Where does new technology come from? The ideal answer is “smart people.” The real answer is “smart people with money.”
The United States of America has historically been touted as a place of pioneers and innovators, but the freedom to carve out new scientific territory requires more than a plucky demeanor. It requires equipment, time, dedicated staff and (if you intend to keep them) occasional days off for good behavior. And none of those things comes cheap. Even when you are fortunate enough to get the whole kit and caboodle, you may spend years of research and development only to end up with absolutely nothing to show for it. It’s not the soundest business model, which is why government plays a key role in funding new technology.
In the 2011 Economic Report of the President, White House economists pointed out how integral new technology has been to both the nation’s wealth and its health. “For example, advances in transportation were made possible by the invention and diffusion of numerous technologies,” they wrote, “including engines, trains, automobiles, and airplanes. People and goods can now cross the country in six hours instead of months.” And while the private sector has contributed to such innovations, the capitalist ethic demands some promise before scientists see a dime. “[B]asic scientific breakthroughs in engineering, genetics, chemistry, and many other fields underpin commercial innovation,” the authors wrote, “but provide little or no direct profit themselves, so basic scientific research relies heavily on public support.”
Public funding is critical to supporting that basic, ground-level research. Unfortunately, this public funding has fallen steadily since the 1960s. More recently, federal funding to university research has stagnated, growing less than one percent between 2005 and 2010. According to a 2013 study by MIT’s Fiona Murray, state funding declined during this same period. .
Funding has also fluctuated throughout various crises and political administrations. As Joseph V. Kennedy, former Chief Economist of the US Department of Commerce, points out, energy research accounted for 12.6 percent of federal R&D outlays during the 1979 oil crisis but fell to 3.7 percent in 1990 and to 0.9 percent in 2008. Under President Barack Obama, Kennedy writes, that percentage jumped up to 2.6 percent in 2011, “partly due to the relatively large amount of stimulus money devoted to energy research.”
But that of course is the point. When the federal government realized foreign oil was strangling the economy, they gave alternative energy research a shot in the arm. But once the crisis was over, the money dried up. And while President Obama has made ambitious efforts to fund clean energy, there’s no guarantee his successors will do the same.
That’s why Christian Braemer, CEO and co-founder of Benefunder, thinks there might be a better way to give money to smart people.
Benefunder: A Foundation for Innovation
A serial entrepreneur, Braemer has been building brands and leading startups for over a decade. His foundation, Benefunder, is filling the public funding gap with an opportunity for socially responsible investment. And while taking a business approach to philanthropy may seem unorthodox, Braemer is uniquely suited to the attempt. He’s worked on both sides of the financial divide, serving as both an advisor for Merrill Lynch and Morgan Stanley and as a leader and volunteer in several non-profits, including as President of the Swedish American Chamber of Commerce, San Diego, and as the co-founder of Hunger at Home.
If Braemer’s aptitude for wealth management makes him ideally suited to steering this new enterprise, his passion for running non-profits is what keeps it on an even course. It’s a passion that has not diverted his frustration with the traditional non-profit model. “It never felt like [non-profits] were quite accountable enough,” he told Planet Experts, “and didn’t really treat donors like customers. And the overhead system has been kind of broken.”
Braemer is convinced Benefunder can fix that system, and that conviction is rooted in a deeply personal experience. “My sister and her husband’s younger son came down with a rare liver cancer at the age of four,” he explained. “It was obviously a traumatic experience for the family.” Yet Braemer’s nephew was fortunate in that his parents are both doctors. “They kind of had the red carpets rolled out wherever they wanted to go,” said Braemer. They chose a university-affiliated children’s hospital in Northern California, and a year later the medical team happily proclaimed the nephew cancer-free.
Obviously grateful, Braemer’s sister and husband wanted to donate to the university’s research division. But that was easier said than done. “He’s now cancer-free,” said Braemer, “and the family’s thinking about, ‘How do we give back?’ ‘How do we support the research that basically saved his life so that we can further it and hopefully save others in the same situation?’ And that’s where they met with a bunch of barriers.”
According to Braemer, when the family asked the researchers how they could support the research specifically, they were told that by the time the money goes through the university system, there’s little left for the research itself. The researchers said that they were better off giving money to the American Cancer Society, which is where they obtained most of their grants.
“So I went and looked at the IRS filings,” said Braemer, “and I saw that there was about 73 percent overhead that year. [The 2015 breakdown is available here.] I couldn’t pick which researchers got funded and I certainly wouldn’t be told what happened. At that moment, I went, you know, there’s a much bigger problem at play here.” Braemer then thought of starting a family foundation. That, too, was easier said than done. “It takes a couple of years to get your IRS certification and you’ve got to hire a scientific committee to advise you. […] So you’re basically a couple years and a couple hundred-thousand dollars in overhead before you write the first check. I couldn’t believe it. I said, this is ridiculous.
“And there was a donor problem,” he added. “I started looking at some of the metrics and I found out that only about three percent of philanthropy actually goes to research, which – when you think about it, when you look at both the social and economic return on investment – it’s the best thing for your buck.”
In checking Braemer’s numbers, the argument could be made that he is actually too generous. According to the National Philanthropic Trust, Americans in 2014 gave $358.38 billion to charity. The largest chunk of that, $258.5 billion, came from individuals, followed by foundations, bequests and corporations respectively. Roughly half of that money went to religion (32 percent) and education (15 percent). Meanwhile, charitable funding received by university-based scientific, engineering and medical research in the US (including endowments) amounts to $7 billion, according to MIT’s Dr. Murray. That would mean 1.9 percent of US philanthropy is actually going to research. But, if we limit our dataset to just individual donors ($258.5 billion), that percentage climbs to 2.7 percent.
Benefunder emerged from Braemer’s desire to fix “the mismatch of need vs. resources” in philanthropy by creating a scalable and more efficient fundraising channel. “Because in most non-profits,” he explained, “the highest expense is actually the fundraising itself. We didn’t want to fall into the same trap as most foundations, where you hire these headhunters that are very expensive, and they go out and get results, and you fire ‘em. We thought, ‘there has to be a better way.’”
What Does Benefunder Do?
Through its Charitable Innovation Fund, Benefunder connects donors to researchers across multiple fields of study, including healthcare, life sciences, advanced technologies, the environment, and the arts and humanities.
Benefunder allows its donors to, in effect, crowd-fund research projects they’re interested in. Its “mutual-funding” platform, however, is distinct from your typical crowdfunder in several key ways. As Braemer explained, “I think the general understanding of crowdfunding today is you have a project that has a beginning and an end, there’s an outcome, there’s a deliverable and there’s a finite amount of money needed. In our case, most of the projects we have on our site, there is no defined end, or the end might be 20 years down the road.” Another important distinction: Benefunder targets high networth individuals, rather than anyone who wants to kick in a dollar or two.
Benefunders are also encouraged to diversify their giving portfolios. Say you have one area that you really want to give to, like cancer research. Benefunder allows a donor to contribute to a particular cancer researcher, or “multiple researchers that are working on the same thing,” Braemer explained. “Because you really never know which solution or treatment will make it to the market.” The system also enables researchers in various fields to benefit from the broad safety net that Benefunder provides. “From a researcher’s side,” said Braemer, “you don’t want to be in a position where you lose your one donor and have to make changes to how you run your lab. It’s better to have a diversity of donors that back you.”
Current Benefunder Projects
Benefunder provides an easy-to-use interface for visitors to see the various causes it’s funding. As of this writing, Benefunder has more than 650 researchers on its platform. A few highlights:
Failsafe Roads (project led by Dr. Olivia Graeve, University of California, San Diego)
- The Problem: It’s no secret that the United States highway system is in trouble. The Tex Wash bridge between California and Arizona was declared functionally obsolete in 2013 and collapsed in 2015. Thankfully, there were no casualties. But when the I-35W bridge over the Mississippi River in Minneapolis collapsed in 2007, it killed 13 people and injured 145. The Federal Highway Administration estimates that it will take $170 billion per year to improve the conditions and performance of US roads.
- The Solution: Dr. Graeve’s research is focusing on the synthesis and processing of nanostructured materials that would make safer, stronger roads. The material even glows when it cracks, preventing further damage and catastrophes.
Curing Autism (Dr. Jay Gargus, University of California, Irvine)
- The Problem: Severe autism can be overwhelming to a family and prevent parents from connecting and communicating with their children.
- The Solution: UCI researchers are investigating how malfunctioning genes affect the common pathways implicated in Autism Spectrum Disorder in order to test the effects and treat the core defects. These researchers are working towards developing new drugs that can mend these pathways and treat the various disorders associated with the autism spectrum.
Bendable Solar Tarps (Dr. Darren Lipomi, University of California, San Diego)
- The Problem: Current solar panels are expensive, heavy and fragile.
- The Solution: A solar panel thinner than a human hair that can be wadded up into a grapefruit-sized ball and unfurled wherever you want. Dr. Lipomi is developing semiconducting materials that are inexpensive, made of plastic and have the physical properties of rubber. “They’re very close to commercialization,” Braemer said. “They’re about a year [or] year and a half out and don’t need a whole lot more money to get to that stage. That’s a great example of someone where I don’t have to come in and fund the lab with philanthropic dollars. It’s about taking the research to the next level, and that’s exactly the kind of thing we want to facilitate.”
Using Stem Cells to Repair the Brain (Dr. Medha Pathak, University of California, Irvine)
- The Problem(s): Alzheimer’s disease, Parkinson’s, spinal cord injury, stroke.
- The Solution: Dr. Pathak’s research is focused on manipulating the Piezo1 protein inside braincells to stave off the effects of neurodegenerative diseases.
Bringing Dinosaurs Back From the Dead (Dr. Beth Shapiro, University of California, Santa Cruz)
- The Problem: We don’t have dinosaurs.
- The Solution: Making dinosaurs. While it’s impossible to resurrect a creature that’s been dead for millions of years, it is possible to reconstruct dinosaur genomes using genome editing technologies. The technology also has applications in extracting more and better quality DNA from older and less well-preserved specimens.
These are a fraction of the fascinating projects currently being Benefunded. I highly recommend checking out the full list.
Making an Impact Through Socially Responsible Investing
Naturally, Benefunder’s model has its critics. Funding this type of research has been almost the sole province of the government since World War II.
“This whole notion of impact investing through philanthropy is still very new,” said Braemer, “and there are definitely two sides of the aisle, one that would say philanthropy has no business getting involved in for-profit and equity, and the other that would say, ‘Well, how else are we going to get this done?’”
Benefunder represents a small part of a much larger financial movement that has taken shape over the last two decades, that of socially-responsible investing (SRI). As Greg Wendt, a Senior Wealth Advisor at StakeHolders Capital and the founder of the Green Economy Think Tank explains, SRI embraces the idea that making money and doing good are not mutually-exclusive enterprises.
“[T]he idea that the economy is a closed system where everything is separate from everything else is a totally false premise,” Wendt told Planet Experts in 2014. “In reality everything is an open system and everything is connected.”
Through SRI (which falls under a larger movement known as impact investing), businesses and people can become more conscious of how money is shaping their world. “You can’t really say that the economy is separate from everything else like a machine that just spits out money and we spend it,” said Wendt.
Don Shaffer, President and CEO of RSF Social Finance, agrees. When I spoke to Shaffer in July, he claimed that many young entrepreneurs are taking an active interest in more than just the bottom line. “What they’re interested in doing is having a very positive, beneficial effect on life as we know it through their business activities,” he said. RSF Social Finance, his San Francisco-based non-profit, acts as a combination bank and foundation to empower social enterprises like RecycleForce, an electronic waste disposal business that offers job training and employment to former inmates.
“[W]e’re seeing a new kind of investor emerge,” said Shaffer, “who instead of just saying what they don’t want to invest in – tobacco or firearms or what have you – wants to find things to invest in that are doing good.”
It’s a trend that isn’t limited to investors, said Braemer, but consumers, too. “You’re seeing consumers now becoming more educated and making buying decisions based on how socially responsible a company is,” he said. “We’re seeing the emergence of corporate social responsibility, and there’s a lot of it out there.”
This trend can backfire, though, such as when a company wants to appear socially responsible but is anything but. “I mean, look at what Volkswagen did,” said Braemer. “They went above and beyond to show how socially responsible they were, to the point that they committed fraud.”
Is Benefunder the Only Way?
The last thing Braemer wants is the for-profit philanthropy model to replace government funding. But he does see plenty of room for more foundations like his in the space. “What I want to do is show the marketplace that there is an alternative,” he said. “It sounds altruistic to say this, but I’d love to let the copycats in. That would be a perfect validation this model is real and it’s working, but also at the end of the day we all benefit from it.”
Foundations like Benefunder can also bridge the gaps in philanthropic funding and help researchers avoid falling into the “valleys of death” that prohibit their work from reaching the next stage. Some valleys open up in early development, others in later stages of commercialization when a company is formed and needs capitalization. “There’s a huge valley of death until around the seed round or A-round,” he explained, “when there’s a real milestone, there’s customers, there’s revenue, all these things that are proof points that this company is going to work out. But until then there’s nothing.”
Whenever there’s a gap, said Braemer, it’s an opportunity for disruption and entrepreneurship. “I think philanthropy is one of those spaces that really hasn’t been disrupted.”
There’s also the future to consider, and America’s position as a global innovator.
“In our current funding situation,” said Braemer, “it is a matter of time before we are no longer the innovation leader in the world. When that happens…venture capitals are going to leave, we’re no longer going to be home to the primary innovators. It means jobs, it means industries. There’s a long-tail effect to losing that position, and right now our best bet is philanthropy in filling that gap.”
The Clean Energy Impact Fund
Right now, Benefunder is aiming to create the largest Clean Energy Impact Fund available on both a public and private platform, with a target donation $200,000 per researcher.
The Clean Energy Impact Fund was created to “buil[d] relationships with a national network of top innovators and convening donors to solve our nation’s biggest energy issues,” and while it is targeted at high net worth donors, it is open to all levels of giving. “You can come in at a lower donor amount,” said Braemer. “This is kind of a new product for us, and this particular product, anyone can contribute to. If you wanted to give $100, you can do that with this fund. Unlike public charity, you know exactly where your money’s going, you know exactly what the ordinance is, and you get to participate in the outcomes.”
Funding these clean energy initiatives will span “early-stage research through commercialization, and early stage debt and equity positions in promising technologies that might be too risky or early for more traditional funding.” Such initiatives include Lipomi’s solar tarps, printable solar cells, new materials for tomorrow’s clean energy technology, improving solar energy conversion, harvesting thermal energy, producing algae-based food and energy, biofuels, nuclear energy without nuclear waste, and many more. Check out the full list here.
“This is a platform for communication and really getting the story out there about the importance of clean energy research,” said Braemer. “By shifting the traditional expensive and time-consuming grant funding model, Benefunder is putting more resources in the hands of innovators, while providing more transparency to donors. Our nation’s academic research institutions are one of our most important infrastructures. Increasing funding in the clean energy space is one of the wisest investments we can all make, and Benefunder is here to make it easy, fun, and efficient, while allowing donors to make a deeper impact for current and future generations.”