3 Twin Cities foundations experiment with new — and dramatically different — forms of philanthropic giving

Frederick Melo, Pioneer Press
·8 min read

When the Venn Foundation funds access to afterschool music classes, med-tech research at the University of Minnesota or the Minnesota Children’s Museum’s traveling exhibits, it expects the money back. The St. Paul-based charitable lender specializes in issuing low-interest and no-interest loans, among other “program-related investments,” or PRIs — below-market-rate financial obligations that are intended to keep on giving to other worthy initiatives as they’re paid off.

That’s a different approach than the one led by Andrew Dayton at the Constellation Fund, where an economist, an evaluation officer and a research associate have turned philanthropic donations in direct service into an analytical science. Working with advisers such as the Federal Reserve Bank of Minneapolis, the Constellation team rates grant applicants based on some 200 metrics before writing the nonprofits checks of up to $200,000 to fight poverty.

“A lot of philanthropy is really rooted in relationships, and getting access to people with resources, frankly people like me,” said Dayton, son of former Minnesota Gov. Mark Dayton, whose family was once best known for department stores such as Dayton’s, Marshall Fields and Target. “And my perspective is I’m not the best person to make a decision about how to fight poverty,” he said. “I’ve never experienced poverty. (Our evaluation is) rooted in evidence, the best that we have, as opposed to my preferences or predilections as a donor.”

The Venn Foundation and Constellation Fund are two of the youngest philanthropic foundations in the Twin Cities, where Minnesotans — including especially wealthy ones — have turned charitable giving into an art form.

Their approaches, heavy on financial analysis, differ considerably from that of the John and Denise Graves Foundation, an emerging Minneapolis-based family foundation that has shown growing interest in unproven ventures, even if it entails launching a new nonprofit and handpicking its staff.

“New ideas need time and space to form,” said Bill Graves, who leads the foundation on behalf of his parents. “Graves Ventures is really focused on incubating new ideas, new ventures, new products, new campaigns that did not exist before, and helping them grow to sustainability.”

DIFFERENT APPROACHES TO GIVING

For 20 years or more, foundations and other major donors to charitable causes have called for nonprofits to be run more like businesses, with data-driven strategies that provide a measurable return on investment. The pushback has been palpable, with some frontline workers noting it’s difficult to measure the tangible impact of mentoring youth, erecting public art, feeding the hungry or coaching little league.

Even some major donors have found the philanthropic world has become too risk-averse and disinterested in experimenting with promising but unproven new solutions to old problems.

Others see data-driven analysis as a key lens through which to help small, emerging nonprofits scale their operations and expand sustainably, much like a startup business looking to grow.

In the Twin Cities, three foundations dedicated to fighting poverty and launching new initiatives have taken heavily diverging paths on the continuum, each one focused, at least in part, on helping young ventures expand through starkly different means.

GRAVES FOUNDATION BACKS YOUTH HOUSING BY HIRING ITS STAFF

Working from his garage, John Graves founded a computer software firm in the mid-1980s, gradually building Convey Compliance Systems into a tax compliance software company that would net his family a multimillion-dollar profit when he sold it in 2014. His son, Bill Graves, was then tasked with spending down a good share of the family fortune on worthy causes, to the tune of up to $3 million per year for 30 years.

How best to direct the $47 million or so of funds in the John and Denise Graves Foundation? Around 2017, the foundation made its first major gift toward a proposed housing development in Minneapolis’ Lowry Hill neighborhood centered in part on youth aging out of foster care.

To open the Peris Hill affordable-housing development in Minneapolis last year, the Graves Foundation hired an executive director specific to the 45-unit housing project, with the expectation that after two years of fundraising and applications for low-income housing tax credits, the director would no longer be on the foundation’s payroll and would continue with the project independently. Peris Hill now has its own nonprofit board.

“We were new to philanthropy, and not realizing that what we were doing was different,” said Bill Graves. “Now we realize philanthropy most often takes the form of giving out grants to organizations that already exist, who already have a track record of doing good works.”

Through the foundation’s Graves Ventures unit, Bill Graves is looking to buck that trend and fully engage what some might call the startup world of nonprofit initiatives, even if it means handpicking their staff.

“We were essentially the philanthropic developer,” said Graves, who has worked with Volunteers of America to manage the Peris Hill property. “We have a long-term commitment to provide services funding for young people in the building. We fund an organization called the LINK that provides the services. They were a supporter of (Peris Hill) throughout and stayed engaged with us.”

Working out of the Midtown Exchange building in South Minneapolis, Graves plans to devote roughly $2 million per year toward established youth, education and anti-poverty initiatives in Minneapolis and its first-ring suburbs, and at least $1 million annually toward less proven new initiatives through Graves Ventures.

“They’re of equal interest to us as a foundation,” Bill Graves said.

Among its grantees, the foundation has funded the Minneapolis Educator Leadership Awards, a project with Achieve Twin Cities to recognize outstanding educators, and Close Knit, a nonprofit that invests in existing “chosen family” arrangements to prevent youth homelessness. Other grants, in the areas of housing and community building, will be issued by invitation only.

CONSTELLATION FUND

While working in the mayor’s office in San Francisco, Dayton became familiar with a foundation called the Tipping Point, which seeks to fight poverty in the Bay Area by helping small organizations scale up their services. He was so impressed that he decided to launch a similar effort in Minneapolis.

With grants of $75,000 to $200,000, the Constellation Fund has supported more than 25 grantees since launching in 2018. The goal is to fight poverty in the Twin Cities by backing direct service organizations, but grantees are all offered — and almost all accept — “Beyond Dollars” benefits that go beyond a one-time financial donation.

That includes introducing the grant winners to private corporations that can provide volunteer man hours, consulting, technology help and other expertise.

Even nonprofit applicants that don’t receive funding but submit to a full review walk away with a thorough data-driven assessment of their organization, the kind of report that a private-sector business might pay consultants handsomely for.

“We conduct a benefit-cost analysis on every organization that we fund,” said Rose Carr, the Constellation Fund’s chief impact officer. “We also provide these analyses to those organizations who don’t receive funding. They are providing us with data, and we want them to leave with something that’s useful. … We’re looking specifically at the individuals that the organizations serve.”

Through the Constellation Fund, the Ostara Initiative, which oversees the Minnesota Prison Doula Project, was teamed with Piper Sandler, an investment bank and financial services company, that helped them rethink their business model, from building out their employee base to considering new options for earned revenue.

“Most nonprofits don’t have those types of skills in-house,” Dayton said.

Other grantees have included the new Dougherty Family College, which offers a two-year associate’s degree at the University of St. Thomas, Lutheran Social Service’s work on youth homelessness, the YWCA of St. Paul and the Family Tree Clinic in Minneapolis.

VENN FOUNDATION

For 50 years or more, large foundations have offered low-interest and no-interest loans, equity and other forms of capital investment to unproven orphan drugs, startup technology and other risky young initiatives.

Since 2018, Jeff Ochs and two partners have attempted to connect individual, socially-conscious investors to similar opportunities, whether or not they have the capital to lend that a larger foundation might.

Based in St. Paul’s Highland Park neighborhood, the Venn Foundation pools funds from philanthropists into some 80 donor-advised accounts and counting. The accounts have issued 30 program-related investments to date, totaling some $16 million in giving. The expectation is those financial obligations, offered at below-market rates, will be paid back into the funds to back more good works down the line.

Recipients have ranged from a baker opening her first commercial space to helping researchers at the University of Minnesota develop a prognostic test for osteosarcoma, the most common form of bone cancer in children.

“Our whole purpose as a public charity is around mainstreaming a very powerful but underutilized tool in philanthropy,” Ochs said. “We’re trying to really unleash the power for maximum impact.”

For instance, many low-income families don’t take advantage of Minnesota’s $1,000-per-child education tax credit to pay for afterschool music lessons, private tutoring and other classes because they can’t afford to front the money and wait until April for a tax reimbursement.

To better connect qualifying families to the tax credit, the Venn Foundation is working with the nonprofit Youthprise to provide zero percent, low-fee loans to pay for out-of-school-time learning, on the condition each recipient family’s tax credit is automatically assigned back to the foundation.

“We’ll do over $1 million this year to over 1,000 families statewide in that program, and we’re looking to scale that program,” Ochs said. “It is a no-interest, no-fee loan, unsecured and paid back only via tax credit.”

Ochs added: “If I’m a philanthropist, I give one time and it helps one kid for that one year. You need to find a way to keep that going. PRIs recycle dollars that could be used more than one time.”

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