Of Cowboys and Capitalists
The Ford Foundation convened a group of about 20 funders on December 6, 2024, to review recent findings and insights on intermediaries from Sampriti Ganguli, former CEO of Arabella Advisors, Bridgespan Consulting, and the Center for Effective Philanthropy. The group, which ranged from “Established” funders (those who support over fifty collaborative funds) to “Emerging” (those who participated in fewer than three collaborative funds) shared several ‘calls to collective action.’ We’ve summarized the insights and actions and welcome a conversation to learn more and share findings if you were unable to join our hybrid session.
Insights & Actions
Work Remains to Develop Both a Comprehensive Census of Collaborative Funds and Align on a Consistent Taxonomy of Terms. While most donors are familiar with collaborative funds and there is now a powerful database of self-reported funds and several comprehensive learning resources, including those developed by the Robert Wood Johnson Foundation, the Gates Foundation, and the Fund for Shared Insights, work remains to broadly educate ourselves about the successes, opportunities and struggles of collaborative funds within the context of the fragile ‘nexus’ of host organizations (fiscal sponsors, primarily) upon which funds rely for backbone operational services. It is useful to distinguish between "hosts" and "funds" as each offers different opportunities and challenges and requires different kinds of support (see below).
Donors Repeatedly Referred to the Broad Field Collaborative Funds as “the Wild West.” Many emerging funders experience the land of collaborative funds as the “Wild West,” meaning it remains a space of discovery and creative exploration for issues and tactics that are not the primary grant-making focus of their foundation. However, the allusion to the “Wild West” also reflected dimensions of loose governance. This begs the question, of course, that if the Land of Collaborative Funds is the Wild West, are donors the cowboys or the sheriffs? Without overengineering the metaphor, I think it’s fair to say that they play both roles, namely there are donors (like those who attended the session) who are interested in creating guidelines, standard practices, and consistency to increase impact and efficiency and reduce risks. Other donors, perhaps more in the ‘discovery’ phase of learning from (or initial funding of) collaborative funds feel less urgency around driving standards of performance and governance but are open to learning more.
Five Forces Will Continue to Drive Growth in Collaborative Funds Without Explicit Funder Intervention. These forces include those internal to the field-- 1)the growth of philanthropic assets at a faster pace than grantmaking capacity; 2) the desire to invest in system-level change which require hybrid capital beyond traditional 501c platforms and newly formed, 3) lean philanthropic institutions (often led by technology donors) with few staff but significant contribution potential. Forces external to philanthropy, including 4) distrust in institutions and 5) polycrises make collaborative funds a natural home for rapid response funds.
Psychological Barriers and Incentives Perpetrate Fund Proliferation. Attendees observed that collaboration in the field often means “work with me” rather than “work as we,” meaning that donors who are interested in collaborative funds are sometimes motivated by moving their institutional ideas and theories of change forward more than truly having grantee and community-led practices and programs.
The Infrastructure That Hosts Collaborative Funds is Less Known to Emerging Funders. The efficient functioning of collaborative funds depends upon a healthy nexus (connection) among host organizations, the funds themselves, and donors. However, each of these actors operates according to a distinct set of institutional ideas, information, incentives, and risk tolerances, leading to mistrust and misalignment. There is still limited understanding of the fiscal sponsors and various host organizations that serve as the operational backbone for most collaborative funds among funders and limited spaces (physical and virtual) where these communities interact with a ‘system-level’ view.
A Series of Market Frictions and Failures Characterize the Host Environment. Today, the enabling infrastructure is characterized by a series of market failures – namely, a vendor/client relationship that drives to lower cost and compromises service quality; an environment where hosts treat donors as clients, trying to meet donors’ needs and demands and shying away from disclosing or discussing their structural capacity challenges. The forced competition may lead to innovation, but it can also create an environment where there is little incentive to share information, solutions, or technologies across hosts, resulting in friction between the funds and their hosts, inconsistent user experience, and no ‘north star’ in terms of what great looks like.
Low Barriers to Entry Results in Even Greater Fund Proliferation. Donors themselves bear some additional responsibility for this market failure – given their penchant for new things and ideas and the “fund with me” mentality cited above, there are no, or very low barriers to entry for funds or hosts for that matter. The more of these that pop up, the more operations are fragmented, potentially putting service quality at risk. Fund proliferation has led to extreme volatility -- revenues for twelve of the largest hosts that house funds rose by 81% in 2020, and declined by 18% by 2022. Those vast swings have huge implications for staffing, morale, and capacity on the part of hosts. As funders start funds and there is no ability to manage the ‘demand side’ of the collaborative fund equation, the ‘supply’ side of hosting organizations will continue to face capacity pressures.
The Private Equity Market May Serve as a Model from Which to Learn. While there may be limited values or goal alignment between philanthropy and private equity, several donors shared that there was an organized effort several years ago to organize standard agreements between Limited Partners and General Partners that clarified roles and responsibilities as well as a self-organized effort to standardize reporting ahead of regulatory changes. It may be worth exploring whether this industry has some standards of practice that could apply to the burgeoning intermediary market.
Collective Action Requires Collective Knowledge Sharing. After more than two decades of experimentation and learning, donors agreed that the time has come to figure out a mechanism that codifies standard practices and encouraged the creation and broad dissemination of a “Blueprint for Operationalizing Collaboration” in the context of stronger host organizations. They also encouraged simplifying (and standardizing) reporting requirements; increasing transparency about costs and services; organizing a more intentional conversation about strengthening host organizations; and supporting current data collection efforts that allow for nuance across different types of funds and hosts.
Prioritize Practices Like Multi-Year, General Operating Support, and Institutional Strengthening. Donors walked away advocating the collective impact that could be achieved if funds made their default practices the provision of multi-year, general operating support and spreading the practice some funders use of encouraging grantees to use general support dollars for institutional strengthening, building reserves across this ecosystem.
If you would like to discuss the findings in greater detail, please feel free to reach out directly to Sampriti Ganguli.
