Teaching Note for Good Ventures: the Power of Informed Decisions

CASE: SI-124 TN DATE: 02/26/15 TEACHING NOTE FOR GOOD VENTURES: THE POWER OF INFORMED DECISIONS In 2010, Cari Tuna quit her job at the Wall Street Journal to work full-time on developing a giving strategy for herself and her husband—Facebook co-founder Dustin Moskovitz. In May 2011, the couple created the philanthropic foundation Good Ventures. Tuna made transparency and knowledge sharing core components of the foundation; creating a blog to report on the foundation’s activities and learnings. Good Ventures co-funded projects so that the foundation could gain insights into the decision-making and evaluation processes of funders with large, full- time staffs, while also encountering pre-vetted, promising giving opportunities. Through what she called “learning grants,” Tuna was able to shape Good Ventures’ focus areas while actively grantmaking. Tuna was inspired by charity evaluator GiveWell and began to learn from, financially support, and eventually partner with the organization. To improve the grantmaking research process, Tuna and GiveWell created a rigorous “funnel” approach using shallow, medium, and deep investigations into potential issue areas to determine what areas had the greatest need, had proven solutions, and were relatively underfunded. This collaboration eventually became the Open Philanthropy Project, an effort to choose particularly promising focus areas for large-scale philanthropy, make grants, and discuss the process and results publicly to increase the quality of information available about how to give effectively. Position in Course This case is intended for use in a course on philanthropic innovation or grantmaking. The teaching objective is to explore the importance of strategy, incessant learning, knowledge sharing, and evaluation in philanthropy. This case highlights the evolution of a new foundation, led by a dedicated young philanthropist, who is approaching their giving as a learning journey. The case raises questions about how to immerse oneself in a new industry and learn to make grants collaboratively and effectively, and how to scale and sustain that giving. Supplementary Readings This case is part of a portfolio of 10 new cases centered on philanthropy, technology and innovation. This set of cases (along with previous social impact cases produced by Laura Arrillaga-Andreessen) can be found on the Laura Arrillaga-Andreessen Foundation’s website (www.laaf.org). Copyright © 2015 by the Board of Trustees of the Leland Stanford Junior University. This note was prepared by Lecturer Laura Arrillaga-Andreessen and the Laura Arrillaga-Andreessen Foundation for the sole purpose of aiding classroom instructors in the use of Good Ventures, GSB No. SI-124. It provides analysis and questions that are intended to present alternative approaches to deepening students’ comprehension of the business issues presented in the case and to energize classroom discussion. Teaching Note for Good Ventures: The Power of Informed Decisions SI-124 p. 2 • Richard L. Fox and Dorian Bon, “The Lifespan of a Private Foundation: Perpetual or Limited,” The Estate Planning Journal, September 2011, 7 pp. • Paul Brest, “A Decade of Outcome-Oriented Philanthropy,” Stanford Social Innovation Review, Spring 2012, 6 pp. • Katie Smith Milway and Amy Saxton, “The Challenge of Organizational Learning,” Stanford Social Innovation Review, Summer 2011, 7 pp. Assignment Questions 1. What were the advantages and disadvantages to Good Ventures of pursuing co-funding opportunities and learning grants? What lessons were learned from these practices? a. Timing for Class: 10 minutes for class discussion 2. What are the pros and cons of conducting analysis at the issue level rather than on individuals or non-profit organizations? a. Timing for Class: 10 minutes for class brainstorming and discussion 3. What specific influences did the relationship with GiveWell have on Good Ventures’ giving strategy? How might this relationship evolve in the future to have even greater social impact and philanthropic influence? a. Timing for Class: 15 minutes for class discussion and brainstorming Analysis 1. What were the advantages and disadvantages to Good Ventures of pursuing co-funding opportunities and learning grants? What lessons were learned from these practices? Advantages of Co-Funding • Benefits of Previous Work: Good Ventures was able to benefit from previous research conducted by the other funders with which it was partnering. This created insights around the way a diversity of funders did landscape mapping, intervention strategy evaluation, research on potential grantees, grantmaking contracts etc. • Increased Learning: Co-funding provides an opportunity to learn from other foundations’ processes. For example, Good Ventures sought to partner with foundations that had full- time staff that focused on evaluation—so Tuna could learn from their specific expertise and experiences. In addition, Tuna targeted co-funding opportunities that were expected to generate meaningful data over a limited time horizon so that she could measurably prove whether or not the partnership was productive and created social value. • Signaling Effects: Collaboration provides an opportunity to signal to other funders. Traditionally, one respected foundation granting to a nonprofit indicates to other funders that said nonprofit is worthy of additional resources and attention. As such, having multiple organizations fund a single non-profit may multiply this “signaling effect.” Teaching Note for Good Ventures: The Power of Informed Decisions SI-124 p. 3 Similarly, as a nascent-stage foundation, by partnering with more established organizations, Good Ventures’ credibility within the philanthropic community increased as it indicated its professionalism and desire to not reinvent the social change wheel. • Simplicity: Aspects of the funding process, such as the evaluation of a nonprofit’s programs, due diligence, site visits, phone conversations, contracts, and other reporting activities may be simplified by combining funders. If structured efficiently, co-funding may reduce the overall work a nonprofit has to complete to receive the equivalent, or possibly a larger, size grant from a single funder. • Strategic Implications: By receiving funding from a pair or group of funders, it reduces the pressure on the nonprofit to align itself with the theory of change of a single foundation. • Future Collaboration: With each co-funding partnership, Good Ventures expanded the network of people and organizations it could potentially work with in the future. • Total Funding: Nonprofit programs might not be fully funded or funded at all if Good Ventures had not contributed to the grant. Disadvantages of Co-Funding • Lack of Control: By co-funding an initiative, Good Ventures voluntarily gave up control of a portion of the grantmaking process in order to partner with another organization. • Trust and Accountability: Good Ventures, through a co-funding partnership, places their trust in another organization’s staff and processes. At the same time, Good Ventures is held accountable for another organization. • Conflicting Priorities: A co-funder potentially has different priorities, strategies, and theories about an issue than Good Ventures. This conflict of interests could potentially lead to “mission creep” if the co-funder is not closely aligned with Good Ventures’ grantmaking strategy. • Complexity: A co-funding relationship creates additional lines of communication that if not managed properly may burden the nonprofit. The co-funding partners could struggle to reconcile their distinct grantmaking processes, which might produce convoluted reporting standards or unclear success metrics. Advantages of Learning Grants • Greater Total Amount of Grants: Learning grants are small enough that Good Ventures can fund numerous nonprofits at once, increasing what the foundation can learn about an issue area. Fewer, larger grants would limit the amount of organizations Good Ventures interacts with, and thus could learn from. Teaching Note for Good Ventures: The Power of Informed Decisions SI-124 p. 4 • Potential for Deeper Relationships: The approach of funding an organization with a learning grant, building trust over time, and then deciding whether or not to fund the organization further creates a deeper relationship, and most likely, a more informed grantmaking decision. Through a learning grant, Good Ventures is able to spend an entire year with a nonprofit, rather than the limited points of contact a funder is typically afforded during a shorter due diligence process. • Lower Risk: In addition to the potential for deeper relationships with nonprofits, learning grants lower the risk of making an unsuccessful future gift because Good Ventures knows much more about an organization than they would through a typical due diligence process. Sharing what they learn also mitigates some of the risk for other funders. • Exposure for the Nonprofit: Grantees got exposure to Good Ventures, GiveWell, and their associated networks through the learning grant process. Other individuals and organizations could become aware of the nonprofit’s work through the public knowledge- sharing aspects of the learning grants. Disadvantages of Learning Grants • Reputational Risk: Due to the transparent nature of the grantmaking process, if the learning grant is not well received, it could damage the reputation of Good Ventures as well as the nonprofits they fund. • Impact Risk: Not all nonprofits will feel comfortable with the

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