Documents/6Q2MEP/5: Grantees/5.5.2: Investment Scope

5.5.2: Investment Scope

Structure your giving to learn and make more informed, and often larger, investments over time.

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Funding Mistake #2: Doing too little for too many (aka, the peanut butter approach) Many donors prefer to spread small gifts among many recipients, rather than making bigger commitments to a shortlist of grantees. At times, this makes sense. Early in your experience as a donor, for example, you may have little sense of what you want to achieve and what kinds of organizations will help you get there. But too often the thinking that drives this "peanut butter approach" is faulty. First, donors have a tendency to be overly optimistic, to underestimate what it's going to take to solve problems. Save the oceans for $5 million a year. Transform public education for $3 million a year. The mismatch between funding and aspirations is often alarming. At the same time, we can be risk-averse. The bigger the bet, the greater the risk. So donors hedge their bets and avoid larger investments. The problem is that it usually takes significant time and money to achieve impact. That means that small tentative commitments may be your riskiest bets of all, particularly if they keep many grantees at mediocre levels of performance rather than helping a few take great leaps forward. How can you avoid this pitfall in your giving? Structure your giving so that you can learn and make more informed, and often larger, investments over time. This is the same approach venture capitalists and corporations take when they are building new relationships or starting a new line of business. Where grantees are succeeding with your support, consider doing more while being sure to re-align your giving to their situation. Just as your experience changes your grantmaking, your grantees will have changing needs over time. For help thinking through how your grantmaking may change depending on where you are, see The 6 Phases of Grantmaking.