The company, called Foundation Source, primarily targets households with at least $5 million in net worth. (Of such households, fewer than 4% have their own foundations.) Sold through financial institutions, the product is essentially a "foundation in a box." Customers just add water in the form of a minimum $100,000 donation. Foundation Source sets the whole thing up in less than 24 hours for $2,500. (It costs as much as $20,000 to start a traditional foundation.) After that Foundation Source assumes all the administrative headaches -- dealing with excise-tax payments, IRS filings, year-end donor receipts, and federal regulations -- for a fee ranging from .25% to 1% of the foundation's assets.
A private foundation has the same air of exclusivity as a private jet. Unless you've got a million bucks to plunk into one and a staff of experts to maintain it, you probably assume it's out of your league.
But Foundation Source's strongest selling point is its technology. Donors access their foundations through a Web site, where they can track their assets, make donations online, print out receipts, and research charities using a database of more than 700,000 nonprofits. Nixon recently set up his own foundation benefiting a local Shakespeare theater, the Red Cross, and a church-operated nursery school. In the future he'll be able to designate set amounts of money to be given away by various family members. "I like using it to pull the family together," he says.
"The market for this kind of product is huge," says Bill Brownson, managing director of philanthropic services for Bank One in Columbus, the first organization to use Mellinger's services. Brownson says that Foundation Source will help make philanthropy "easier, faster, and less complicated" for his customers. And while it may sound counterintuitive for financial institutions to encourage people to give money away, the alternative is worse. "Help investors give today lest their assets walk away," cautions a report by TowerGroup senior analyst Matt Schott, who argues that assisting investors with charitable giving is "one of [a financial institution's] most significant and growing opportunities."
Although Mellinger is selling to banks, brokerages, and accounting and law firms, his sights are squarely on the end customer -- of which he himself is a prime example. The CEO's own foundation, which he is moving to Foundation Source, has contributed significant amounts to youth and economic-development programs. "We have a social revolution going on that will have an unbelievable impact on this country and the rest of world," says Mellinger. "There's a vast number of entrepreneurs and corporate executives in their forties and fifties who are saying, 'I've made more money than I could ever spend. I'm interested in trying to solve something.' "
Mellinger's goal is to help fledgling philanthropists find that "something," by identifying the best vessels for their passions. Education, he believes, is key, so Foundation Source developed a database that includes not just the names, addresses, and descriptions of 700,000 charities but also reports on the charities' performance. "We'll leverage the research of nonprofits, and we recently hired a chief philanthropic officer," Mellinger says.
The Foundation Source Web site will also include information on philanthropic consultants, requests from charities that need volunteers, and chat rooms where members can share information and even pool their resources for collective giving. "My ultimate goal is that we'll help identify problems of common interest to our members and that we'll bring people together," says Mellinger.
At press time, Foundation Source had just two financial partners: Bank One and TD Waterhouse Institutional Services. But Mellinger expects that 8 to 10 more partners will sign on by the end of the year and says the company could be a $100-million concern in five years. Page Snow, chief officer of institutional planning at the Pew Charitable Trusts, doesn't discount him. "Once you set up a foundation, you're going to have strong philanthropic instincts," she says. "There's an incentive to think hard about results." The market, Snow continues, is more receptive than ever to new ways of giving.
Branches from the Giving Tree
If Foundation Source is a vehicle for attracting donors, Social Venture Partners represents a proliferation of donors creating their own vehicles. SVP was never elitist, but when Paul Brainerd started it, five years ago, he didn't dream that its appeal would extend far beyond Seattle's young and wealthy high-tech community. Today SVP has 1,040 members in 20 cities, from Calgary to Austin to Pittsburgh to Boston. Each affiliate was founded by locals who were willing to put up both their money and their time. If there's no SVP where you live, you can easily start your own and expect a warm welcome into the fold.
Originally, SVP looked a lot like a traditional giving circle, in which donors pledge money to a common fund and then participate actively in grant making. Typically, participants agree upon a mission: SVP's was to support existing nonprofits that had good track records in children's and education issues. The cost of entry was $5,500 a year for at least two years.
