discount an idea simply because it presents new or difficult challenges. Neither should they rush to begin work on their philanthropic “dream” without significant research and planning.

As you consider launching a major project, it’s worth asking if you will be proud to have it become part of your legacy of giving. Imagine its success. Imagine your role in that success. Ask yourself if you, and your partners in philanthropy, will have the dedication and determination to stick with the effort through difficulties and over the long haul, in the way a parent is there for a child. If you have that kind of motivation, it’s not only worth asking why, but why not.