Outlier or Bellwether? A Closer Look at a Big Unrestricted Campus Gift

Practically every alumni mega-gift over the past two years shares a common and predictable trait. In each instance, the alumnus earmarks said gift for a specific purpose or cause.

This is why a recent unrestricted $140 million gift from an anonymous donor MIT to support the school's the school's educational and research mission is so intriguing. We see the occasional anonymous donation, but rarely one of this magnitude—much less with no apparent strings attached. 

That said, with legions of tech alumni embracing digital age business concepts like "flexibility" and "agility," the gift to MIT may be a harbinger of things to come. Unrestricted funds are akin to start-up capital from risk-tolerant angel investors; why wouldn't business-savvy donors embrace this approach?

Here's one reason: They're reluctant to relinquish control. Here's another, less cynical reason: They have a vision and the funds to execute it. Still another is that donors may be prodded less often toward this approach by campus fundraisers than you might think. While we rightly tend to assume that all institutions thirst for unrestricted funding, schools can often most excite donors to give big by sketching out a very tangible set of results that will be achieved with new money. Donors get jazzed, and can be upsold by the prospect, say, of backing a team of researchers chasing a breakthrough or underwriting a cool new capital project still on the drawing board. They're also more likely to circle back and make follow-up gifts if they like what their initial donation has achieved. 

A pitch for unrestricted support is less likely to get a donor's juices flowing. And it carries risks of disappointment. What if the donor disapproves of how the money is allocated? What if it funds the school's new football stadium scoreboard? It's no surprise that donors are leery of a hands-off strategy, but there can also be good reasons for campus fundraisers to link gifts to compelling deliverables. 

At the same time, as we've noted in a more detailed piece on this subject, quite a few living donors seem willing to give up control over how grant dollars are spent—as long as they believe they are investing in the right people or institutions. 

Which brings me back to the MIT gift.

The "living donors" universe is, of course, incredibly broad, so it's important to zoom in a bit further and tease out the nuances within the subset in question here—the "living alumni donor" community. With regard to the MIT gift, it isn't a huge logical leap to assume that the donor in question made his or her fortune in the tech or sciences field. If you accept this premise, it leads to an intriguing thread of discussion: Are certain kinds of alumni donors—say, "tech donors"—more likely to embrace unrestricted giving?

On the surface, conventional wisdom says "not really."

After all, tech donors like measuring things. In a chat with IP's David Callahan, Nick Tedesco, the West Coast lead of J.P. Morgan Private Bank’s Philanthropy Centre, corroborated this theory. “There is a really strong focus on measurement and evaluation, he said. The bank's tech clients "really want to understand their return on investment.”

It's relatively easy to track the results of a new scholarship fund or monitor the construction of a new building. Less so when your donation vanishes into the general fund vortex.

Second, shaped by the crucible of life experience, tech donors understand the importance of STEM education and the skills needed to succeed in a dynamic digital workforce. This helps to explain the boom in STEM-related giving. These donors also tend to be intrigued by such areas as scientific research and entrepreneurship. With a strong worldview and distinct interests, it follows that these donors would tend to make targeted campus investments. That makes all the more sense when you consider how many techies and other entrepreneurs distrust established legacy institutions, which they often see as overly bureaucratic and insufficiently nimble. Writing a blank check to a dinosaur isn't appealing by contrast with funding something specific and exciting on a campus. 

And yet.

Your typical MIT alumni understands the power of start-up capital and flexible resource allocation. Consider the zeitgeist. Social media sites change which ads are shown based on real-time data crunching. Uber rates automatically increase when nearby taxi demand is higher. Why shouldn't schools have the same kind of flexibility?

Indeed, this idea that unrestricted money can support the flexible allocation of capital is a huge part of the story here. "For the faculty and students of MIT, unrestricted resources are the vital fuel that helps big ideas take off," said MIT President L. Rafael Reif. MIT's use of unrestricted funds have been applied to research in the fields of Alzheimer's disease research, physics and digital learning, as well as scholarship aid for undergraduates and startup funds for junior faculty members.

This reality allays donor fear that unrestricted gifts will disappear into some giant void while speaking to their desire to quantify a return on investment. If universities can make a credible case that these gifts will measurably improve areas of research, performance measurement-oriented tech donors may be more inclined to take the unrestricted leap.

Also consider Nick Tedesco's contention that new tech donors are not interested in creating traditional foundations of the kind created by earlier generations of donors. "A lot of people have a lean staff, and are looking to lean on others for grantmaking advice and execution," he said. For donors looking to stay nimble and responsive, unrestricted giving takes this idea to its logical conclusion: It cuts out the advisory middlemen entirely.

Lastly, new tech donors, according to Tedesco, have an "appetite for risk." Not coincidentally, according to MIT's press release announcing the $140 million gift, unrestricted funds have traditionally served to "invest in high-risk ideas" and "advance early-stage ideas considered too risky to qualify for backing from traditional sources."

Again, the donor remains anonymous (which, it's worth noting, comes with its own set of concerns that we'll table for the time being). For all we know, the MIT alumnus in question could have graduated with a degree in music or literature. But the larger argument is still valid. While unrestricted giving remains rare, it may start to look increasingly attractive to risk-tolerant, ROI-driven alumni donors sympathetic to the idea that when it comes to allocating funding, the university knows best.