Why it Works: University Research and Pre-Exit Philanthropy

It’s easy/not easy to build a pre-exit philanthropy program. It’s exhilarating one moment and frustrating the next.

As you work on it, there comes a point at which you can both 1) see the entire field of play — the whole university entrepreneurial ecosystem — and 2) understand the individual pieces. The whole system resolves itself into an elegant orrery which, though complex, is ordered and predictable.

This idea behind pre-exit philanthropy has legs. But there's little precedent, and in making the case to build a program, it can be helpful to provide info to your colleagues and leaders about why this experiment has a reasonable shot at success. Executive sponsorship is critical to progress.

Beyond the extensive process documentation our team compiled as we built our program, I labored to understand and codify the framework that I suspected governed the concept. I intuited that it wasn't a one-off, but I didn't yet have the language to explain how I knew it. Like most university employees, I had access to thousands of books, academic papers, and periodicals through the campus library—so I hit the books!

What I learned, and continue to learn, has convinced me we're on to something big. Here are three powerful concepts from leading scholars in this field.

THe Study of entrepreneurship EMERGES

Academic study of entrepreneurship is young. It only began humming about 40 years ago, just a couple of decades after the birth of venture capital itself. Some of this scholarship built on the earlier work of Joseph Schumpeter, an economist who coined the term ‘creative destruction’ in 1942. Creative destruction refers to the process by which a capitalist economy renews itself from within—by destroying old ways of doing business and replacing them with new models. Sound familiar?

Philanthropy as the subject of academic scholarship grew around the 70's and 80's as well. But they didn't converge for a couple of decades...

CONCEPT 1: zoltan acs and the intersection of entrepreneurship and philanthropy

Zoltan Acs is a professor at the Schar School of Policy and Government at George Mason University, and also has an appointment at the London School of Economics. Acs was one of the economists who took up the study of entrepreneurship in the 70's. Among his many projects is the Global Entrepreneurship and Development Institute, a think tank he co-founded to explore entrepreneurial ecosystems across the world. This gives him a unique insight into entrepreneurship and the American economy.

In his 2013 book, Why Philanthropy Matters, he describes how philanthropy entered the sphere of his work in the 1990s as he puzzled over how and why the two seemingly disparate fields fit together.

Acs' work tells us that the link between entrepreneurship and philanthropy is fundamental to American capitalism—in fact, it's a defining feature of our economic and cultural DNA. What can we as fundraisers can derive from this concept? That resources deployed to build bridges to this constituency are a good investment. These efforts leverage a deeply-embedded cycle of innovation > wealth creation > and giving back. We can build on this.

CONCEPT 2: CHRISTOPHER HAYTER'S WORK ON HIGHER ED ECOSYSTEMS—AND WHAT IT MEANS FOR FUNDRAISERS

Christopher Hayter is a professor at Arizona State University's School of Public Affairs. Among other related areas, he studies university entrepreneurship — what makes university spin-outs successful? How do they germinate? What policy recommendations can we glean from these patterns?

As fundraisers, we can zero in on one of Hayter’s many interesting papers as especially relevant to our work. "A trajectory of early-stage spinoff success: the role of knowledge intermediaries within an entrepreneurial university ecosystem" explores how “knowledge intermediaries” — a broad term that includes many different folks — might help a startup or a founder on a path to success. He focuses mainly on faculty and graduate student founders, and the intermediaries are typically other faculty, VC’s, tech transfer staff, etc.

But here is an intriguing hypothesis: I propose that fundraisers can also function as knowledge intermediaries. Indeed, I propose that fundraisers are among the university citizens best-positioned to do so. In a typical month, we interact with faculty, grad students, undergrads, alumni, entrepreneurs, VC’s, volunteers, various program staff, administrators, communications staff — and other fundraisers, who have their own sets of interactions with these groups.

Take a moment to pull your call reports. Do you see this pattern? Imagine a small core of knowledgeable fundraisers moving fluidly between these nodes, like bees carrying precious pollen from one flower to another, and making the whole ecosystem bloom.

Ok, that's cheesy. But the metaphor applies.

And the institution benefits from this activity, therefore supporting the fundraiser's goals as well. When fundraisers become brokers of value, goodwill and attention accrue to both the individual and the institution. Many times, I've reset a relationship to a non-responsive alum by pivoting away from outreach focusing on interaction between me (i.e. the university) and the alumnus. Instead I take myself out of the equation and make a small non-gift ask on behalf of one alum (or faculty, or student) to another. I'm clear about the ask, I do a double-opt-in intro, and most often—I get a response! It immediately adds a new depth to my relationship with an individual, and I am merely a bee carrying a little pollen between two flowers.

Keep in mind this scenario of fundraisers as active 'knowledge intermediaries'—this active hive of value exchange. Because this is another layer of the pre-exit philanthropy 'business' you're about to build.

CONCEPT 3: PARKER AND VAN ALSTYNE DEFINE THE BUSINESS MODEL OF OUR ERA - THe PLATFORM

Geoffrey Parker at the Thayer School of Engineering, Dartmouth College; and Marshall van Alstyne, at Boston University's Questrom School of Business are probably the world's leading scholars on platform business models. Both are affiliated with MIT as well.

Co-authored with entrepreneur Sangeet Choudary, their recent book, Platform Revolution, is a revelation. They define a platform as:

a business based on enabling value-creating interactions between external producers and consumers...The platform's overarching purpose: to consummate matches among users and facilitate the the exchange of goods, services, or social currency, thereby enabling value-creation for all.

Facebook, Airbnb, OpenTable--these are platform businesses. Their primary product is not a widget, or even a service, but rather a way to enable interaction between parties. Sometimes there is a transaction involving money (as when someone rents a house on Airbnb), or sometimes the transaction is social (when friends connect on Facebook). They call to mind the 'creative destruction' we talked about above.

Platforms will dominate business in our lifetime—and they have some fundamental characteristics that we can replicate.

Because a pre-exit philanthropy program is a platform business. Parker and Van Alstyne's work helps explain why alumni might join a program, how programs can reach the point where growth becomes organic and almost self-sustaining, and why it can be hard to understand beforehand how much we stand to gain or lose by starting a program—which does have a cost. We can use the same principles to

formulate the program's structure → design the core interactions → and encourage growth.

I've had the distinct privilege of discussing some of these ideas with Geoff Parker directly, since we work together here at Dartmouth. His advice was to pay special attention to the core interaction we offer our members.

There's so much more to read and explore in this area. Just follow the citations! Academic papers not your normal reading material? Mine either! Dartmouth College research librarians helpfully recommended this short video on how to read a journal article. It's good stuff.

So there you have it. Some basic building blocks for what I believe could become a major new philanthropic movement. Use these building blocks to blaze a trail at your school! And keep me posted on what you learn!