We’re only scratching the surface in the design space of “how can people with money (funders) support provide who need money (grantees)”.

Grants

• Restricted vs Unrestricted
  • Restricted tends to be the default — “I’ll give you money for this project”. But this is quite annoying for nonprofits; reduces their flexibility and ability to react
• Lump sum vs Over time
  • Over time would be less expensive (wrt cost of capital to funder); keep incentives aligned. Could have checkpoints to see regular reports of more work.
    • Is it good for funders to have more touchpoints with their grantees?
      • Failure mode: funders telling grantees how to do their work, when grantees are the actual expert
• To individuals vs to orgs
  • Microgrants to individuals has become very popular: Emergent Ventures, Fast Grants, ACX Grants, etc
  • Grants to individuals may make them less likely to work within an org

On the surface, it might seem that grants are the most desirable. Free money! Some problems with grants:

• Implicit restriction on what you can spend it on
  • Grantees have to try and predict “does this make the funder happy”
    • Unlike in for-profit companies, where the objectives are clearer
• Grants move “PR risk budget” onto the funder
  • Cf “Every grant is also a bounty”
  • Necessitates more screening by the funder, more cautiousness. If you make one bad grant, everyone comes at you
    • But more screening also weeds out the weird but promising ideas
• Less mechanical alignment between grantee and funder.
  • The incentive of a grantor is to pick grants that look good instead of grants that will pay out well in the future
  • A loan or an equity investment requires a story of some kind, that
• Most expensive for the grantor
  • When you give a loan, there’s some chance of default, but in expectation you’ll be able to make back your capital
  • Grantors have to ask to raise more money after, and would have to optimize for “good-lookingness” of grants
• Free money might attract scammers?
• Free money might encourage free-spending (or appear to)

Loans

• Loans to individuals
  • E.g. student loans? Common for expensive long programs like med school
• Loans to nonprofit orgs
  • E.g. contingent on future fundraising
    • Would larger grantmakers be unwilling to pay future loans, if what that does is just subsidize earlier grantmakers?
    • If a grantmaker has promised funding but is slow about delivering it (cough SFF), then a loan can help smoothen operations
• Microloans
  • Providing access to finance in Africa was a popular thing. why didn’t this end up working out/seeming cost effective, esp in comparison to GiveDirectly?
• Unsecured vs secured
  • Generally hard to securitize the kinds of loans given in EA…
    • $300k loan: securitized against Oli’s personal assets