Who are the “New Rich”?

The ‘new rich’ are mix of all different sorts of people in a wide range of fields. They can be executives at large companies, high tech workers, celebrities, or your local car dealer. Among them you will find the wealthy – individuals who have a net worth in the millions, and the mega wealthy – with a net worth of more than $1 billion. When they choose to give to charity, some of the new rich will be traditional donors; often giving large gifts to high profile programs that will directly help people. Others are new to philanthropy and may be willing to fund operating and infrastructure costs. Social entrepreneurs, venture philanthropists and high tech donors usually fall into this second category. However, it is important to remember that each donor is an individual. Some high tech donors may act like traditional donors and someone who is normally a more traditional donor may spontaneously support an infrastructure project.

Social entrepreneurs

Social entrepreneurs are found in all sectors of society: public, private, and nonprofit. They are often younger, energetic risk-takers who are able to convince and inspire others to work on a project. They believe in a socially engaged private sector and see opportunities to bring entrepreneurship to the nonprofit sector. In terms of their values, social entrepreneurs focus on outcomes and believe that investment is superior to charity. There is a desire to balance wealth creation with public responsibilities and they want to see organizations make money from their work. However, because of their entrepreneurial nature, these donors may also want to take control of the projects they fund and this is something that nonprofit organizations must wrestle with in order to keep site of their real mission.

Venture philanthropists

Like social entrepreneurs, venture philanthropists desire personal involvement in an organization they fund and may want a seat on the board of directors. They like to see a social return on their investment and some improvement in the community, but they also want an emotional return and to feel that their gift made a difference. They encourage accountability and want results that can be measured yet they also understand that some projects fail and that there is a risk of losing money. One of the benefits of venture philanthropy is that it makes fundraisers do important tasks, such as budgeting, planning and evaluating programs. And because they were often venture capitalists before they became venture philanthropists, these donors usually have good business sense and understand that most nonprofits are undercapitalized and in need of infrastructure. They are willing to invest not only money, but also their time and expertise, which can be a big boon for a nonprofit organization.

High tech donors

A study conducted by the Association of Fundraising Professionals (AFP) found that high tech donors believe human capital is the key to human development, that ideas are more important than money, that growth in scale is a success indicator, and that modest achievement is the enemy of the greater good. They want nonprofits to be more perceptive about the needs of the people they serve and to address an entire issue as opposed to parts of an issue. Much like venture philanthropists, high tech donors want to put their money to good use and will take the long view when approaching a project. Because of the industry they are in, nonprofits will find that high-tech donors speak a different ‘language’, have different experiences, and come from a different culture. They are also keen to use the strengths of technology to help an organization.

Working with the new rich

As with anything, entering into a relationship with the new rich has its pros and cons. On the plus side, these donors may provide long term funding which can enhance planning and they can offer technical assistance to aid in the growth of infrastructure. However, these new philanthropists can be intrusive and the lure of ‘easy money’ may force some charities to change their values or mission. Also, the emphasis that some donors place on quantifiable results is often difficult to replicate in the nonprofit world. Still, when the new rich decide they want to donate to a nonprofit organization there are ways to earn their gifts and make the relationship work.

Building the relationship

Before an organization approaches the new rich for a potential donation it is important to prepare. Your organization’s mission and vision must be clearly defined and your goals and objectives must be specific, measurable, achievable, realistic, and should have a time line. If your mission and objectives are clear it will be easier for a wealthy donor to make a connection with your organization and remain loyal to your cause. In the role of fundraiser, you need to:

  • seek out the new rich
  • help educate them
  • learn from them
  • link technology to your mission
  • be willing to be an active partner

Organizations wishing to approach the new rich must also remember that these wealthy individuals may be uncomfortable with their wealth and may have already been approached by a host of other groups seeking funds. The right fit is key to making the relationship work and honesty is critical. You must be able to articulate your case in a very clear and brief way and ask yourself these questions:

  • Do our values match those of the prospect?
  • Does our leadership inspire confidence?
  • Is our organization perceived as a leader in providing innovative solutions?
  • Do we have a new way to look at an old problem?
  • Will the prospective donor feel that their gift has a major impact?
  • Will he or she have a role to play beyond the gift?

How to reach new donors

After you have done some preparation, you need to find the new rich. Although nonprofits may not know where to start, they are actually intimately connected through social and business networks. Contacting financial advisors, fundraising professionals, major agencies and academic centres may all prove fruitful in reaching potential donors. Once you have approached a donor, you need to:

  • listen to your donors
  • do research
  • work with the donor on their timeline
  • be prepared for partnerships and focus on tax benefits
  • recognize and thank supporter – the sooner the better
  • create an entrepreneur’s circle to build on success and attract others

Above all, remember that global trends are producing more social entrepreneurs, more new rich, and more donor philanthropy than ever before, presenting a myriad of fundraising opportunities to nonprofit organizations.

Based on a presentation by Harvey McKinnon, CFRE, of Harvey McKinnon & Associates. For more information visit www.harveymckinnon.com.