Foundation Woos New Donors With Its Rigorous Style

When Robert Kaplan, a former vice chairman of the Goldman Sachs Group, started to think about formalizing his giving, his initial plan was to create a nonprofit venture-philanthropy organization to help social entrepreneurs start new organizations.

Then he heard about the Draper Richards Foundation, which had been created by two pioneering venture capitalists in Silicon Valley, from one of his students at the Harvard Business School, where he is now a management professor.

As he learned more about the foundation’s more-than-money approach, which combines unrestricted grants with intensive business coaching for promising leaders of young nonprofits and met with the philanthropy’s founders and grantees, Mr. Kaplan had a change of heart.

Instead of starting his own foundation, he donated $6-million to the fund, which then became the Draper Richards Kaplan Foundation: “I had not intended to join someone else, but I realized this is better than anything I would do.”

Mr. Kaplan is one of 15 new donors who, together with the philanthropy’s founders, have contributed nearly $30-million to expand the work of the Menlo Park, Calif., foundation, attracted by its rigorous, business-minded approach and enviable track record betting on social entrepreneurs.

Picking Winners

During the foundation’s first decade, it made grants to 42 organizations, including standouts like Kiva, Room to Read, and Grassroot Soccer.

With the new infusion of money, the fund expects to be able to work with 38 new entrepreneurs in the next five years.

Founders William H. Draper III and Robin Richards Donohoe modeled the philanthropy’s approach to that of venture-capital firms. The foundation provides three-year, unrestricted grants of $300,000 and intensive business assistance to social entrepreneurs running nonprofits that are less than three years old. During that period, a foundation staff member serves on the grantee’s board of directors.

In a nod to the foundation’s venture-capital lineage, it refers to the money that Mr. Draper and Ms. Richards Donohoe contributed to set up the philanthropy as its Founders Fund.

The new money committed to expand the foundation’s reach is called the Springstep Venture Fund.

And, just like in venture capital, the founders say they plan to keep seeking new rounds of money for the philanthropy.

Rather than making grants to specific causes, the foundation places a premium on supporting strong leaders, new ideas to tackle tough problems, and organizations that have the potential to expand their work widely.

“The venture-capital business is about making lots of different investments,” says Ms. Richards Donohoe. “You work hard on them all, but you never quite know where the winners are going to come from. Part of the fun is being involved in a wide variety of projects.”

An Easy ‘Yes’

When the foundation decided to seek additional donors to expand its work and promote its engaged style of giving, it met its original fundraising goal of $15-million much more quickly than it expected, so the fund set its sights on $25-million. Officials at the foundation estimate that they reached out to roughly 200 prospective donors.

“It was a very easy ‘yes,’” says Reid Hoffman, a venture capitalist and co-founder of the professional social network LinkedIn, who saw the foundation in action when he served on Kiva’s board of directors with the fund’s executive director.

Mr. Hoffman, who donated $1-million, says he was attracted by Draper Richards Kaplan’s ambition in looking for new ideas with the capacity to grow.

“I care about that large extent of change more than whether it’s in education or poverty alleviation or health care or the environment,” he says. “I care about all of these causes, but it’s which of my tools can create the most game-changing impact.”

Sharper Giving Skills

For some donors, making a gift is a chance to sharpen their own skills as philanthropists.

Like many of the new donors, Tom Crotty, managing partner of Battery Ventures, in Waltham, Mass, is a venture capitalist. He first got to know the foundation as a board member of Grassroot Soccer, serving at the same time as the fund’s representative to the board. Mr. Crotty and his wife, Shari, donated $1-million to Draper Richards Kaplan through their family foundation.

By contributing to the foundation’s overall work, the couple can take advantage of the research the fund’s staff conducts and look for organizations they’d like to support on their own, says Mr. Crotty. “They’re kind of a first-line of filter for us,” he says. “Then we can figure out if there’s something that resonates for us that we can get involved with.”

To date, the couple’s giving has “been a little bit haphazard, just based on what comes at us,” says Mr. Crotty.

“Working full time and my wife raising our kids, we haven’t really had the bandwidth or the time to sit down and really form a great mission for our foundation yet,” he says. “Our investment in Draper Richards Kaplan will help us focus and figure out what our foundation will start to look like.”

Buffett’s Example

One of the biggest questions the foundation had going into the campaign was whether donors would be willing to give to a foundation that others had started, says Christy Remey Chin, a director at Draper Richards Kaplan who says she was one of the doubters.

“I thought we needed to change the name of the foundation in order to raise money,” she says. “I did not think anyone was going to give us money, regardless of where the grants went, because some other people’s names were on the door.”

Ms. Chin credits the example of Warren Buffett’s gift to the Bill & Melinda Gates Foundation and the selflessness of their donors for proving her wrong: “These are donors who don’t need their name on a building.”

She says the value of the foundation’s fundraising campaign extends beyond the contributions it garnered. While only a small number of people contributed to the foundation as a whole, many more said they would like to stay in touch about grantees in a particular field or geographic region, says Ms. Chin: “We’re more connected as a result of having pushed to meet people.”

While foundation officials are excited about the prospect of extending its reach, they say holding onto the elements that have made the fund successful even as the number of organizations it supports grows will be a challenge.

Leaders of the grantee organizations often cite the relationships they’ve built and the advice they get from one another as two of the most important benefits of being a Draper Richards Kaplan grantee.

The foundation seeks to foster those ties with an annual gathering and quarterly conference calls that many entrepreneurs continue to participate in even after the fund no long supports them.

It took 10 years for the total number of grantees and alumni to reach 42, and the plan is to add another 38 entrepreneurs in the next five years.

“There’s a lot of power to be garnered there—a lot of sharing of knowledge, a lot of support that can be provided,” says Anne Marie Burgoyne, a director at the foundation. “But on the flip side, it’s easy to get lost in a crowd of that size.”

Plans for Growth

Going forward, she says, the foundation will have to find structured ways to build connections that might have been forged naturally in a smaller group. The fund is also considering how best to create opportunities for its new donors to interact and learn from one another.

Although the foundation is just starting to jump into its second round of financing, Mr. Draper and Ms. Richards Donohoe are already looking to the future.

“We’re having so much fun with this that there will definitely be fund after fund,” she says. “By having a larger portfolio through the years, all under the constraint of making sure that we keep the quality, our hope is just to provide more and more social change to the world.”