Sunday, June 6, 2010

Collective Venture Philanthropy for the Small-Time Donor

Edit: Holden from GiveWell and Lucy from Philanthropy 2173 responded in the comments, and Lucy responded on her blog. Check out what she said and join the discussion. I started a twitter account to better coordinate and respond to the comments. (Sorry I couldn't use vowels.)

I agree with what Holden said that, in practice, this type of site might not be able to promote a lot of necessary due diligence. Both he and Lucy bring up constructive ways to harness the power of social media and use it effectively to help both donors and non-profits. Check out Lucy's response and continue the discussion there or here.

End Edit

I wrote a post a while back criticizing GiveWell--a charity rater that looks at effectiveness--for their own tendency to criticize ineffective charities rather than encourage them to be better. One commentor on that post made the point that GiveWell's strategy is to find the "blue-chip" charities that are a safe bet for small- to medium-level donors, not to help individuals find charities that will be or could be effective. GiveWell reiterated this strategy in a recent post.

In some ways, it makes sense that casual donors should only focus on these sure-bets for effectiveness. It doesn't make sense for the small-beans donor to give to an up-and-coming charity, because if that charity goes under, the money would have been better spent on those "blue-chip" options. In an email to me regarding a previous post, Holden Karnofsky of GiveWell made the point that most start-up non-profits, like most start-up businesses, are funded by professional venture capitalists with lots of money and the "capacity to hold them accountable." People with less money typically don't have the means (or the time) to make sure their contributions are going to good use.

However, in some comments on my previous post on supporting small charities, a few ideas were tossed around about how to get small donors connected to these up-start charities. Mark made the point that now people are more willing to invest in companies before they turn profit, as long as they think they have a good vision (think of Google and many other online start-ups.) This discussion when applied to the non-profit world is the difference between supporting organizations with "high performance"--those charities with a good vision--versus "high impact"--those charities with proven impact, i.e. "blue chip" investments.

Of course, as Karnofsky alluded to, these high performance organizations can completely fail before they obtain their blue-chip status (like the dot com bubble bust.) But I wonder if there is a way for casual donors to be a part of this venture capital stage and still try to maintain some level of accountability.

One viable solution already in place is the prevalence of social media connecting people to charitable means. Many organizations are out there to bring small-time givers together so they can pool their resources and support different charitable projects: DonorsChoose, Kiva, Hope+, and a myriad of corporate-sponsored, Vote For Your Favorite Idea! contests, like the Pepsi Refresh Project. Could this social media technology be harnessed to raise funds for upstart non-profits? (For a cool example of this donor social-media at work, check out this article about some kids who are trying to take down Facebook.)

Accountability will still be an issue with collective venture philanthropy, but several things could be done to try to mitigate the risk: Frequent updates to the donors, a la Kiva, a strict screening process and a focus on best-practices. There will always be risk with venture capital, as many small-time donors have learned from defaulted loans on Kiva. But I know there are many people out there interested in helping something start from the ground up and this site could give people's new ideas a way to get out there and gain support. It would also give non-profits a stronger, broader donor base from the get-go that they can continue to engage as they expand.

Of course, if done poorly, this type of site could end up being a Craig's List of random charity ideas. Things that should have stayed in the dark could be brought to light and fully funded.

Thoughts? Any takers on funding this idea? I'd probably first need a social-media based venture philanthropy site to get it off the ground.


  1. Jeff
    You raise some important questions. In our recent report - Disrupting Philanthropy - we have two graphs "The Long Tail of Giving" and the "The long tail of Receiving" (

    What is so interesting to me about the two graphs is that, despite the fact that they take the same shape, we actually don't know how they correlate. Are big donors funding all the small nonprofits down the long tail of organizations (as Holden's comment in your post claims?) Or is something else going on? (FYI - my gut, but not any data - agrees with Holden)

    The possibility of aggregating small donors, and helping them inform the big donors at the head of the tail is, I think, one of the most exciting potential byproducts of social media/online giving platforms/ and the changes in philanthropy. The example of Kickstarter which you link to (the story of Diaspora - the Facebook Challenge) is one early indication of what could be done.

    But step back for a second. Why is this so exciting? Because more nonprofits and social enterprises would get funded? I don't think that's a compelling reason. I think its because the small donors, folks in commmunities and on the ground, have information and insights that the big guys in their offices don't have. The exciting potential is to marry a new source of insight - donors/activists in communities - to the existing research and resources that exist at the head of the tail. So we create a new type of data source from the crowds of people that can be integrated with existing data and new solutions can be found - think of Ushahidi, groundsourced crisis information, and the resources of the State Dept and Red Cross in response to Haiti. One doesn't replace the other, the complement each other and allow us to see new solutions...

    Thanks for the post - I'll cross ref this over on p2173.

    Lucy Bernholz

  2. Jeff, I don't think that the websites you name are empowering individuals to do meaningful due diligence. Look at any of these sites and you'll see only superficial blurbs, not the kind of information that could allow a donor to really hold anyone accountable.

    To the extent that any meaningful due diligence is being done on these projects, I believe it is being done by Kiva / DonorsChoose / whoever is actually running the exchange. Then users of the website get an experience that may be fun and interesting and expressive of the donor's values, but doesn't represent any kind of results-oriented, due-diligence-based allocation of funds.

    From our experience, understanding the pros and cons of a donation simply isn't something that can be done casually / in a few minutes. (GiveWell itself originally had this aim, and concluded that it wasn't realistic.) I don't believe that social media is going to change that. Where I do see promise is in the idea of donors with similar values and goals banding together to form teams and/or funds that can do true research using dedicated staff and resources. I don't see much of this happening yet, and wonder whether sites like the ones you reference are working against getting donors to invest in true due diligence by providing the illusion of it.

  3. I suppose I had ideas similar to Holden and Lucy (before I read their comments), but I'll tack something on.

    I think using the idea of open-source software could be useful here (especially because you cite one example of it in your article).

    Open source succeeds at time in aggregating many small funders to do big things. They eventually may branch off and become self-sustaining (like OpenOffice or Firefox), but they start from small groups.

    However, this applies to small-donation-venture-funded nonprofits in that supporting the organization isn't just a monetary gift. It means looking at code, or helping with design, or evaluating marketing plans. One thing kickstarter allows people to do (I think) is get extra perks for their money if they give (such as a signed CD in thanks for supporting an independent artist make a record). What if donors gained access to documents, strategies, and ideas of the nonprofit in the manner of an open source project? Then, like Lucy says, these organizations could harness not just the money of the masses but the unique perspectives and ideas. To appropriately use a buzzword, this could be crowd-sourcing at its finest.

    As always, thanks for writing!