Philanthropy: Deploy. Don’t Donate. Part III

(Previously published on Medium)

We are living in an extraordinary time for philanthropy. Donor-advised funds now hold over $250 billion in assets that are largely liquid, tax-advantaged, and awaiting direction. Projections indicate that this balance is poised to surpass one trillion dollars within ten years.¹ The alternative avenues to deploy this capital are well-established: recoverable grants that recycle principal, program-related investments that absorb early risk, and patient equity that supports ventures until they reach market recognition. This is not theoretical; these strategies have been tested and proven effective.

But proof does not equal scale. Much of this capital remains inert, constrained not by imagination, but by lack of alternative blueprints for deployment. Impact investing has reverted back toward traditional benchmarks. Public budgets are increasingly under strain. Meanwhile, essential systems from energy and housing to scientific research, public health, and civic infrastructure, remain underdeveloped or unfunded. Donor-advised funds largely continue to operate on a manual cadence: one (or two) donors, one grant, one legal review at a time. This limits the ability of processes of deployment to be streamlined and scale. The use cases and structural advantages of doing so are clear. But without a formalized designed path to execution, these advantages remain illusory. To meet the systemic and formidable challenges of our time, we must build deployment frameworks that are standardized, repeatable, and swift. The time to act is now.

There are working examples. PRIME Coalition’s investment into RedWave, structured through DAF capital, helped close a round that brought in a sovereign wealth fund and ARPA-E.² Elemental Excelerator has combined grants and recoverable capital to support early-stage climate infrastructure.³ Yet these cases are exceptional, not the norm. These interventions were functional and helped unlock institutional follow-on capital. But consider if these processes scaled. Currently, there is no entity tasked with absorbing and replicating their architecture. No operating mechanism refines, replicates, or extends what has already worked.

In venture and private equity, scalable practices emerge by design. Capital is pooled and effective strategies evolve into standard practices. In this way, the infrastructure compounds.⁴ That system has a structure: general partners, limited partners, portfolio discipline. Donor-advised funds deployed through these alternative pathways have no equivalent. Perhaps they should.

While there are lessons to draw from traditional venture capital, the goal is to define a distinct role for donor-advised funds. This role would be based on market conditions and the need for capital in economic sectors that are underfunded. It would have its own cadence, platforms and tools, and decision models grounded in the unique advantages associated with donor-advised funds. Moreover, this philanthropic capital would be structurally capable of absorbing risk in part because it is not beholden to the market forces that drive venture capital investing. But theoretical capability without an investment infrastructure is not a sustainable way forward.

The tools exist. Standardized recoverable grants, program-related investments, equity sleeves, and pre-commercial term sheets. None of these need invention. What they need is normalization, repeatability, and templates with DAF-linked guardrails that remove the need to reinvent structure at every transaction.

That infrastructure would begin with thematic structures with clear sectoral mandates, such as grid modernization, modular housing, or compute infrastructure, each organized around a specific systems need. These are not funds in the private equity sense. They are deployment rails, purpose-built to aggregate intent and move capital efficiently into underbuilt domains.

We will need a shared language. A concise taxonomy of recoverable grants, concessionary loans, and patient equity, each linked to a clear charitable purpose. A common lexicon will reduce the likelihood that sponsors rebuild every deployment from the ground up.

Next, we set cadence. Capital moves on an agreed-upon pace, not by regulation or impulse. This includes fixed intervals, focused agendas, and transparent thresholds. Predictability and an evolving track record would promote participation. Perhaps the reason donor-advised funds are not more frequently deployed this way is because many donors simply do not know these pathways exist.⁵

Cadence requires visibility. This means that the process could benefit from an anonymized ledger recording what matters to future DAF donors: relevant financial instruments, investment sectors, and status. Patterns would appear without exposing donor data and allow sponsors to correct course in real time. Each completed deployment would return performance data to the accumulating taxonomy, eventually resulting in improved and more efficient investment as knowledge is shared.

None of this supplants commercial capital in these sectors. It builds a parallel track for philanthropic capital to claim stakes. This capital can wait, absorb risk, and exit only when systems are steady enough for markets to follow. With that track in place, philanthropic capital can recycle back into charitable-only coffers, and enable the distance between moral intent and execution to shrink.

Further:
¹ National Philanthropic Trust. 2024 Donor-Advised Fund Report. November 2024.
² MIT Innovation Initiative & PRIME Coalition. Donor-Advised Funds: An Underutilized Vehicle to Support Innovation in Science and Engineering. June 2017.
³ Elemental Excelerator. Annual Impact Report 2024. October 2024.
⁴ National Venture Capital Association. Private Equity and Venture Capital Playbook. 2023.
⁵ National Philanthropic Trust. Donor Perspectives: Awareness of Non-Grant Deployment Pathways. Survey Brief, July 2023.