Did you know that philanthropic capital can be used to invest in businesses run by female and BIPOC founders? One of the most overlooked ways to help close the racial and gender wealth gap is to invest in businesses run by women and people of color. Daintree has partnered with two innovators in the field, Inspire Access and Legacy Global Foundation, to help facilitate the flow of philanthropic capital to support this mission. Through our partnership with these nonprofit organizations, investors/donors are now able to tap into their philanthropic capital to invest in for-profit businesses run by women and people of color. By tapping into the more than $125B that currently sits unallocated in donor-advised funds in the US., Daintree is working to close the investment gap that currently leaves female and BIPOC founders with access to less than 3% of investment capital.
What is a donor-advised fund?
A Donor Advised Fund (DAF) is a fund or account established at a Section 501(c)(3) public charity sponsoring organization to help people efficiently coordinate donations to charitable causes. As soon as an individual transfers money to a DAF, they surrender legal ownership over the funds and are eligible to receive the tax benefits of a charitable donation. The donor is then able to advise on how the contributions are deployed for charitable use.
DAFs have exploded in popularity in the US over the past decade as they provide individuals with a convenient and efficient way to donate to charities while simultaneously de-linking the task of deciding how much you want to donate from the task of deciding to whom the funds should be granted.
The unintended consequence of delinking these steps, however, is that individuals are often slow to allocate funds to a final recipient. In fact, over $125B currently sits idyl in DAFs in the US.
But I thought DAFs could only grant to 501(C)(3) organizations?
If you thought money sitting in your donor-advised fund (DAF) could only be used to grant to 501(c)(3) organizations, you are not alone. This myth exists because on the largest DAF platforms it’s true. Perhaps surprisingly, this restriction is not due to IRS regulations but instead imposed by the DAFs themselves as the easiest way to prove their activities support a charitable purpose. Per applicable regulations, funds contributed to DAFs are required to be used for charitable purposes, but they are not limited to supporting only nonprofit organizations.
Innovators in the field recognize that often the most effective path to significant charitable impact involves working with both nonprofit & for-profit organizations. These innovators are structuring their DAF platforms and processes to enable funds to be invested in for-profit organizations so long as that investment is furthering the DAF’s charitable goals.
How does this impact Daintree’s strategy and funding?
Daintree has partnered with innovators and legal experts at the intersection of for-profit and nonprofit capital to design an investment mechanism that enables the flow of investment capital to for-profit companies run by under-represented founders. One of these partners, Inspire Access, is a 501c(3) founded with the exclusive purpose of ensuring historically under-represented founders have equal access to investment capital. Inspire Access has partnered with Daintree Capital to structure a 3-year Impact Note that allows investors to use philanthropic capital to provide loans to historically under-represented founders.
Inspire Access conducts due diligence on all their partners—including Daintree—to ensure they are appropriate vehicles for carrying out its charitable purpose.
How can I help?
If you are interested in learning more about how you can use tax-advantaged funds to invest in under-represented founders, please reach out to us below: