credit: Leica-Geosystems

Alex Amouyel, executive director of Solve, and Casey van der Stricht, principal of Solve Innovation Future at MIT Solve, write why and how donors should use donor-advised funds (DAFs) to invest in innovation toward achieving the UN Sustainable Development Goals.

The article authors express the issue where with DAFs, there are no required disbursement rates, thus money can sit in DAFs for years before donors grant them out.

While the money waits, only a small percentage is invested for impact, and even less is allocated to venture impact investing.

The authors tackle the question: What if donors could leverage their DAFs toward impact investing, specifically venture investing?

To fill in the "pioneer investment gap" for early-stage social enterprises, the authors recommend providing the patient capital early-stage entrepreneurs need and using DAFs for social venture investing.

Amouyel and van der Stricht advise that families, foundations, and institutions interested in supporting early-stage social innovators can use their existing DAF capital (or move new capital into DAFs) can take the following next steps: 1) Select the right DAF sponsor; 2) Define your investment thesis; 3) Think about what additional, non-financial support you can provide; and 4) Work with partners.

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