DAF Commons: The Next Step in Catalytic Capital

In 2019, MacArthur, Rockefeller and Omidyar launched the Catalytic Capital Consortium and gave our field a working definition. Catalytic capital is investment capital that is patient, risk-tolerant, concessionary, and flexible in ways that differ from conventional investment. Money that goes in early, stays in long, takes the first loss, and bends its terms to fit the deal. It was a gift to everyone doing economic justice work. We finally had language and the process for what we’d been begging for; a clear alternative to return-first impact investing.

The DAF Commons is the most welcome innovation in the economic justice capital stack since then. It’s the next step. It is even more patient. And it is willing to fund the unglamorous infrastructure that makes everything above it in the stack possible.

I sat down with Claire Raffel, one of its three co-founders, to understand why.

Three women who got tired of doing it alone

Claire, Alex and Lily Starling Louis are all inheritors and all DAF holders. Each had her own career. Each had come, on her own, to the realization that her DAF money could be doing a lot more, and each ran into the same walls: structural barriers, family barriers, psychological barriers. They worked through them alone and found it frustrating.

Then Claire, Alex Hammer Ducas and Katherine Katcher started a multi-donor fund together, the Collective Climate Justice Fund, investing in renewable energy with frontline communities. They discovered it was easier, more joyful, and they learned far more doing it together. That became the seed of the Commons.

“We’re not just sellers, we’re users,” Claire told me, invoking the old Hair Club for Men ad. “We’ve felt the pain personally, and between the three of us have probably made every mistake in the book."

Claire spent her career in public-sector food policy, fighting Big Food and Big Ag over federal, state and local programs that feed children. As a fundraiser, she scrapped for $50,000 grants her whole life. Then she learned how much money was sitting in DAFs. “Frankly, it was infuriating,” she said. “There’s money just sitting there making money.” Her organizer instinct saw the flip side right away: there’s real money there, if it can be moved.

The size of the prize

DAF holders steward roughly $330 billion in the U.S., a number poised to grow to trillions as the generational wealth transfer flows into these accounts. More than one in five charitable dollars in the US now flows through a DAF. Most of it sits in conventional market funds under a “grow to give” logic, where the money is invested in things that work against what the donor cares about while it waits to be given away.

The DAF Commons (on the $5b Impact Assets Donor Advised Fund platform) exists to change that story. Its work runs on three tracks: education on what’s possible, connectivity between DAF holders and the infrastructure they need, and narrative. That last one is the foundation. The goal is to shift the narrative from “grow it responsibly so you’ll have something to give later” to “make sure every dollar is doing good right now.” They aren’t purists about what that means. Grant more, great. Invest catalytically outside the market, great. But you don’t have to do what your financial advisor or your DAF sponsor tells you.

Their survey found that 80 percent of DAF holders want to collaborate with other DAF holders. That’s the signal. It’s also the answer to one of the most isolating features of the vehicle. As their site puts it, being a DAF holder can feel isolating and anonymous, and holders rarely see themselves as part of a group, let alone one with shared power.

Multi-donor funds as the on-ramp

The Commons treats multi-donor funds as the on-ramp, the way people learn to invest in community by doing it alongside peers. Collaboration lets DAF holders learn, experiment, and overcome high investment minimums and sponsor limits. Claire rattled off the ones already bubbling up: ocean health, bridging early- to late-stage climate investing, philanthropic venture for high-risk climate companies, arts, media, employee ownership, education, and women-only funds organized by demographic rather than theme.

Two of these connect directly to work Neighborhood Economics’ community is already working on..

Paying for the plumbing: loan loss reserves for DCIFs

Katherine Katcher spoke in Galveston last week about her multi-donor fund for community ownership of real estate. Her fund is now in discussions with the DAF Commons and NC3 about serving as a pooled loan loss reserve for Diversified Community Investment Funds.

That matters more than it sounds. A DCIF lets a neighborhood own its own real estate and local businesses, with capital raised publicly from within the fund’s own community, including non-accredited investors. That is how wealth gets built in the neighborhoods where people die ten years younger. But first-time community funds need someone to stand behind the downside so that the bank, the CDFI and the local investor can say yes. Loan loss reserves are the plumbing. Nobody wants to pay for plumbing. Foundations mostly haven’t. PRIs go to a certain level, then stop. DAF money, pooled and willing to sit patiently in a reserve, can go further.

Getting in bed with Salmon Returns

The other connection is in the Pacific Northwest. My longtime friend Donna Morton co-founded Salmon Returns, which moves capital into Indigenous-led climate justice and regeneration across Salmon Nation. As Donna wrote just this week, the aim is to move capital toward Indigenous-led regenerative economies across the Salmon Nation bioregion, from Alaska to Northern California, through British Columbia, with seventh-generation underwriting and braided capital.

The two organizations share a home. The Commons is fiscally sponsored by CataCap, which contributes the sponsorship in kind. In the US, Salmon Returns is a sponsored project at CataCap and uses the CataCap Donor Advised Fund at ImpactAssets, the DAF sponsor my old friend and SOCAP co-founder Tim Freundlich built. Lily, the Commons co-founder, regularly presents alongside the Salmon Returns team, describing the division of labor this way: while she goes wide, they go deep into the communities, the enterprises, and the work across the Salmon bioregion.

That’s the pattern: a peer community of DAF holders going wide, and trusted, place-rooted intermediaries going deep.

The demand side

Community foundations hold an enormous share of DAFs, and many aren’t interested in hearing this story. Years ago, a group of cutting-edge community foundations asked me to find a partner in Southern Appalachia. I went to our local community foundation and made the pitch. The answer: “We have no intention of being cutting edge.” At least it was clear. Usually it’s two meetings with an underling that go nowhere.

Claire’s theory of the case is the right one. Sponsors won’t move until there’s a demand-side push, until DAF holders tell them, “Bring us these opportunities or we’ll move to someone who will.”

What’s next

Next year is about community building: a first cohort of around 50 DAF holders who will design the community with them. In person or virtual? Big or small? Thematic, place-based, or organized by where people are on the journey? The cohort will help answer that. It will likely skew toward women, just as the Collective Climate Justice Fund grew from eight women and one man to twenty four women and three men. They seem to be the ones who want to do this collectively, and they’re a big part of the wealth transfer.

I’ve invited Claire to hold a DAF Commons convening at our Neighborhood Economics gathering in Cincinnati next fall. That’s what we do: put local innovators on stage next to peers from Detroit or Louisville doing the same thing, because the early majority buys by reference, (rather than buying into the innovation, like an early adopter does, they need to tell their bosses, the ones with the bigger budgets, who don’t buy something just because it’s new and innovative, that it’s happening in several places and it’s working). The DAF Commons is exactly the kind of catalytic funder those rooms need.

Catalytic capital gave us the language. The DAF Commons is building the constituency.