Catalytic philanthropy in a time of declining aid: Community perspectives
A series of fall roundtables revealed the potential of catalytic philanthropy and an urgent need to expand awareness and access for donors seeking greater impact.
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This year brought sweeping changes to the global aid system and left a growing gap in development funding that philanthropy alone can’t fill. Yet, when used strategically as catalytic philanthropy — to take risks, test new ideas, and attract follow-on investment — philanthropy can unlock a more sustainable path forward.
“Catalytic philanthropy doesn’t just fund projects; it opens markets, builds confidence, and draws in the private investment needed to achieve impact at scale.”
Stacey Faella, Woodcock Foundation
While many professionals in the international development and investment communities have elevated the topic of catalytic philanthropy, the approach remains niche, and both international giving and innovation-focused giving are still a small fraction of overall global philanthropy. Given the urgency of this moment, Acumen and the Woodcock Foundation, a major advocate for catalytic philanthropy, teamed up to connect with people in our community to discuss the topic, share insights, and explore ways to accelerate the use of this powerful tool.
Philanthropists, entrepreneurs, and investors convened for dinner roundtables on catalytic philanthropy in Los Angeles, La Jolla, and San Francisco. Over a shared meal, guests exchanged perspectives on how philanthropy can serve as a catalyst for unlocking new forms of capital to address global challenges during a time of declining aid. Here are some major themes that surfaced.
Philanthropy as leverage
Catalytic philanthropy makes deals possible and draws in other investors by playing a critical role in absorbing early-stage risk, signaling viability, and attracting private investment to underserved markets. The risk tolerant nature of philanthropic capital can be used to prove and test models, which then provide commercial investors with the confidence to scale them. Acumen has seen this play out time and again with its investees and partners, who are able to scale solutions over time when the right kind of capital comes in early.
But one theme that emerged during our dinner series was that this approach does not always feel accessible to donors. Many people in a position to donate are unaware of more catalytic options and approaches. Foundations with endowments are a natural starting point. Because they have grant capital and investment capital to deploy across a range of asset classes with differing impact and return expectations, they are particularly well suited to utilize philanthropic capital creatively to mobilize additional assets and enable communities to share in wealth creation.
The Woodcock Foundation, for instance, commits 100% of its endowment to mission-aligned investments and targets catalytic investments for 5% of its portfolio, which it can use to support early-stage, proof-of-concept, high-risk ideas before they’re ready for commercial investment. Woodcock’s catalytic portfolio includes one of Acumen’s earliest investment vehicles and the more recent ALEG II fund, which invest in social enterprises and entrepreneurs in underserved markets.
Nonetheless, donors either don’t know that approaches like the ones that Woodcock uses are an option or feel actively discouraged from using grants to support for-profit or commercial endeavors. Increasingly wealth advisors are incentivized to discourage risky or non-traditional investments that could be extremely effective in unlocking capital or scaling an innovative business model with significant social impact.
Reframing roles and language
Our discussion revealed the need to reframe the role of philanthropy and perhaps even the language of philanthropy itself. Some of the participants in our conversations felt there was a stigma around the language of philanthropy, viewing the concept as inaccessible and expressing discomfort in identifying with it. There was shared concern over how tax incentives, jargon, and institutional gatekeeping (by advisors, firms, and even the language itself) form barriers to creating impact. The wealth management industry’s profit-maximizing norms and the perception of impact as concessionary were seen as obstacles, as was the lack of confidence and knowledge among wealth holders to challenge these norms. Many saw redefining the purpose of capital — from preservation and profit toward purpose and shared prosperity — as essential to cultural and systemic change.
Thus, we want to emphasize that this moment is not just about insiders and experts: We’re seeing the impact that individuals and families can have on unlocking catalytic capital firsthand. We heard a range of inspiring stories from guests: entrepreneurs who prioritized philanthropic giving even when they had student loans to pay; first-generation funders who were eager to ensure their contributions would achieve maximum impact, even when it meant shifting norms within their own families; and wealth advisors and philanthropy professionals looking for ways to empower their clients with new tools.
“Giving back has always been a priority for our family, even when we didn’t have much to give. Now we want to find ways to give back that align with our values and our own experiences as entrepreneurs and investors.”
Roundtable dinner participant
Sharing insights and redefining success
We were incredibly fortunate to have a diverse group of leaders at our dinner tables, spanning entrepreneurs, investors, and funders alike. However, those at the table noted that spaces for talking openly about lessons learned, areas of uncertainty, and failures were often hard to find. Guests expressed a strong desire to exchange insights and lessons, not just transactional opportunities, and recognized that knowledge-sharing fosters collaboration and accelerates systemic change. There is growing interest in collective action across diverse stakeholders and a desire to find communities that are more comfortable with risk and innovation.
Because taking calculated risks is essential for innovation and for validating new models that can scale, catalytic philanthropy should not shy away from failure. Woodcock Foundation embraces this idea with a portfolio-level goal of recovering invested capital with no additional return. They have an expectation that some of the bets made will succeed and yield strong returns, while others will face roadblocks and challenges that lead to financial losses but ideally generate lessons for the sector as well.
Acumen has analyzed both the success and impact of its Patient Capital investing work to support early-stage ventures, as well as the failures. In 2023 we published “Failing Forward: Lessons from Investing at the Edge” to share patterns that emerged from our experience with companies that did not meet their full potential, whether in terms of social or financial performance. For Acumen and many others focused on innovation, grants are viewed not as “free money” but as catalytic tools for experimentation and shared learning, multiplying the value of every philanthropic dollar. We heard feedback on the importance of redefining success as embracing risk, “good failure,” and purpose-driven experimentation. Success can also be framed as a balance between head and heart, embracing complexity while striving to make both philanthropy and impact investing more accessible, joyful, and aligned with moral purpose. Catalytic philanthropy encourages us to ask the question, “What more can I do with this dollar?” whether by unlocking innovation, learning, or directing more capital for impact.
Moving forward: Hope and generosity shine through
This has been a year of upheaval, setbacks, and threats to communities and institutions that value collective well-being. Nonetheless, we were overwhelmed with an enduring spirit of generosity and a continued love of giving at all of our discussions. Catalytic philanthropy is not simply about direct impact. It is about leverage and ultimately unlocking new market-based solutions by taking early risks, validating models, and strengthening ecosystems. It provides the bridge from declining aid to sustainable development, aligning investors, entrepreneurs, and governments on a new path forward to create lasting, systemic change.
While the challenges of inequality, climate change, and weakening democracy are complex, capital is abundant, and at its most impactful, it is flexible and dynamic. To translate this capital into lasting and systemic solutions, we aim to continue to learn together and create the kind of community that encourages boldness and experimentation. We hope more people will join us in this learning and experimenting. The urgency and the need to collaborate and evolve together couldn’t be greater.
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