According to the Foundation Center’s 2014 Key Facts report, community foundations today have nearly $65 billion in assets, more than 9 percent of all foundation assets ($715 billion). As noted at a recent White House conference, over 700 community foundations operate nationwide. Yet while the first community foundation in Cleveland was founded in 1914, their present-day prominence is fairly new. As recently as 1990, U.S. community foundation assets totaled $6.6 billion. Even after adjusting for inflation, that means a six-fold increase in assets in two dozen years. The number of community foundations has also more than doubled over that period.
This is impressive. But community foundations now face growing internal and external challenges. The leading external challenge is familiar to all of us—namely, a stagnating economy marked by mounting inequality and poverty. In this environment, traditional grant strategies increasingly fall short. As F.B. Heron Foundation president Clara Miller put it, “The world has changed and so must we.” Philanthropy, Miller contends, must address structural economic barriers if “full livelihood, democracy and opportunity for all” are to be achieved.
The internal challenge, which gets plenty of attention among community foundations, but perhaps less from the rest of us, has to do with how foundation money is raised. Increasingly, this is done through donor-advised funds. With a donor-advised fund, money is parked at the community foundation, but the donor has considerable say over how those funds are spent. Community foundations once were virtually the only game in town, but now face growing competition for management of these dollars from investment firms such as Fidelity, Schwab, and Vanguard.
So, how do community foundations respond?
One option is to follow the donors. Emmett Carson, President of the Silicon Valley Community Foundation, the world’s largest, noted in the Stanford Social Innovation Review that his foundation’s aim is to “meet donor partners where they are and support their personal definitions of building community—locally, nationally, and around the globe.” As a result, the foundation has diversified its grantmaking: in 2013, $197 million went to Bay Area nonprofits, while $165 million was donated outside of the region.
Yet many others have chosen instead to “double down” on their commitment to build local community wealth, both to meet the challenge Miller raises, but also to differentiate themselves from investment firm competitors. This, in a nutshell, is the central theme of a recent Democracy Collaborative report. Titled A New Anchor Mission for a New Century: Community foundations deploying all resources to build community wealth, the report, authored by Marjorie Kelly and Violeta Duncan, profiles 30 community foundations with a combined total of $19 billion in assets (i.e. more than 25 percent of the field’s assets) that have moved in this direction. So, what is this new anchor mission and how does it work in practice?
As Kelly and Duncan carefully point out, the new approach is still in formation, but centers on using foundation assets to build community wealth by supporting local business development. Examples include support for worker cooperatives, enterprise accelerators, and regional economic development intermediaries. For example, the West Central Initiative in Minnesota offers loans for business start-ups and expansion, provides support to nonprofits and schools specializing in business creation and expansion, and targets grants to support workforce training and development as part of a broad effort to oversee, in partnership with the state, regional economic planning. In Cincinnati, a minority business accelerator, supported over the past decade by the Greater Cincinnati Foundation has led to the creation of nearly 2,000 jobs.
Central to the notion of a community wealth building anchor mission is linking mission-driven investment capital to the creative deployment of a wide range of tools. Kelly and Duncan point out that while low-cost capital is important, the primary challenge most often “is not the lack of financial capital. Rather, it is the lack of business skills and cultural support systems.” Kelly and Duncan add that community foundations, to be effective, need to embrace a broader range of strategies beyond grantmaking, including acting as a convener, recruiting partners, providing loans, fostering policy initiatives, launching pilot programs, and promoting donor co-investment.
As Angela Jones Hackley, acting president of The Community Foundation for the National Capital Region, observes, beyond the individual projects, the adoption of an economic anchor mission involves, critically, a change in ways of thinking. It requires, says Hackley, “shift[ing] your mindset from a poverty-reduction frame to a wealth-building frame—not just providing direct services, but how you really set people on a path to take ownership of their lives.”
(Image credit: Democracy Collaborative)