How This Founder is Leveraging Donor-Advised Funds to Close the $4.4 Trillion Wealth Gap

Forbes

In this Forbes Talks conversation, Ali Jackson-Jolley sits down with Project Wellspring founder Brooke Daniels to dissect the blind spots in traditional venture capital – and makes the case for using donor-advised funds (DAFs) as a tool for equity.  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  0:00 - Introduction to Brooke Daniels and Project Wellspring 2:40 - Transition from Institutional Finance to Project Wellspring, Daniels discusses her background at Salesforce Ventures, Techstars, and Black Ambition. 4:22 - Addressing the $4.4 Trillion Opportunity Gap 6:54 - Innovating Philanthropic and Private Capital 9:59 - Understanding Donor-Advised Funds (DAFs) 12:47 - Transparency, Reform, and Innovation in DAFs 20:41 - Optimism for Closing the Opportunity Gap  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Hi, I'm Allie Jackson Jolly. I'm here with Brooke Daniels. She is the co-founder of Operation

00:10Wellspring. Brooke, welcome and thanks for being here with us. Thank you. I'm excited to be here.

00:16Yeah, so Brooke, Project Wellspring describes itself as, I wrote it down because it's a lot

00:21of words, part donor advised fund platform, part economic development engine, and part investment

00:29group. That's a lot of hats, but in layman's terms, tell us what that means, what you're trying to

00:36build here, and why now? Absolutely. So we would say Project Wellspring is definitely focused on

00:43being an economic development engine, and we want to be the jail in the ecosystem. We started,

00:49I'll tell you a little bit about our origin story, started when me and my other partners,

00:53all of whom have backgrounds across finance, venture capital, family offices. We noticed that a lot of

01:00our peers were doing really great work to try to solve gaps around mostly wealth equality, but all

01:06that work was siloed, and so no one was sharing resources in a really great way. We weren't

01:11sharing knowledge. It was very much build your own, and we said something has to change about that

01:16because we're not going to go far enough, fast enough, if we can't find a way to collaborate and

01:20work together. And so out of that idea, we actually brought together a room of folks we knew in the

01:26community that were doing the work. We had over a billion in AUM represented in the room, and we

01:31said if we build Project Wellspring and build this engine that can be the jail in the ecosystem,

01:36will this activate us in a different way? Wait, say that number again for me. Was it 8M million or

01:418 billion? It was over a billion AUM in asset center management across maybe 40 folks in the room,

01:48and we did this in Atlanta, and just painted the vision of how we wanted to unlock capital,

01:52how we wanted to take a new approach to building systems to solve the wealth equality gap, and it

01:58was just great feedback about, yes, please build it. We would love to do this work, and that was how

02:03Project Wellspring started. Yeah, but the thing that's interesting to me is that I know that you have

02:09quite a career path in VC and in finance. You've worked for some of the largest institutional

02:18company platforms that there are, Salesforce Ventures, I have, tell me if I'm correct,

02:25because I pulled this from your bio, Tech Star, Pharrell Williams, Black Ambition.

02:30So you moved from that to founding Project Wellspring. I'm curious, what couldn't you do inside of those

02:41gigantic platforms that you want to do here with Project Wellspring?

02:48Great question, Allie. So that's actually a large part of our thesis. One, I would say I'd have

02:54fantastic experiences working at these companies and really learning the game. Like with venture capital,

02:59a lot of it is around knowledge and demystifying venture. You hear it, if you're not exposed to it,

03:05it's like, man, that's complicated, and what is it? And it can actually be intimidating, right,

03:11from creating access for people. And so when I've been in these different groups, and transparently,

03:16I still do mentor for groups like Black Ambition and Tech Stars, and so a lot of that is just sharing

03:21that knowledge in the ecosystem. But I did notice that you're still within the constructs of what

03:26those systems are trying to achieve. And so while we do have the flexibility to think about how we

03:32bring others along, we're still building alongside of a mandate. Whereas what we're doing at Project

03:36Wellspring is really around moving from incremental changes in existing systems to creating new systems

03:43that can go a lot faster. And we just didn't have the ability to bring that level of innovation

03:48in existing systems. Okay, so let's shift for a second. You've cited a $4.4 trillion, with a T,

03:56opportunity gap. What's being left on the table? I guess I should say, can you describe what that,

04:04where are you identifying that $4.4 trillion? What are you calling that? What's being left on the table?

04:11And who's missing out by this gap existing? So America is missing out by the gap. And I always

04:20take a step back to talk about it in the lens of not just the impact from the lens of the groups that

04:27aren't getting a chance to build wealth through that opportunity, but also the lens of what does

04:31that mean for us and how we compete on a global stage. And I think right now, as everyone can see,

04:37there are threats globally everywhere, right? Not just physical, but a lot are intellectual

04:41and also driven around AI and how do we keep up and what's driving the next. All of that has to do

04:48with how we harvest talent, we support talent, how we pour into talent in this country. And so we would

04:54argue that America does not have the luxury to leave behind 60 million, 70 million Americans who just

05:00don't get funded. We're missing out on that talent. And so luckily, there's a lot of research now that goes

05:06out that talks about this annual 4.4 trillion gap. And that's a combination of not funding women,

05:12right? Certain founders of color. It's around geographic locations that are left out because

05:16so much funding still goes to San Francisco and New York and specific geographies. And so we're looking

05:22across all of those different lens when we think about how to capture that opportunity gap.

05:26And what are the mechanisms that are in place that allow that gap to continue to exist?

05:33Yeah. So there's really, I would say, three or four areas that we're focused on when it comes

05:38to removing barriers. And I like to wrap it around a story because when we talk to people about this

05:44work, it really is along the lines of, because it's part philanthropic with the donor advised fund,

05:50but we're aligning that with private capital. And so we ask people, are we trying to solve problems

05:56at the root or are we trying to bandaid problems? Like, what would it look like? This is how we start

06:01every strategy conversation is how could we solve the wealth gap for good, period? Just get rid of

06:08it. And we want to think that big when we look at different mechanisms and strategies to activate

06:12on that mission. And so a lot of times we'll see philanthropic capital that's focused specifically

06:18on granting and focused on solving for the bandaid and the solutions that are happening now.

06:23We absolutely have to do that, but we also have to go upstream and look at the actual problems and

06:28how we solve the problems at the root of the cause. And so that's what we're focused on here.

06:33We always say, do you want to keep building backpacks and giving out backpacks every year

06:36that make us feel good? I've done a lot of those projects, or do we want to build a world where we

06:41no longer have to give out backpacks? You know, there's a lot of talk about the tension between

06:47philanthropy, funders, and founders, right? Because that's what you're, at the end of the day,

06:54it sounds to me like Project Wellspring is trying to work across sectors. How do you, I guess,

07:02flatten out that friction? How do you create an ecosystem of these three different, very, you

07:09know, very different groups that can look at the same problem and work together with a really,

07:16to your point, with a very different mandate? Because a philanthropy mandate is a very different

07:21mandate than an investor mandate, which is a different mandate than a founder's mandate.

07:27They are different, but they're not as different as you would think. And that's part of what we're

07:32trying to bring together. There's always been this idea that we put wealth in one bucket,

07:36right, of all the strategies we do to build wealth, maintain it, protect it, and then the other bucket,

07:41we have impact. And we see that play out over and over again. And I actually think that's why

07:46certain vehicles, like donor-advised funds, can get a bad rap. We all know there's $230 billion

07:52locked up in these donor-advised funds, but it's because they've been taught this very traditional,

07:57almost endowment model of like preserving assets to do impact. And so what you see that what happens

08:03is the bulk of that capital, which we would call kind of the corpus, 90% of it, is locked up in

08:09traditional investments. A lot of it's public equities. And then they're only allowed to grant,

08:14you know, 5%, 10% off the top. And it kind of continues with this cycle. And so what we're

08:20arguing is like actually having 90% of that capital locked up in these entrenched systems

08:24is causing a lot more harm, right, than you can, depending on where the assets are,

08:30than you can make up for by deploying 5% of capital that goes out in grants.

08:34And so it's actually more of a yes and for us. It's like we absolutely have to do grant work.

08:39We absolutely have to support people who are in need today. However, what does it look like if we

08:45truly innovate and redirect a part of that 90% corpus that traditionally goes into stocks, ETFs,

08:51mutual funds? What does that look like if we redirect that capital into impact investments as well

08:56that are solving problems upstream versus just at the root of the actual symptom that we're

09:02experiencing today? Okay, great. And so let's talk a bit more about donor-advised funds. First of all,

09:08you shouted it out when we first started, which is a lot of BC financial terms is jargony that keeps

09:19people out of understanding. So first for our audience that doesn't know, I'm sure plenty of

09:24them do, will you define donor-advised funds for us? Absolutely, absolutely. So donor-advised funds

09:32are vehicles that have actually been around for quite a long time, since the 1930s, but they've just

09:37historically been used by ultra high net worth individuals. But they work in a fashion where

09:44you're able to grant or gift, make donations into these donor-advised funds, and they help reduce

09:51tax liability. You get a deduction for making those grants, investments, contributions into these donor-advised

09:57funds. However, you don't have to deploy that capital right away. That's what a lot of people

10:03like about it still gives you flexibility to be thoughtful on how you deploy that capital.

10:08And where we're starting to bring innovation and donor-advised funds is how you can deploy that

10:12capital. And so even though I know they get a bad rap and philanthropy right now is really struggling,

10:18right, with looking at how they find more sustainable ways to build and grow. And so a lot of people are

10:23looking at how do we activate those donor-advised fund dollars. But we would argue that part of it is

10:28also meeting people where they are and understanding that when you look at these accounts where people

10:33have 10 million, 20 million, 50 million, they've had some type of exit event, and now they've decided

10:39they want to put this capital to work for good, most people have been taught this method of preserve

10:46that aspect, grant off the top. And so we're trying to introduce systems where that capital works

10:52alongside each other. So not only are we granting, how do we create platforms that allow that impact

10:58innovation on the donor-advised fund? In today's world, unless you're working with independent

11:03platforms like our own, usually if you're just working with a financial platform on the donor-advised

11:08fund side, you really don't have a lot of choice on where those dollars are invested. Some will ask you

11:14to decide if you want conservative, more, you get one, two, three buckets, we're going to decide where all

11:18those dollars are placed. And so honestly, donors, wealth managers, family offices haven't been

11:23empowered through the right platforms to do the work that we're talking about doing. But our platform

11:29is bringing a level of innovation to that, both from the lens of more flexibility in how we deploy

11:33those investments that then fuel impact from a different lens. So it doesn't have to be, that's

11:39kind of the part we're trying to break is this lens of like, I make my wealth over here with these

11:43strategies. And then the only way to have impact from a philanthropic lens is granting. And we're saying

11:48yes, and it must go in tandem with the impact investing.

11:51And then so how about you did mention that donor-advised funds, or I'm going to use their

11:55short term because it's a mouthful, DAFs, have gotten a bad rap. And part of that is around lack

12:03of transparency. So I do hear you saying that you're focused on creating a more innovative system

12:11that provides more flexibility. Does it also provide more transparency? Question number one.

12:18Question number two. Some folks think that there needs to be reform around DAFs. Do you believe

12:24that? Or do you think that there is space for new types of systems to innovate within the current

12:33infrastructure? Absolutely the latter. I think there is a plenty of room to innovate. And we're

12:41already seeing a lot of traction with it, right? Not just with our clients, but just across the board in

12:46the industry, a lot of the partners that we're working with right now are starting to shift into

12:50this model. I would say, especially with some of the new proposed tax changes that are coming out that

12:56may increase the amount of taxes on investment revenue with foundations, we anticipate that's going

13:01to accelerate the transition out of foundations into DAFs. It's already been increasing because of the

13:08flexibility they allow for. And so the different innovations we are bringing, we think it's more to

13:14your question about picking the right partner for you to activate in the way that you want to activate

13:20and less about regulation trying to drive that behavior. I mean, the donors and partners and family

13:25offices, investors, folks that we work with are very excited about how they can put capital to work

13:30in more interesting ways. And so even at Project Wellspring, we have this notion of collectives where we

13:36bring together groups around certain themes. So we have a sports and entertainment collective that looks at

13:42how our investors who are building wealth and sports and entertainment also want to put dollars to

13:47work for impact. And so an example of that is with the World Cup coming to Atlanta and then LA is getting

13:53the Olympics, right? How do we also look at some of that capital flowing into programs that support the

14:00local community and small businesses? How do we help them build wealth and accelerate their business

14:05growth when these events come to town? And not just one time, but growth that drives them into the

14:10future. And so working with partners around these different themes and theses has been super,

14:16super, I would, catalytic is probably the right word for the impact it's having. We have another

14:21collective that's also focused on community lending, place-based lending. How do we help bring more

14:27capital, both private and philanthropic, to CDFIs? We're looking at franchising as a way to help build

14:33wealth in communities. And so the tools we're using actually look a lot like investments,

14:38but we're bringing that to philanthropic capital as well.

14:41So I'm curious about you. You have built a career in some very elite rooms, rooms that don't necessarily

14:52usually hold space for people that look like you or like myself. How did you find your way,

15:02make your way, create space for yourself in those rooms? And what's your advice for others, either other

15:11aspirational funders or founders who think that there's not usually space in those rooms? How do you

15:19get there? What's your advice? So it is about, I feel like truly opportunity, right? When talent and drive and

15:28ambition meets opportunity, it's actually the essence of what we're trying to capture in our thesis with Project

15:33Wellspring is how do we bring opportunity to areas that are overlooked? I'm originally from South Carolina. My granddad was a

15:41sharecropper. Dad worked in factories. My mom was a teacher. And so nowhere, even though I had a great

15:47education and upbringing, there was nowhere in there that we were talking about venture capital and

15:51finance. It just wasn't what we were exposed to. And in South Carolina in general, there's not this

15:56amazing venture market right happening for you to just go intern at XYZ Place or any of those opportunities.

16:02And so for me, it truly was my junior year of college. My German professor literally printed out an

16:09application and put it on my desk and was like, apply. And it was an invitation to apply for a U.S. State

16:16Department and German Bundestag program called CBYX. But it was to create better business relationships

16:23between the U.S. and Germany. And I never heard of it before. He literally just pushed across my desk.

16:28And I ended up being one of 150 Americans that got to actually with 75 Americans and the other way with 150

16:35Germans that came to America. But we got to go abroad as part of this U.S. State Department youth exchange

16:41program. And that led me to working at BMW Financial Services. And so that entirely changed my career, career

16:49coming back. And I just think it speaks to how one opportunity can really can really change things. The other lens I'll put to

16:56that, too, because I know part of it is we we tend to look at talent as being focused in specific areas.

17:03It's just it's a bias we all have right about universities and where we went to school and how

17:07people are who are in our fraternities or sororities. It's very natural. And so when I actually first broke

17:13into my career at Silicon Valley, one of my mentors ended up working for a startup company and she invited me to

17:20apply, went through. I knew this job in my soul was for me, had great interviews. One of the leaders

17:27was like, this is the best interview I've ever had. And yet I was originally declined for the role because

17:32I didn't live in Palo Alto. And there was a preference to just hire someone locally in Palo Alto. And at this

17:37point in time, I was still in the Carolinas. And so three weeks go by and I actually get a call back

17:44directly from the C-suite. And they said, you know what, we interviewed all these other people in Palo

17:48Alto, but none are as good as you. And so we're going to make an exception and you're going to be

17:52the first first North Carolina hire that we we bring on board. And the rest is history, right? I spent

17:58seven years there, all the things, M&A experience, led a practice group, grew with this company as a very

18:04early employee, private company through IPO, sprang board into Salesforce and all the things. But it goes back

18:10to finding people who really will take a chance and give you an opportunity, even if you don't

18:15look on paper, do you know, like what you think you need really being open minded to what talent looks

18:21like. Yeah, I love it. That sounded like that was a lesson for our managers and C-suite and, and talent

18:33recruiters. Or so that for them, like the talent, right? Because the talent, because that was, your

18:42story was the opportunity that somebody helped you see. Now it was your drive that decided, okay, I'm

18:48going to put the application in and do something way out of my comfort zone. But to your point, if that

18:54one individual hadn't, that German professor hadn't put that on your table, who knows where your career

19:00would have taken you. Exactly, exactly. Okay, so we're almost out of time. But I have a final question

19:08for you. It's been quite a year, right? There's been lots of pushback on programs that create access

19:18to equity. It's been a year. But what makes you optimistic that we can close this 4.4 trillion

19:27opportunity gap? You're a little younger than me. So I'll say in your lifetime.

19:33I am very optimistic because I, I think in times of, of need, and I think this is a time of need,

19:40that everyone can identify no matter what your passion is, right? What you care about. This is

19:45a time of need just across the board. And so it actually makes us challenge our norms, you know,

19:51on how we operate, how we think about capital, how we think about impact. And so there are a lot of bright

19:56spots. A few that we're seeing is with this wealth transfer that's happening, right? That's going to

20:01the next generation. Generationally, as you, as you brought up, the way that people think about

20:07deploying their capital looks different, right? G2s maybe didn't make their money the same way that

20:12their parents did. And they have different expectations for how they want to see that

20:16money show up in the world. A lot more conversations are happening about both wealth and legacy.

20:21Across the board, we're seeing more collective giving. I could say Project Wellspring in some

20:27ways is that because we're not actually trying to just build this massive shop in the middle,

20:32right? We're actually trying to be lean and link arms and partner, but look across the ecosystem and

20:37fund the ecosystem, but bring in expertise across all of these areas. But giving circles have come back

20:42in full force. We've seen quite a few organizations that are bringing back giving circles in a powerful way.

20:47And in some ways, CapTable Coalition, which is an angel investing group I'm a part of, is exactly that,

20:54right? It's a group of people that are coming together to deploy capital and do deals in a

20:58specific way. And so I think that's a bright spot that we're seeing to continue to fund deals.

21:04The last thing I'll leave you with on the opportunity gap is that I do think in some ways this does give

21:10us an opportunity to really reframe the opportunity gap, not just in the lens of what it does for

21:16people and individuals from a charitable aspect, but what does it do for our economy,

21:22for the global economy when we look at it differently? Again, we cannot, if we're trying

21:27to achieve our goals, ignore a third of Americans and think that we're going to activate on a global

21:33scale. We simply can't compete. And so lots of emotions around the way that things have been going,

21:40but I focus on the positive and the good work that I see come out of it. And I do think by shifting

21:45into the 4.4 trillion annual opportunity gap, what does that look like when we activate more women,

21:51right? We bring more investors along, more people of color. What does that look like when we give them

21:55the opportunity, not just for their individual lives, but for our country and on the global scale?

22:00And so those types of activations and conversations are actually bringing a lot of energy to the work.

22:05Yeah, great. I love it. Now we are out of time. Brooke, thanks so much for joining us. And let's

22:12do it again soon. Thank you for having me, Allie. And for anyone that's out there, I would say we work

22:17with a lot of different groups. So if you are a family office, a donor, investor, maybe a wealth manager,

22:25or just a partner who's also excited about doing this work in the ecosystem, building shared success

22:30around solving for wealth equity, we absolutely would love to hear from you.

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