Google’s $1 billion for-profit philanthropy is the latest example of a changing charitable landscape that increasingly brings together funds from corporations, foundations, the public sector, and affluent donors to find creative cures for social ills. In the new philanthropic landscape, distinctions are blurring between for-profit and not-for-profit solutions.
When Google’s initial public offering raised billions of dollars in capital in 2004, many market observers wondered how the Internet search engine could possibly find useful ways to invest the huge influx of cash. Soon after, the company’s founders pledged that a sizable portion of the windfall—as much as $1 billion—would be devoted to philanthropic causes under the banner of the newly formed Google.org. Later would come perhaps the biggest splash of all: while part of Google.org would be a nonprofit foundation, the larger part of the philanthropy would be a tax-paying, for-profit venture.
As a for-profit enterprise, the thinking goes, Google.org can achieve philanthropic aims that it cannot achieve as a nonprofit. It can invest in other for-profit ventures, for example, that are working on environmental technologies that would reduce dependence on fossil fuels. “We’re not doing it for the profit,” Google.org CEO Larry Brilliant told The New York Times in September. “And if we didn’t get our capital back, so what? The emphasis is on social returns, not economic returns.”
Recently, in a philanthropic strategy very similar to Google.org’s, British airline and media magnate Richard Branson pledged $3 billion in investment in green technologies to help combat global warming. Tellingly, he announced his intentions at the Clinton Global Initiative, an effort launched by the former president to encourage public-private partnerships to deal with public health, poverty, climate change, and ethnic conflict.
In recent years the traditional firewall between profit-seeking enterprise, the public sector, and the nonprofit world has dissolved, the result of a changing philanthropic marketplace where more complex and creative solutions are sought for more complex problems.
Some of the driving force behind this new creativity comes from a new dedication to sustainability. A successful commercial enterprise that also pays social dividends might be considered a self-perpetuating philanthropy. After an initial investment, it no longer needs donors; it funds its own operations. Charitable dollars can then move on to the next project. “You make the investment today so you don’t have to make the investment tomorrow,” says Bruce McNamer, president and CEO of TechnoServe, a Washington, D.C.-based nonprofit that has been helping launch commercial ventures in the developing world for almost 40 years.
TechnoServe is comprised of business consultants who advise aspiring entrepreneurs, helping them identify business opportunities, structure their management staff, scale their operations, and locate investors. Working primarily in rural areas, TechnoServe finds that thriving private enterprise inevitably impacts a community’s social welfare, fueling improvements in health, education, and general well-being. Last year, in recognition of their shared approaches, the nonprofit arm of Google.org awarded TechnoServe a $500,000 grant to fund a business-plan competition in Ghana.
In its earlier years, the TechnoServe model was once a hard sell to donors, who were wary of funding a nonprofit whose primary purpose was to empower business people, McNamer says. Not anymore. “There was a little bit of discomfort on the part of some donors of putting philanthropic dollars into for-profit enterprises: ‘Why should I support people so they can get rich?’ It turns out that getting people rich in these countries is critical.”
For donors like Google.org, Richard Branson, or those that fund TechnoServe, there is another benefit to the for-profit model. Donors increasingly want accountability for their dollars, quantifiable means of assessing success, says McNamer. When you invest in for-profit enterprise, you get measures like jobs created, profits, and businesses created, which demonstrate clearly the impact of the investment.
Charitable Distinctions Continue to Blur
“Every enterprise is a social enterprise to me,” says Clara Miller, president and CEO of the Washington, D.C.-based Nonprofit Finance Fund, pointing to the beneficial impact of many for-profit companies. For many philanthropic efforts, there was never much use in building a wall between for-profit and nonprofit approaches. Many nonprofits have been developing profit centers within their organizations for years. Nonprofits have to be creative in revenue generation, says Miller, because nonprofits scale differently than their for-profit counterparts. When a for-profit company expands its mission, it does so with the expectation that revenue will increase at a greater rate. But when a nonprofit expands, its revenues get stretched over a larger operation.
Share Our Strength, a Washington, D.C.-based anti-hunger nonprofit, was so successful in creating revenue-generating enterprises within the organization that it spun off its know-how into a for-profit consultancy. The result, Community Wealth Ventures, Inc., advises other nonprofits on building revenue. In a for-profit scenario, “ultimately it’s unrestricted revenue, the hardest revenue for these organizations to get,” says Alfred Miller Wise, Community Wealth Ventures’ president, “and they can use it to provide additional services, or to invest in themselves to build their own capacity.”
One of the ways Community Wealth Ventures helps nonprofits is in facilitating corporate partnerships, where a corporation donates to an organization and the company’s employees sometimes volunteer in the mission, helping boost company morale and its image in the community. Over the years, Share Our Strength has raised $200 million, roughly half of which has been through corporate partnerships.
Navigating Mission and Money
When Google.org announced its for-profit model, there were critics suggesting that in lean times, the main business might raid the revenues of the philanthropic arm. Indeed, there is a caveat that comes with the increased freedom in philanthropic thinking. “Mission and money can be seen as two ends of a spectrum,” says Wise, speaking about the role of profit-making within nonprofits, “and having real clarity as to where they want to be on that spectrum is essential.”
But the potential benefits far outweigh the risks. The new openness in funding approaches isn’t just about finding new, untapped sources of revenue. It’s about cross-pollination among sectors—for-profit, government, and nonprofit—that in the past were segregated efforts. By piecing them together in new combinations as needed, philanthropy can draw from the strengths of each for the task at hand. This creativity in approach ultimately yields greater efficiency and the maximization of donor dollars.
Daniel Morton is a freelance writer based in Washington, D.C.
Copyright 2006 Community Foundations of America
Used with Permission