You have likely read about the dramatic rise in giving to Donor Advised Funds (DAFs), and while there are arguments to be made about their overall benefit to philanthropy, they are now a reality and a major funding opportunity for your organization.
But because of their structure, and likely as a feature, it is difficult to gain insights into individual DAFs or the behavior of their donor(s). If you can find out who has one, you still likely do not know how much is invested in a DAF or how much and to what other organizations a DAF is contributing.
To gather more insight into DAF donor behavior, we suggest looking at another giving vehicle that acts comparably and draws a similar audience while having more available data—the private foundation. The Foundation Source recently released its 2022 Report on Philanthropy (covering data from 2020-2021), and here are a few takeaways that shed insight into private foundations, and likely correlate with DAF donor behavior.
Total dollars granted from the 948 private foundations studies increased from 2020 to 2021. This was largely due to the giving of the largest foundation ($50-$500M), while giving from foundations with $1-$50M was flat to slightly down. Increases in asset values accounts for some of this growth, but the foundations analyzed gave 7.2% of their assets (above the 5% required). This was driven primarily by smaller foundations ($1-$10M) which were the most generous, giving 8.9% of their assets.
Despite giving more dollars, private foundations gave to fewer organizations and shifted away from urgent needs driven by the pandemic. Giving to human services and public/society benefit both fell by 2% from 2020-2021 (largest sector decreases), likely due to granting fewer emergency funds that were given during the pandemic. The overall number of gifts from foundations with over $10 million also decreased and foundations gave more restricted grants in 2021 than in 2020.
Although most private foundation giving occurred at the end of the year (35% in November or December), there is also a “summer spike” with 10% of gifts being distributed in June.
The whole report is worth examining, but here are a few takeaways to keep in mind in light of the trends illustrated above.
Even though these are foundations, there are still people behind them and it is important to build those relationships. This is even more important as competition for grants is increasing and donors are becoming more focused in their giving.
Focus on the long-term vision of your organization. While donors spread dollars around and turned to the emergency needs brought on by the pandemic in 2020, they are now becoming more focused with their giving. Communicate the future needs of your constituents and how your organization will address them.
Do not assume gifts are made at the end of the year! Again, this is where having a personal relationship can be helpful. Ask when the best time for a gift request is, or what can make your proposal the most competitive.
One final note—this data is from 2020-2021, two years that saw strong market performance. As we know in 2022, most portfolios and assets decreased in value. And because foundations have been generous over the past two years, many have excess grant carryovers that could cause their giving to dip below the 5% threshold.
When we finally see the data from 2022, it would not be surprising that foundation giving takes a bit of a dip because of these two factors. But just like individual giving, it will NOT disappear, making it all the more important that you explore, engage, and steward these donors in 2023!