The Mysterious Case of the Disappearing Foundation

Spend-down philanthropy is a high-stakes game.

Picture this: Freddy Mercury struts across the stage, belting out “Another One Bites the Dust.” The crowd goes wild, feeding off the electric energy of loss turned into defiance. That’s precisely the vibe the philanthropy world is experiencing as a growing number of foundations choose to close their doors and spend down their endowment funds.

It’s a bittersweet symphony of emotions, where grief and joy dance together. For nonprofits, the vanishing act of these funders can trigger anxiety and uncertainty; and for the foundations themselves, it can lead to exhilarating liberation and, at times, friction with their counterparts.

So what’s behind this seismic shift in the philanthropic landscape? Why are more funders trading in the long game for a high-stakes, short-term strategy? Let’s dive into the mysterious case of the disappearing foundation.

The Upside: Unleashing the Full Potential of Philanthropy

Imagine a world where foundations stop hoarding wealth and start making it rain for nonprofits. That’s the new philanthropy landscape we’re witnessing, as an increasing number of funders adopt a venture capital mindset and spend down their endowments on high-impact, high-potential projects.

The old 5% rule? Increasingly a relic of the past (and in Canada, the new minimum amount that you must give away). Foundations are now placing big, bold bets on innovative ideas with massive scalability, throwing open the gates and democratizing the funding process. This shift is long overdue, as global challenges become increasingly urgent and nonprofits struggle to find the resources they need to stay afloat.

In this brave new world, foundations have the chance to create transformative change, acting as catalysts for growth and innovation. They’re breaking free from the constraints of traditional models and seizing opportunities to make a real difference in people’s lives.

The Downside: Losing Leaders in a Changing Ecosystem

With great power comes great responsibility, and the shift toward spend-down philanthropy is not without risks. Dependable, long-term funding is the lifeblood of nonprofits, and the disappearance of this support could leave them scrambling to adapt.

As organizations chase big investments, they may find themselves focusing more on quick wins than on long-term, systemic change. The pressure to deliver results in a short time frame could hinder their resilience and capacity, ultimately undermining the very impact these foundations hope to achieve.

And what of the seasoned veterans who have spent decades nurturing the nonprofit ecosystem? As their voices fade into the background, will we lose the wisdom and expertise they have to offer?

The Verdict: A Balanced Ecosystem Demands Equity

Here’s the bottom line: options are good. I’m optimistic about the evolution of philanthropy, but I’m not dogmatic about it. To truly maximize impact, we need a diverse range of funding models, from traditional endowments to bold, spend-down strategies.

For those who stick to the old ways, I challenge them to examine their motivations and consider how they can contribute to systemic change. For the trailblazers spending down, I urge them to share their knowledge and help nonprofits navigate the new funding landscape.

In the end, it’s all about one thing: driving lasting change. To pull that off, we need an ecosystem that’s as diverse as the challenges we’re up against. We need philanthropic rockstars ready to roll up their sleeves and get down to business, working in harmony to create innovative solutions and game-changing impact.