Last week, we began to follow Coursera’s new MOOC “Beyond Silicon Valley: Growing Entrepreneurship in Transitioning Economies” and wrapped-up the first lesson on the role of government.
This week, we tackle another topic, with the Role of philanthropy and donors: why do they get involved, how different are they from invests and governments? US laws allow companies to give money to non-for profit association, usually through foundation. The Cleveland foundation, one of the first set up in the US, used to help more the artistic scene.
Role of philanthropy: patient donors who can match funds
In Ohio, alongside the Ohio Third Frontier program covered last week, a new foundation, the Fund for our economic future, was set up to support an economic rebirth of north-eastern Ohio, with $80m in funding.
A local startup, Wireless Environment, got $400k of funding through Jumpstart, an organism which gets parts of its money from companies, just like a foundation. “When I came here, I noticed that many foundations were giving money to stable communities, such as museums”, says its CEO. Dorothy Baunach, from Nortech, adds that it’s not easy to convince foundations to put money in companies: “we need people to have jobs to get money and attend the wonderful museum or orchestra funded by foundation”.
Founded in 1914, the Cleveland Foundation is the largest community foundation in the US. Ronn Richard, its CEO, says the role of the foundation in the economies is now key. The Fund for the economic future is actually funded by some 50 members – other foundations, the Cleveland University, and Jumpstart for instance. When companies felt away, the foundations were called to fill the void.
Number of Fortune 500 companies from Cleveland
Dorothy recalls us that even if the foundation funds what companies are not more able to do, there’s still the Fund Matching requirement. In this sense, the Fund for our Economic Future acts more as a first-mover, but it never acts alone, which “forces”, in a way, the construction of the ecosystem.
Donors like foundations are also more patient, compared to traditional investors, but also compared to governments, which operate in short cycles, due to elections. The support of entrepreneurship could then be more sustainable. This “long view” is an asset, but is must be kept alive, and adapt to the new necessities of one’s time.
Donors also include foreign government, through their international aid programs (USAID being probably the most visible. French have the AFD and a few others). NGOs can be acting as donors too, as well as corporate foundations.
To wrap-up, we can see that donors are more patient, they often act out of the scope of governments (even if the latter can coordinate the efforts). Next lesson: intermediary organisations.