Shaking the Foundations

A Foundation of One's Own

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. Setting up a foundation "can be a daunting and complex task," says Jeff Nixon, managing partner at Interactive Capital Partners, a venture-banking firm in Rowayton, Conn. "So I shied away from it."

Doug Mellinger changed Nixon's mind. Mellinger, a former software-company CEO, was interviewing to become a partner at Interactive two years ago and told Nixon about a business he was working on that would automate, and consequently bring down the price of, private foundations. "The idea was to systematize the private foundation so that it could be created very rapidly and democratize it so that it would be available to more high-net-worth individuals," explains Mellinger. Interactive Capital invested in the start-up, and Mellinger became its chairman and CEO.

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.

 PREV  1 | 2 | 3 | 4 | 5 | 6  NEXT