Many of today’s private and family foundations are run by 21st-century philanthropists who embody a new class of donors. They made their fortunes as entrepreneurs, business leaders, and professionals; they are relatively young, independent, driven, tech-savvy, and highly skilled. And they approach philanthropy as they do their businesses, seeking to focus their skills, smarts, and passions to make impactful charitable investments. These philanthropists run many of the 80,000 private and family foundations in the US today. They may not be billionaires—snagging headlines like Bill and Melinda Gates, or Oprah—but they have the means, vision, and drive to make a real difference.

Meanwhile, there are well over one million nonprofits in our country that search continually for new sources of funding. Private foundations are an important source of funding because they make larger gifts and may continue to provide support for several years. But finding new donors in the foundation community is extremely costly and inefficient—few donors have the time to read a grant proposal—and so nonprofits spend on average 25 cents (or more) of every dollar raising money from this source.

In fact, the need for nonprofits to gain the attention of 21st-century philanthropists has only increased over the past two years of recession and choppy financial waters. While the nation’s largest institutional foundations scaled back their gifts in line with shrinking endowments, we have witnessed smaller and mid-sized foundations step up to the plate, and increase both the number and amounts of their grants. These foundations increased giving by 9.3 percent in 2009 and 17.8 percent in 2010.

Fortunately, the growth of the Internet opens new avenues for collaboration between foundations and nonprofits. But while the trend has already begun, we have yet to realize its full potential to bring these two groups together. Three notable changes are critical to the changing landscape.

First, the Web makes it possible to bring rich content about charitable needs directly to a donor’s desktop, where they can review it privately and anonymously. Two leading sites that solicit small gifts from individual donors, DonorsChoose and Kiva, take this opportunity right down to the level of $100 classroom purchases and $25 personal loans. Both sites offer a nuts-and-bolts view into charitable needs that has never before been possible on a grand scale. You literally know where every dollar will go.

Only now is this model becoming available for nonprofits that seek much larger grants from private foundation donors who need much more information and insight about larger, complex, longer-term projects.

Second, the Web gives foundation donors a place to learn about philanthropic causes and to share their own experiences and best practices with other, like-minded donors. Where their philanthropic universe was once limited to friends, family, and other personal relationships, it is now possible to tap into a much larger universe of experts and peers. And while these foundations don’t necessarily pool their funds, donors do respect the opinions and due diligence of their peers. They also seek to be informed by experts and online sites that evaluate the work, efficiency, and impact of potential grantees.

Finally, the newest and still-developing aspect of online giving is the ability to match foundations and grantees as cleverly as online retailers recommend books, films, and music. Innovative new sites will make it far more efficient to cut through the clutter so that donors can zero in on projects that match their foundation missions and personal interests. As a result, more capital will flow to the most effective organizations, and the cost of fundraising will come down dramatically.

Today, the challenge facing most nonprofits is to break through the privacy veil that surrounds private and family foundations. Many of these foundations are run from the kitchen table and few hang out a shingle on the door. Most donors will never read a paper proposal, no matter how elegantly (and expensively) crafted. It’s not that they don’t want to evaluate an organization’s performance and select grantees as thoughtfully as they research investments. It’s simply that few have the time, board support, or paid staff to do the work. And the few that do have found that measures of social return on capital are not nearly as well developed or as clear as they are for financial investments.

Only if we fully embrace the transformative power of the Web will we realize what’s possible. New sites will supply the answers to 21st-century philanthropists’ questions, provide a forum for collaboration, and effectively match donors with causes. They will expand the reach of nonprofits into the foundation community (while respecting that community’s privacy) and lower the cost of fundraising. And they will offer donors more varied, creative, and impactful giving opportunities.

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