Rich donors want to give charities their two cents

Warren Buffett’s decision to hand over tons of money to a trusted organization is an old-school way of charitable giving: Take this check, put it to good use.

Increasingly, though, wealthy donors are opting for a more hands-on approach, giving money on the condition that the charity take their management advice, too. In many cases, fledgling nonprofits, in exchange for new funding, agree to let benefactors overhaul their business models, make personnel changes and install financial controls.

Donors often see it as the way to get the best bang for their charitable buck by building sustainable organizations, not simply funding pet programs. New Profit Inc. of Cambridge, Mass., which helps local charities expand, provides nonprofits that win grants with professional consulting services from the Monitor Group, a business strategy firm. REDF of San Francisco helps nonprofits establish and manage for-profit operations, like a janitor service staffed by ex-convicts. In New York City, Blue Ridge Foundation provides start-up funds and support for new nonprofits, often sharing work space with them. Venture Philanthropy Partners of Washington, D.C. relies on well-connected business executives to devise expansion plans mainly for nonprofits serving low-income children.

Venture Philanthropy Partners, known as VPP, is a group of wealthy investors that pools its resources to help children in low-income communities around Washington. It’s the brainchild of Mario Morino, a former private-equity investor and software executive. The philanthropy doesn’t solicit applications. It initially conducted its own analysis of 3,000 nonprofits in the Washington area, which were eventually whittled down to the 12 “investment partners” it supports today.

One is See Forever, a foundation that in 2001 was struggling to operate the Maya Angelou Public Charter School, an institution for youth who had failed at traditional schools. “We didn’t have any sort of governance or long-term strategy,” said David Domenici, one of See Forever’s co-founders. “We had to get some things in place, or we were going to cease to exist some day.”

VPP began its courtship of See Forever in early 2002. “We thought they were for-profit guys who didn’t know anything about inner-city kids,” Mr. Domenici said. Nonetheless, he says he was won over by their thoroughness. “They asked every single question about our school, our personal lives. They looked at every single record.”

See Forever now educates 275 children at two schools, up from 80 and one school at the start of their investment partnership with VPP, which expires next year. The foundation created an alumni support program, and it is currently scouting for its third building. This time, VPP acting managing partner Carol Thompson Cole says, the group is doing more of the search on its own, “but they always call and ask questions.”