NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

What if the best way to ensure your philanthropic legacy … was to close your doors?

The stakes today for philanthropic funders are higher than ever. From climate change to deepening inequality to threats against democracy, the world’s most pressing problems demand urgent, bold and time-bound action. Incremental giving over generations often falls short. That’s why a growing number of funders are rethinking the traditional “give away 5% of the endowment annually, forever” model and choosing instead to “sunset” their operations — deliberately spending down their assets within a defined timeframe to maximize their impact now, when it’s needed most.

This article explores how impact investing can be a strategic enabler of this approach, which we refer to as “catalytic sunsetting.” Drawing from seminal concepts like “catalytic philanthropy” and the “What’s Your End Game?” framework, it will outline how family offices and foundations can not only exit with intention, but leave behind resilient, self-sustaining ecosystems of change. Linked Foundation, a private foundation based in California, has been walking this path since 2005, strategically deploying a $20 million corpus over the past 20 years to improve health and economic self-reliance for women in Latin America and the U.S. By seeking to prioritize impact first (rather than prioritizing the maintenance of the endowment), we’ve been able to front-load capital aimed at catalyzing systemic change, building lasting institutions and attracting co-investment at a scale that small perpetual payouts rarely achieve.

Below, we’ll discuss what the foundation has learned, outlining three strategies — which we call the “ABCs of Catalytic Sunsetting” — that can help any funder spend down with purpose and power and amplify its impact.

A – Activate Sustainable Social Enterprise Models

Foundations often start by funding direct services. But sunsetting funders must go further: They must help build models that can stand on their own.

Linked Foundation worked with Global Partnerships (GP) to put this approach into practice, leveraging the two organizations’ complementary strengths and resources to support early-stage health enterprises in Latin America. The foundation provided capital and health-impact analysis to these businesses, while GP contributed financial due diligence, international underwriting and loan servicing.

For instance, we provided early catalytic debt funding to SalaUno, a Mexican eye-care enterprise that used this support to expand its reach into rural areas. This financing helped the enterprise open up two of its first clinics in poorer communities, by supplying it with flexible debt capital that is often hard to obtain in the commercial market. The foundation also provided a grant to help SalaUno develop a technology platform that created greater operational efficiency and allowed for data collection. Similarly, Clínicas del Azúcar (CDA) — now Mexico’s largest private diabetes care network — was able to start to scale due to an early loan from Linked Foundation and GP that helped it open its first clinics. Shortly thereafter, as our familiarity with the company’s needs and vision grew, we offered an additional grant to enable it to launch a call center that unlocked deeper impact: increased appointment retention, better outcomes and a sustainable job-creation model that is now core to CDA’s operations

In both cases, catalytic capital provided these businesses with a bridge to sustainability that a smaller, renewable annual grant could not have accomplished.

B – Build Complementary Partnerships

With a ticking clock, sunsetting funders can’t go it alone. Instead, they must build alliances that outlast them.

Linked Foundation’s partnership with GP showed how complementary assets can create a multiplier effect. GP brought rigorous financial underwriting; the foundation contributed patient capital and a health equity lens. Together, the partnership backed ventures that neither organization could have supported alone — de-risking innovation in maternal care (Reina Madre), eye care (SalaUno) and diabetes prevention (CDA) across Mexico.

But our partnerships didn’t stop there. In 2020, Linked Foundation joined forces with New Ventures Capital, a Latin American impact investor, to co-create Empodera 360 — a women’s health-focused accelerator that blended capital with hands-on support. Over three years, the accelerator nurtured early-stage health social enterprises, tested new revenue models and built the pipeline for a follow-on investment fund: Empodera Impact Capital, launched in 2023 with a $30 million target and a goal to reach 3 million women with quality care.

These collaborations show how sunsetting funders can seed ecosystems, not just individual organizations, by enabling a shift in mindset — from “which organizations will we select as ongoing recipients of annual grants” to “what resources do organizations need to solve specific social issues now.”

C – Catalyze Additional Capital with Impact

Spending down doesn’t mean scaling back. In fact, it’s a unique opportunity to crowd in more capital aligned to your mission.

Sometimes that means absorbing early risk, as Linked Foundation did by participating in an innovative loan guarantee model with MCE Social Capital, a nonprofit impact investing firm that provides flexible capital to financial services providers and small businesses in emerging markets. This approach offers a fascinating opportunity to “leverage up” philanthropy by providing a modest amount of grant funding that covers the shared portfolio loan loss (along with other guarantors), derisking investments and unlocking additional loans that far exceed the original donation amount.

Other times, spending down means field-building: For instance, Linked Foundation funded regional healthcare market analyses conducted by the William Davidson Institute (NextBillion’s parent organization), and provided funding and other support to the first global GenderSmart Investing Summit (now 2X Global), helping to shape early thinking around gender-lens investing.

These interventions helped spark new investor interest, strengthen capital infrastructure and build the case for greater investment in sectors — like women’s health — that had long been overlooked.

The Case for Catalytic Sunsetting

Sunsetting, when done intentionally, offers six strategic advantages:

• Urgency and focus: With a time limit on operations, every dollar, every year, matters more.
• Risk tolerance: With no legacy to preserve, bold bets become easier to make.
• Ecosystem building: Planning your exit forces other funders to step in — and step up.
• Capital leverage: Providing a clear timeline for when the funder will wind down operations draws in new funders and motivates longer-term partnerships aimed at deriving ongoing value from this funding, even after the sunsetting has concluded.
• Field-wide learning: When a funder or grant recipient isn’t focused on continually highlighting the impact of its funding in the hopes of sustaining it, transparency around challenges and failures becomes a feature, not a threat, generating learnings that can be applied by others.
• Strategic capital alignment: Sunsetting funders are often willing to use a variety of financial tools — from grants and debt, to equity and guarantees — enabling them to drive greater mission-aligned results than other funders, who tend to prefer more traditional funding instruments that may not work for some recipients.

Linked Foundation has seen the impact of these strategic advantages in our work. And we are not alone.

Tara Health Foundation, for example, is on a sunsetting path that will conclude in 2030. In its remaining years, it is working to channel catalytic capital into women’s health, maternal care and reproductive equity — helping shape a new market for gender-lens investing. From making direct equity investments to anchoring impact-first funds and supporting the launch of intermediaries like Rhia Ventures, Tara is proving how time-bound capital can influence private markets and public services simultaneously.

Atlantic Philanthropies spent down $8 billion by 2020, demonstrating the power of urgency, transparency and systemic investment. Its legacy includes not just the institutions it funded, but the ethos it inspired across philanthropy.

The Gates Foundation has also pledged to sunset by 2045 — underscoring that time-bound giving is gaining mainstream traction, even among the largest philanthropies.

In each case, sunsetting isn’t a retreat — it’s a strategy. And the legacy it enables isn’t in the longevity of the institution, but in the durability of the impact it leaves behind.

Where We Go From Here

Philanthropy is at a crossroads. The problems we face — from navigating climate change to strengthening the care economy — demand more than incrementalism. They require urgency, collaboration and capital that’s willing to lead.

We believe more funders should explore the path of catalytic sunsetting. It’s not just about closing down: It’s about activating the enterprises, partnerships and capital flows that will carry your mission forward.

Because in the end, your most enduring legacy isn’t the life of your foundation. It’s the lives your work has changed after you’re gone.

Nancy Swanson-Roberts is Executive Director at Linked Foundation; Kusi Hornberger is a Partner at Dalberg Capital.

Photo credit: photosaint