Donor Advised Fund Cohort

This Midwestern Start-up Wants to Help DAF Holders Hand Over the Power -- Not Just the Money  -- in Their Funds

 

Black founders and founders of colors across the country lack equitable access to grants, loans, and flexible capital. While Black founders struggle to get the financial support they need to get started, over $140 billion dollars are stagnating in donor advised funds. 

 

And this stagnation is on everyone’s radar.

 

The philanthropic sector is currently split on a bill that proposes placing new restrictions on donor-advised funds(“DAFs”). Those opposing the sweeping legislation say that it is a misguided and overreaching attempt to address income inequality. Supporters say that it is a long awaited overhaul that will close loopholes that allow tax-deductible dollars to stagnate indefinitely.

 

The bill proposes a radical change from a current US law that provides DAF holders with an instant tax deduction for contributing to a DAF (with taxpayer subsidies up to $0.74 on the dollar) but imposes no deadline for the money to be paid out. Not a loose deadline. Or a lengthy deadline. Currently, there are no deadlines at all. 

 

The new law would create deadlines and fund holders (and perhaps most vocally fund investment managers and hosts) aren’t happy. 

 

The mudslinging across the divide has fractured the charitable sector at a level not seen in living memory. 

 

But a start-up social venture out of Indiana is arguing that the “when” and “how” of the legal changes aren’t the most important issue at play. 

 

Family & Friends Fund, Inc. is arguing that the bigger question -- and one that can be answered without sweeping legislation -- is who. 

 

The Family & Friends Fund was started as a donor-advised fund hosted in Fort Wayne, IN at a local community foundation. The two founders, a Black man named Ty Simmons and a white woman named Kristin Giant, opened the fund to help redirect money from mostly white self-proclaimed “allies” and “anti-racists” in their city into a fund that would be completely and autonomously directed and invested by leaders of color. 

 

The fund gained immediate traction -- activating hundreds of thousands of dollars within months. Giant and Simmons focused on fundraising from mostly white community members with access to generational wealth, while Simmons led a team of 5 Black donor advisors (with a combined over 300 years of lived experience in the most diverse and underinvested in area of the city) in strategic and relationship based grantmaking in their community. Their name highlights the growing racial wealth-gap and the resulting dearth of “family and friends” style risk capital available to initiatives run by non-white leaders. 

 

The novel concept of utilizing an out-of-the-box tool (that is currently under scrutiny for being a contributor to ongoing racial inequality) to democratize access to capital and power was noticed by Uncharted (recently merged with Common Future) who selected the FFF to participate in their first ever Economic Inequality Initiative. 

 

It was in this cohort that Simmons and Giant realized that their best chance at impact wasn’t crowdfunding and starting new DAFs with zero balances -- it was reaching out to DAF holders directly and offering a simple and powerful framework for giving away the decision making power over some or all of the funds in their DAFs to members of communities most closely affected by the issue areas the DAF holders cared about.

 

In Fort Wayne, IN that looked like handing over the reins to Black community leaders so that they could be the decision makers on how best to invest in Black entrepreneurs and nonprofit founders in their city. Perhaps in another city it might look like a DAF holder who is interested in investing in indigienous founders, or undocumented domestic care providers, or adults with disabilities, handing over the grant-making power to members of those communities. 

 

The possibilities are limitless. There are leaders of every race, ethnicity, and socio-economic background who have the relationships wealthy DAF holders crave in order to deploy smart and impactful capital from their fund balances. All these fund holders need is someone to guide them through the emotional and administrative journey of transferring power. 

 

The proprietary framework developed by Giant and Simmons includes facilitation of crucial conversations, identification and recruitment of key stake-holders to become advisors, education for those advisors on the basic governance of donor-advised funds and the evolving best practices in grantmaking/investing, and support for the deployment of capital. Additionally, FFF also provides ongoing legal, technical and philanthropic support for the duration of the project.

 

Simmons and Giant are proud to announce the formal launch of a nation-wide pilot of DAF holders interested in investing in BIPOC founders and in learning and implementing the brass tacks of power sharing/distribution. 

 

Applications open on June 21, 2022 – the two year anniversary of the launch of the Family & Friends Fund. 

 

If you have money in a donor-advised fund and are interested in connecting with the team at Family & Friends Fund, Inc. to learn how you can distribute the power and money in your DAF to BIPOC advisors in your geography you can apply to be a member of the first cohort here: www.familyandfriendsfund.org/cohort .