DAF = Donor Advised Fund = a private fund administered by a third party and created for the purpose of managing charitable donations on behalf of an organization, a family, or an individual.
How does philanthropic investing scale up? It could be from DAF sponsors telling their donors that they can invest, but it is far more likely from the fund raisers adding just one line to their pitch.
What works are a handful of short words, tacked on at the very end of a pitch, after all the other details are shared. The words are the title of this post: “By the way, you can use a DAF to make this investment”. Full stop. Pause for effect.
The vast majority of investors sophisticated enough to invest into a fund or directly into a private company have a DAF, so there is rarely need to explain that part. A common question from that statement is, “Oh, how does that work”, as a common inner thought after that statement is, “Oh, this looks interesting but also a bit too risky.”
Providing the option of investing using a DAF is providing an option to use capital that has already been given to charity. De-risking an investment is using risk-free capital can be catalytic to the investee, providing the missing capital needed to reach the next milestone to attract capital that isn’t so risk adverse.
So… if you are a fund raiser, try adding those words to your pitch. And if you are an investor, keep them in mind the next time you hear a pitch to an impact fund or company, as whether the fund raiser knows it or not, you can invest using your DAF. Any DAF.