Rethinking Philanthropic Priorities During Downturns
Should high-net-worth donors rethink their charitable priorities when a recession looms? Should they reconsider where their dollars will go furthest during these times? For instance, it may make sense to reallocate philanthropic efforts to those nonprofits able to manage funding most efficiently and those that may even help counteract tightening conditions. To explore this idea, I talked recently with Rene Salgado, Founder and President, EmpreSomos, by the Global Alliance for Entrepreneurship and Business Development. EmpreSomos is a virtual business incubator and online learning and knowledge-sharing resource encouraging the emergence and sustainability of venture development, social entrepreneurship, and intrapreneurship in the Central American Region. Here’s what Rene had to say about donor priorities during a downturn.
As a smaller nonprofit, how do you make your organization attractive to high-net-worth donors during times of economic uncertainty?
Entrepreneurship is critical for economic growth and that’s especially true during difficult times. By creating new products and services, entrepreneurs stimulate new employment and address societal gaps, which ultimately drives economic development. Our mission is to build the entrepreneurial self-reliance of our beneficiaries – an objective close to the hearts of many wealthy donors who may be successful entrepreneurs or descendants of prominent creative minds. If given the opportunity, most of them would be inclined to give back by empowering others to become self-reliant.
EmpreSomos behaves with the same entrepreneurial approach we encourage in the new businesses we cultivate. We operate with extreme agility because of a very flat structure including our Board of Advisors that complements our team’s strengths and supplements our expertise. International volunteers help us create content, deliver programs, and implement projects. We use any cash donations very carefully to purchase necessary supplies and to outsource critical tasks. We rely on in-kind donations and partnerships to cover other essential needs. We any make any contribution go a very long way.
As a result, we’re attractive to philanthropists who realize that donating dollars alone is not the same as making a difference. Investing in the strengthening of entrepreneurial ecosystems in Central America in partnership with a lean, efficient, and results-oriented social enterprise will lead to far-reaching positive outcomes for that region and the United States: It will reinforce ethical behaviors, enhance economic opportunities for families and communities, and reduce forced migration
What relationship should nonprofit leaders have with wealth advisors to better guide clients’ philanthropic decisions?
Advisors help clients understand how to use a variety of financial management tools for philanthropic strategy. But they also need to match their financial knowledge with their clients’ values and interests. It’s not uncommon for clients to ask their advisors to recommend nonprofits that they might want to support financially. To do that, advisors need to stay current on what nonprofit options exist that might be a fit and which of those are most efficiently run.
Nonprofit leaders can help wealth advisors by helping them understand how their efforts match the advisor’s client base. A large proportion of wealthy people in the US are successful entrepreneurs who are willing to engage in "entrepreneurial philanthropy" -- oriented towards encouraging others’ entrepreneurship.
For EmpreSomos, I need to help advisors see how the development of an entrepreneurial ecosystem in developing societies – particularly those with a close relationship with the United States, like the Central American region – can have far-reaching impact, including on our domestic economy. It’s easy to donate to a large, nationally known nonprofit. But how far does your dollar really go with that? But what if that same dollar or that same million dollars went to change the entire way that a country’s workers looked at themselves and what they might create?
Among all the possible charitable donations a high-net-worth individual might make, why should they favorably consider social impact/social entrepreneurship-focused organizations?
Social impact entrepreneurship creates positive change addressing a pressing societal issue. It is about making constructive systemic progress rather than isolated individual impact.
EmpreSomos' work focuses on the Central American region and on making a systemic shift in how entrepreneurship is fostered – moving it from a top-down, centralized, government-managed approach to a distributed, bottom-up, entrepreneur driven one. The societal impact we have goes beyond Central America. Much of the forced, perilous, and risky migration journey reported in the U.S. news comes from the so-called Central American Northern Triangle. Opinion polls on Central American migrants show that more than sixty percent describe the lack of opportunities as a strong motivation for their migration. Meanwhile, the US receives virtually no such forced migration from a country like Costa Rica, which is in the same geographic area as Honduras or El Salvador. One variable distinguishing Costa Rica is its superior enterprising, entrepreneurial ecosystem and entrepreneurial culture, with entities, businesses, and entrepreneurs taking advantage of fourth industrial revolution developments. One important EmpreSomos objective is to help other countries in the region to have an entrepreneurial ecosystem as thriving as Costa Rica's.
Supporting social impact nonprofits that spark local entrepreneurship is a smart way for high-net-worth donors to make sure their contribution goes a very long way…especially at times when every dollar counts.