On Becoming a Better Tech Funder

As part of the Yelp Foundation’s efforts to build meaningful relationships with grantees, board chair Miriam Warren (left) met with staff at Hot Bread Kitchen, a nonprofit social enterprise that creates economic opportunity through careers in food, in East Harlem.

When I became board chair of my tech company’s charitable foundation, I had spent the previous seven years leading our international expansion efforts. In that role, I was used to being the first person on the ground in places where I often didn’t know the customs or language, much less the operating norms. As we prepared to launch in 30 different countries, my team found that the folks closest to the ground were the ones who held most of the critical information we needed to move forward. That’s why we usually started by talking to them.

I tried a similar approach when I found myself at the helm of the Yelp Foundation in 2017. As I began to learn more about philanthropy and considered how to evolve the foundation’s giving strategy, I listened keenly to nonprofit executives and staff who worked to secure funding themselves. And the more I listened to them, the more I realized that tech philanthropy tends to think a lot of itself, but not nearly enough about the needs of the organizations it hopes to help. Over the past few years, I have been fortunate to have numerous, forward-thinking funders and nonprofit veterans share their valuable time and thoughts with me. From these conversations, I’ve gleaned some fundamental lessons on how to be a better funder that may benefit others, especially new tech funders, who find themselves at a similar starting point.

My first learning was that we had to stop running contests. For several years, we attempted to extend our foundation’s reach by giving modest, four-figure grants annually to nearly 200 nonprofits across more than 60 US cities, all via a contest where the public could vote for their favorite organization online. But as Kevin Starr sums up well in his bid to get rid of contests: “Too many of these contests and prizes seem like they are more about the givers than the getters anyway.” Our peanut-buttering approach proved an administrative nightmare, and impeded our ability to respond to grantee’s needs or build meaningful relationships.

Eliminating contests and narrowing our focus allowed us to invest more time and money in grantees who were working locally in San Francisco, Chicago, Phoenix, New York, and Washington, DC—cities we know and care about, and where most of our US employees live and work. Knowing staff members by name, understanding the challenges their organizations are facing, and being able to respond to their needs (including making relevant introductions to new sources of funding and potential board members) are all part of our process of “going deeper” that’s now much more possible with 15 grantees. This narrower focus also allows us to make the grantmaking process more equitable by doing our own due diligence, relying on publicly available sources to get the majority of the information we need. By the time we reach out to grantees, it’s to tell them we are awarding them a five-figure grant—and they don’t have to compete or complete any other make-work to get it. Respecting nonprofit leaders’ time is the first step toward balancing the inherently unequal power dynamic between grantors and grantees.

Funders should also strive to do the following:

1. Make the grant application as simple as possible. As with contests, the typical grant process is often unnecessarily taxing on potential recipients. The Hewlett Foundation’s Madison Initiative recently streamlined its grantmaking process, and in their article outlining the changes, Daniel Stid and Jillian Misrack Galbete share a number of insightful and replicable ideas, including paring down the information funders ask of grantees, and accepting write-ups and budgets grantees have already prepared for other funders. In the tech sector, we don’t believe in make-work, and we shouldn’t create it for nonprofits. In short, don’t ask for time or data you don’t need.

2. Make funding unrestricted and give multi-year grants. In his article on the power and pleasure of unrestricted funding, Kevin Starr asserts that unrestricted money makes an organization work smoothly, enables innovation, and provides fuel for growth. He also notes: “If you don’t think an organization is smart enough to use your money well, don’t give them any.” Similarly, Paul Shoemaker reminds us that “unrestricted absolutely does not imply unaccountability” and challenges all grantors to “provide 100 percent unrestricted funding.”

There is also benefit in sustained funding. In their article detailing practical steps toward nonprofit financial resilience, Rebecca Coker, Neela Pal, and Miguel M. Salinas write that “projecting a budget over multiple years gives an organization much-needed visibility into its financial future.” For seven consecutive years, the Nonprofit Finance Fund’s State of the Sector report found that most nonprofits had less than three months’ operating reserves on hand, while nearly 10 percent had less than 30 days. As the culture of plenty has fostered innovation in tech, unrestricted and multi-year funding ensures that nonprofits can improve existing programs and develop new ones.

3. Expect general and administrative costs. Just as in for-profit work, getting a product or service out the door requires more than just the parts themselves. Does your company run on 10 percent overhead? Funders tend to ask nonprofit administrations to be as lean as possible, but then ask for so much in return—grant reporting, digital presence development, general availability. All this contributes to what Ann Goggins Gregory and Don Howard have coined the “nonprofit starvation cycle.” They suggest that “funders should help meet grantees’ identified infrastructure needs by making general operating support grants.”

4. Get the money out the door when you say you will. Nonprofits plan how they will use grants as soon as funders promise them, but they can’t make crucial hires or order materials for campaigns until they have cash in hand. Expedience allows organizations to move quickly and maximize impact (just as funders in tech prefer and often expect). Wire transfer is the fastest, safest way to send cash and spares grantees days of mailbox monitoring.

5. Join a nonprofit board. Joining a nonprofit board is a good development experience for all private-sector employees, but especially for funders. It immerses funders in the challenges of the social sector and the experiences of nonprofit professionals, equipping us to be the best funders we can be. In their piece, “Resetting the Grantor-Grantee Relationship,” Matthew Forti and Dave Peery show how “simple tweaks in mindset and behavior can go a very long way.” Attending regular board meetings, reviewing nonprofit financials, and interacting with folks running nonprofits day-to-day have the potential to do the same.

As more tech companies earmark funding for philanthropy, tech funders ought to consider their own origin stories and the role unrestricted, multi-year investments played in enabling their innovation. Tech funders have the ability to provide the same runway for nonprofits by removing unnecessary funding obstacles, which will pave the way for important, positive change in the social sector and society at large.

Read more stories by Miriam Warren.