- Philanthropy is facing a crisis with the tax-and-spending bill targeting wealthy donors and the social safety net.
- Iconiq, the wealth manager that counts Mark Zuckerberg as a client, gets entrepreneurs to band together to tackle global issues like climate change.
- Iconiq s Matti Navellou told CNBC that the firm has gotten $900 million out the door in less than a decade and described how the process works.
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Even if tax reforms may discourage affluent people from contributing, a top investment firm is developing a novel philanthropic strategy that may encourage large contributors to take immediate action.
To boost charitable giving, Iconiq Capital, which began in Silicon Valley with clients like Mark Zuckerberg and Jack Dorsey, has established collaborative philanthropy funds. These so-called co-labs combine the funds of their clients to provide multi-year grants to a collection of nonprofit organizations that address issues such as economic mobility and climate equality.
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Ten families have contributed $112 million to the most recent co-lab, which focuses on teenage mental health and aims to reach $200 million by the end of the year. Over the course of six years, the firm’s philanthropic giving arm, Iconiq Impact, has advised on contributions totaling around $900 million, primarily through the co-labs.
Matti Navellou, the head of Iconiq Impact, came to the San Francisco-based company six years ago from UNICEF. After learning that clients wanted to hear from their peers about philanthropy, she created the co-lab program.
“It is a really lonely journey, and it’s hard to find peers at the same wealth level who are struggling with the same type of challenges,” she stated. “With so many people pitching you all the time, how do you handle it? How do you determine where to concentrate?
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President Donald Trump’s tax bill, which drastically slashes social safety net programs and lowers tax incentives for affluent donors, exacerbates the problems facing the charity sector. According to nonprofit organizations, such as the National Council of Nonprofits, which has 30,000 members, charities will have less money available even while there is a greater need for their services.
Due to reduced federal assistance, Navellou said philanthropic giving is more important than ever.
“There are so many areas where, truly, philanthropy can move the needle right now, and so this structure that has been set up is problematic because it doesn’t actually incentivize accountability for spending that money for what it is designed for, which is funding nonprofits,” Navellou said. “We aim to influence the faster movement of dollars out the door.”
According to Navellou, time is of the essence, but the majority of Iconiq’s clientele are busy founders who have not yet established foundations with little time for charity. Since they are only obliged to donate 5% annually, she added, foundations aren’t necessarily designed for speed either. Although donor-advised funds are a well-liked low-effort choice, they are not required to distribute money to charitable organizations.
Clients can donate money to organizations more quickly and easily thanks to the co-labs. Following a series of in-person and Zoom meetings with other funders and outside experts on causes of interest, Iconiq works with clients to create a “portfolio” of charities. Following weeks of discussions, Iconiq creates the “portfolio” with the funders’ approval and handles the remaining tasks.
“What this does is it enables them to just move money much faster when they are in that time period of their life running companies,” Navellou explained.
“The key to the process is to get donors to trust not just Iconiq but the charities, instead of micromanaging how the funds are allocated,” she added. She said that charity directors may concentrate on their work instead of fundraising thanks to the multiyear, unrestricted funds.
Nonprofits can adjust to a changing policy environment thanks to flexible funding, according to Bill Smith, founder and CEO of grantee Inseparable. Starting this past December, Inseparable, one of 25 NGOs in the youth mental health co-lab, received approximately $1.3 million annually for five years.
“One of the hardest things when you’re running an organization, especially an advocacy organization, where we have changing circumstances with different administrations and what’s going on in states all over the country the flexibility of having unrestricted money lets us go where we need to go and do what we need to do without constraints from a funder,” he stated.
In the future, Navellou stated that she hopes to expand Iconiq Impact’s charitable donations, which is facilitated by teamwork. The co-labs are open to donors who are not Iconiq clients, but funders are often expected to contribute a single-digit million dollar amount per year for three to five years, she added.
Iconiq explained that once its charity portfolios are created, they are “open source,” which means that additional donors can continue to contribute as little as $250,000 annually. According to her, it’s practical for younger business owners who wish to dabble in philanthropy.
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According to Navellou, the large wealth transfer could bode well for philanthropy. She has observed that Iconiq clients’ young adult children are more likely to act quickly and are more concerned with quantifiable results than with particular causes.
“There’s certainly a young cohort that do think about philanthropy differently, and I would say, are much more impatient around changing things and leveraging that capital in different ways, including through impact investing,” she stated. Additionally, I think they are topic neutral, which is fascinating. Instead of coming to the table and declaring, “I really want to move the needle on this issue,” they frequently ask questions about the data and use it to inform and drive their actions.
According to Cerulli Associates, women are anticipated to receive almost 70% of the $124 trillion that will be passed down over the next 25 years. According to Navellou, this is also encouraging for charity donations.
“What we’ve seen anecdotally, although there is data backing this as well, is that women tend to be more generous,” she stated. “There is a lot more female-led charity, which is a really fascinating sector. That’s what we’re witnessing, and we’re eager to build on that momentum.”
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