More Than Money: Mellinger's Revolution

Doug Mellinger was 10 when his life changed. An eager fundraiser even at that age, he found himself on a nationally-televised Jerry Lewis telethon handing over a check for money he had raised along with friends and family. The impact of that moment—the experience and the feeling of giving—he says, has never left him. “The feeling of giving was powerful. It got me very excited,” Mellinger said. “Over the years, I’ve just continued to raise money, give money and be involved in charities as a board member.”  Now 43, he’s pushing a revolution he hopes can transform philanthropy and dramatically magnify the impact of donor dollars.

The Vehicle

His vehicle: a company he helped create nearly nine years ago called Foundation Source, which today handles an estimated $3.5 billion in assets and stands as the nation's leading provider of outsourced support services for private Foundations. Foundation Source helps private foundations with back-office administrative tasks such as compliance monitoring, federal and state filings and grants management—tasks that sap time, energy and money, but which have little to do with the organization’s core mission.

But its mandate also includes a far more ambitious mission: to shake-up, reorganize and transform the entire charity sector to achieve the economies of scale he sees as essential to successfully attack huge global problems. “We’ve got over a million charities trying to solve the world’s problems and they aren’t getting the job done,” he says. “We need a more cooperative model.”

 For Mellinger, such work is now, and always has been, a labor of love.

The Revolution

He helped established his first charity as a college student and focused on youth/collegiate entrepreneurship. The experience reinforced his conviction that reaching people while they are still young is crucial to solving global problems. “I became very interested in young people because I felt they were going to be the answer,” Mellinger said. “We couldn’t think about solving all problems today, we had to think about solving problems during the next 10, 20, 30, 40, 50 years. So if we can focus on youth, we can have a huge impact.” That thinking has spawned an important tactic of Mellinger’s revolution: When wealthy families decide to give, get the children and grand-children involved early. Then keep them involved. 

In his career as a private sector entrepreneur, Mellinger was accustomed to the discipline imposed by the competitive pressures of the market place, but his experience of serving on the boards of numerous charitable organizations taught him that non-profit charities operated in a different culture.  As a result, they tended to be poorly run and over-matched for their mission. However well intentioned, however noble their cause, they were essentially small businesses trying to tackle complex global problems.

“I was concerned how the sector itself was operating, the scalability of organizations trying to solve these big problems and the high cost of capital,” he said. Ultimately, Mellinger became convinced that if he really wanted to make an impact, it was more important to focus on how charities were operating than the causes they championed.

When someone pitched him a business plan for a company that would help charitable organizations with tax receipts, it sparked a larger vision in Mellinger, one that eventually became the seed of Foundation Source. After developing a business plan backed by two venture capital funds and many wealthy families, Mellinger helped found the company—as a for-profit—in April, 2000, with goals that included:

Easing the administrative burden on small and midsized foundations by offering them efficient back office services, a step that provides them with the same quality of service enjoyed by a multi-billion dollar foundation and allows them to focus more resources on the issues they care about most;

*Providing the technology needed to keep all members of a donor family involved and informed – especially younger generation members;

*Creating a community of donors, using Internet technologies to share experience, hard-earned wisdom, and nurture the kind of cooperation needed to build economies of scale;

*Nudging foundations working in similar fields towards greater collaboration, another step needed to build economies of scale needed to solve some of major social problems;

Nearly a decade later, Mellinger is heartened by the progress. “We’re starting to build national communities of interest,” he says. “My dreams are beginning to come true.”

 Mellinger says he’s comfortable with Foundation Source’s for-profit model, convinced that once this company was big enough, there would be a direct correlation between its economic success and the socially positive outcomes achieved by charities because of the greater efficiencies his company was providing them. “We bring more efficiency to the table,” Mellinger said.

The Goal

Foundation Source now works with nearly 900 foundations and works with donors, mainly wealthy families, whose collective wealth runs at about $70 billion. The company has survived the dot-com bust of 2000, the recession of 2002 and is weathering the current downturn, primarily because investors not only believe in the economic potential of Foundation Source, but also in its ability to make a real difference.

In the next couple of decades, as baby boomers retire in greater numbers and seek to donate money and ultimately transfer their wealth to the next generation, Mellinger sees anywhere from $7-25 trillion flowing into the charity sector. If that happens, he says Foundation Source is well-positioned to drive the innovations that can transform the charity sector.

”If we can be successful and get to a critical mass, we can change the world,” Mellinger said. It was a comment wrapped in a 10 year-old’s passion and a visionary entrepreneur’s commitment to drive his revolution.