What is a transformative gift?

by Meredith Dreman

Here at The Morgridge Family Foundation (MFF), we use the term transformative gift on a daily basis. It is a North Star that guides the investments we make. And yet, it is a term that usually elicits a polite nod, blank stare, or the follow-up question, “what does that mean?” In this article, we’ll define what a transformative gift is and point out key factors that differentiate it from other types of philanthropy.

Definition: A transformative gift changes the trajectory of an organization to make an exponential impact possible.

In order to meet this definition, a funder must identify a leader or organization with an innovative solution and accelerate its development forward. Transformation, therefore, refers primarily to the effect a gift has on the organization’s ability to do its work. You may be wondering, “why not focus on the transformation that the gift ultimately causes?” The answer is simple: we do. It is the holy grail of philanthropy. We care deeply about it and would even go so far as to give it a term of its own: “transformational impact.” However, it is naive to assume that the work we do as philanthropists equates directly to impact. That idea promotes a savior mentality in which well-resourced individuals or foundations swoop in and fix everything on their own.

We know that’s not true. As funders, we are partners with organizations and leaders on the ground. Our role is to supply resources to the people who understand a problem from within, and have used that understanding to find a creative solution. We provide a transformational gift that sets a cascade of events in motion. Think about it in the context of a logic model; a transformational gift falls in the “Input” category, enabling the activities that lead to outputs, outcomes, and finally, the impact.

Here are the three hallmark features we look for when determining if a gift is transformational.

Timing is Everything
In order to be a transformative gift, the timing has to be right. That is, the organization has found a solution and shown it to be viable. There is a strong case to be made that scaling the solution would benefit a larger population beyond the organization’s current capacity. For example, a local freight farm is providing healthy produce to low-income families in Denver, Colorado. There is reason to believe the model would work in other cities where space is limited, the demand for farm to table food increases, and low-income families struggle to find affordable produce. The organization is looking to grow, and are asking for funds to help make that happen.

It’s Risky Business
Transformative gifts have an element of risk to them. Each transformative gift is setting out to do something that has never been done before. There is no guarantee that the solution will succeed when different environments and factors come into play. It is a sink or swim moment in an organization’s life, and we want to see them swim. But we also know that sometimes, it’s not going to work out. As philanthropists, we can accept more risk than most because we have less bureaucracy to cut through. This is why we step up for organizations at this pivotal moment. Often, other funding sources are waiting to see evidence of success and will take the baton once the organization has shown proof of concept.

The Potential Is There
This may be the most obvious point, but in order to warrant a transformative gift, the organization must have a reasonably high chance for success. To invest in anything less would be irresponsible. At MFF, we look at how the organization is currently running and the impact it is having on the existing community. We look at the leader of the organization to see the vision, management, and strategy. We lean on our network to get insights into that specific field of expertise. In other words, we do our homework to see if an organization is the right fit for a transformative gift and if the leader is capable of implementing their own transformational ideas.

While the above three features help us explain what transformative gifts are and when we invest, the next section is about what transformative gifts are not. These are a few common misconceptions that often get blurred together with transformative giving.

It’s Not About Size
Too often, the term “transformational gift” is a euphemism for giving a lot of money. As our definition says, a transformative gift “changes the trajectory of an organization to make an exponential impact possible.” The amount of money to do that will be vastly different depending on the organization, sector, and expansion plans. A $5,000 check may be what one organization needs to expand its current program across the state. That is still a transformative gift. For others, such as an endowment, a $5 million check may not add any new programming or expand the organization’s reach. Therefore, it is not a transformative gift. While funding is a critical resource in the nonprofit world, a dollar amount by itself never tells the whole story.

It’s Not About Keeping Doors Open
This is a sensitive point but a crucial one. A transformative gift should not be measured on whether it allowed an organization to stay operational or not. Transformative gifts have the potential to go beyond what is currently possible, not simply maintain what has been done. At MFF, we learned the hard way that gifts given in moments of desperation fail more often than not.

In Summary
A transformative gift is a niche form of philanthropy that sets an organization up to accomplish their goals. There are three features to look for when determining if a gift could be transformational. 1. Timing: Is the organization at a pivotal growth moment? 2. Risk: Is the organization pushing the boundaries of what has been done before? 3. Potential: is there a reasonably high chance for success and scale?

These are the indicators we have set for potential MFF partners to better understand what we are looking for. We don’t speak for every philanthropist;  these are simply the principles that guide our work. It isn’t for everyone, but for the work we do, it is everything.