Diversifying Grantmaking: Ten Regrantors or Two Staff?

The classic approach to grantmaking is that a principal (funder) sets up an entity (e.g., a foundation) and grants to operating projects (NGOs). But this does not have to be the only way. Funders could give to philanthropic funds, individuals who regrant, or other foundations. These are less common strategies, but I think they might have significant promise.

I have already made the case for funds in other posts, so in this one I mostly want to explore the idea of regranting to individuals. For the case study, we are going to consider a foundation giving out $10m a year. The classic approach would be to set up a foundation, maybe hire two staff, and let them deploy the funds effectively. These staff would typically be full time and spend the majority of their time comparing different specific grants.

But what if instead the foundation gave $1m of regranting to 10 different individuals? Some of them would choose to do full-time grantmaking; others already in the field might do it in addition to other responsibilities.

There are some major cons to this approach, so let’s start with those. There is likely more overhead, both in terms of literal costs and coordination costs. These grantmakers might have to talk and coordinate with each other, as well as reinvent certain processes, such as how people apply or how they determine funding. Any economies of scale are lost, and more time would also have to be spent finding the 10 people instead of just two. More time would also have to be spent vetting these individuals and determining whether they should receive the same regranting money next year. Overall, I would guess that what might be $250k of overhead in a two-person foundation could easily become double that in a 10-person split, even with many of the grantmakers not working full time.

Some major pros also come up. There immediately ends up being a higher degree of funding diversification and the benefits that come with that. More opportunities are likely to be considered, and more angles of attack on the problem are tested. Likely smaller and more innovative grants are given relative to a more consolidated single funder. These regrantors also have tighter feedback loops, not necessarily being guaranteed regranting money in the future and having clearer comparison classes, making it more incentivizing to do better grantmaking. It might also encourage those individuals to grant more of their own funds if they like the process.

I also think there is significantly more outreach power that results from this system. Ten new voices mean more opportunities for that cause area to receive media attention, be heard about by other funders, or for an NGO to interact with a funder. I think it’s likely that 10 people, even part time, would result in over 4x the effective outreach for the area. It also trains a wider range of people to think about and practice grantmaking, which I think benefits the ecosystem broadly and could lead to uniquely strong grantmakers being proven out who otherwise would have been unlikely to be directly hired by a foundation.

There are also some unclear questions. One of the biggest uncertainties here is which group ultimately makes better grants. More overhead for more outreach is a fairly clear trade-off to consider, but will 10 grantmakers make better grants than two, even if each controls one-fifth the funding? There are clear arguments for specialization, but there are also common diminishing returns for a grantmaker and often more limiting bureaucracy.

My net take is that I weakly think 10 regrantors would result in more volatility but higher expected value overall. But this might be influenced by my sense that in many ecosystems the best available grants are often smaller-scale, harder-to-find opportunities — particularly in ecosystems where there are other impact-minded actors. What do you think would a higher spread generally lead to more impact or less?