Unrestricted Money for Philanthropy-Supporting Organizations: A Case Study

MacKenzie Scott has showered the nonprofit world with nearly $8.6 billion over the past year-plus. One surprisingly big beneficiary? Philanthropy-supporting organizations.

Some 32% of Scott’s total grants went to philanthropy and grantmaking infrastructure, according to a Bloomberg analysis. Of the $4.3 billion in gifts whose amounts have been disclosed, $1.2 billion went to such organizations—not to mention some additional portion of the remaining half.

Granted, Bloomberg included grants to groups that are not generally considered PSOs, such as Scott’s many gifts to the nation’s United Ways, not to mention lumping in recipients like the East Bay Fund for Artists and the Mann Deshi Foundation, which aren’t typically compared to PSOs like CHANGE Philanthropy or Funders for LGBTQ Issues.

Nevertheless, it’s clear PSOs have been a big winner. Scott, who is a novelist, gave to so many such organizations that it’s unreasonable to list them all here. Gifts spanned not only groups focused on specific identities and issues, but also those concerned with grantmaking practices and specific donor groups.

What impact might all those large, mostly unrestricted gifts have on the sector? A new report offers a potential preview.

Over the past six years, the Seattle-based Satterberg Foundation has given four regional philanthropy-supporting organizations on the West Coast no-strings-attached gifts of up to $1 million annually. Last month, the foundation released a report, “Making the Leap,” outlining what all that money—and trust—made possible.

The 43-page document catalogues the funding, collaborations and partnership that this sizable investment in philanthropy’s community builders and connectors brought about.

From disaster response to advancing equity, the funding has facilitated a wide range of work by the four recipients—Catalyst of San Diego and Imperial Counties, Northern California Grantmakers, Philanthropy Northwest and SoCal Grantmakers. All four are regional groups, unlike any of Scott’s otherwise wide-ranging grantees, but the comparisons and lessons are still apt. Let’s take a deeper dive.

How the program came about

There’s an echo of Scott in how Satterberg’s program got started. The death of the family’s patriarch William Helsell, who bequeathed his estate to the foundation, required the Satterbergs to rapidly scale up giving—just as Scott chose to do after her divorce from Amazon founder Jeff Bezos left her with a $38 billion fortune.

“Overnight, the assets went from $4 million to $400 million,” said Sarah Walczyk, the foundation’s executive director. “With a rising payout and not fully staffed, it’s like, ‘what can we do now?’” she said. The foundation decided, among other things, to give big gifts to the groups that help organize and rally philanthropy. The program is now winding down as the foundation shifts its focus to other areas, but Satterberg is still actively funding all four organizations.

The process has changed Walczyk’s perception of PSOs. Before joining Satterberg, she thought of such organizations as simply networking spaces, places to connect with grantmaking peers. That has changed. “No, this is where action and movement and organizing is really truly happening,” she said.

According to Walczyk, two things were particularly integral to the program: A freedom to take risks, and Satterberg’s trust and collaborative approach. “Rather than them saying, ‘Hey, did you meet the deliverables?’ It was, ‘how are you making change?’” she said.

How the funding made an impact

The report lays out the impacts of Satterberg’s funding in four buckets: equity, public policy, government partnerships and community support. Examples from each area show the organizations’ impressive range.

For instance, community leaders in Los Angeles gathered with help from Southern California Grantmakers to produce a major report, “No Going Back,” which I covered a year ago. It offers a bold and wide-ranging policy roadmap, bolstered by data, for addressing systemic racism in the region.

In Washington, 36 funders pooled more than $2 million in a fund organized by Philanthropy Northwest to support Census outreach by community groups. The fund also partnered with local leaders in a successful push for $15 million in state funding for Census 2020. And to respond to the COVID-driven food crisis, Philanthropy Northwest partnered with Washington state and major food banks to create a fund that has raised more than $16 million.

Back in the Golden State, Northern California Grantmakers brought together funders and the state government to channel more support to areas given little attention by philanthropy, with a focus on Fresno, San Joaquin and Kern counties, as well as the Inland Empire.

The grants also helped a decade-old idea finally come to fruition: Philanthropy California. The partnership brought together the three California groups—Catalyst, NCG and SCG—in a more coordinated manner than ever before, with each leveraging their respective specialties: impact investing, disaster response and policy.

“Like so many efforts to combine forces and move toward a greater good, the ability to set aside time and energy towards that has really been a direct result” of the Satterberg funding, said Megan Thomas, president and CEO of Catalyst of San Diego and Imperial Counties. “Together, we’ve been able to leverage all of that so each of us benefits.”

How the grants played out in San Diego

Thomas has had a front-row seat to the grants’ impact: She was hired in 2015, thanks to Satterberg’s funding. Over those six years, Catalyst received $1 million annually. Most of that sum has gone to launching projects with partners.

One of those was the Women’s Empowerment Loan Fund, which brought together $850,000 in investment capital and $150,000 from philanthropy to support women of color entrepreneurs. As part of another project, San Diego became one of two innovation labs for the ImPower Initiative, a 10-year impact investing partnership between the U.S. government and private groups that channels support to under-resourced neighborhoods. Catalyst also used funds to work with local ethnic chambers of commerce and to make regional leadership more representative.

In addition, the funding allowed Catalyst to launch a Social Equity Collaborative Fund, an equity-oriented regranting program that gave community members decision-making power. It has given out more than $2 million. Thomas said the fund was invaluable in modeling a community-centric form of grantmaking for its members—and sharing the lessons it learned along the way.

Catalyst invested less than half of the funding it received from Satterberg into its own operations, according to Thomas. The influx of cash has been transformative. The group, which changed its name from San Diego Grantmakers as part of the process, has reinvented how it operates, she said. It’s a trajectory common to all the recipients, according to the report.

The grants were central to “transforming our organization from one that serves philanthropy to one that serves the community in partnership with philanthropy and other investors,” Thomas told me. “We’ve evolved from an organization that is responsive, in the sense of trying to meet the needs expressed by our members, to one that is proactive in trying to understand the issues in San Diego and Imperial counties, and working with our members” to address them.

Not all agree, but time will tell

The notion of lavishing money on organizations that help foundations do their work is not without its critics.

In July, Tim Schwab argued in The Nation that Scott’s gifts “buttress the wealthy, professional class of advisers, consultants and media outlets that advance and defend the special interests of Big Philanthropy.” He singled out two recipients—Independent Sector and United Philanthropy Forum—for their opposition to proposed changes to donor-advised funds.

However, as my colleague Philip Rojc observed, that critique both paints a diverse group of organizations with an absurdly broad brush and gives PSOs little credit for the vital role they play in pushing philanthropy to change for the better.

This report offers a distinct counterpoint to critiques of PSO support. It presents a wide range of lessons and specifics on the multifaceted capabilities of PSOs when given freedom and funding. With PSOs all over the country receiving big checks from Scott, perhaps it also gives us a glimpse into the future.

Clarification: This article has been updated to clarify the amount of Satterberg funding that Catalyst invested in its own operations.

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