On Getting into Philanthropy
Technology should improve the lives of everyone. It should amplify our own ability for growth and change, and enable people to better their lives and those of their families, communities and complete strangers.
Earlier this year my co-founder Michelle and I left the growth team at Airbnb to start ALMA. We wanted to make philanthropy — giving back — easy and simple for everyone.
It’s been a crazy and amazing journey so far from the world of tech into philanthropy.
As we crossed 2k supporters in the Bay Area, I wanted to look back and reflect on what we’ve learned since we started. Here’s some of most interesting and surprising things so far…
Everyone does it and no-one talks about it. Charitable giving sits in that same category as personal finances, sex lives and voting. (Almost) everyone does it, but feels awkward or embarrassed talking about it. Over 50% of American households give to charity each year, and give a median of $800. And yet, when was the last time you had a conversation about giving to charity with your friends or family?
People are apprehensive about giving. Following from the above, because we don’t talk about it, most people feel uncertain about what they’re doing. How much should I give? Who should I give it to? How do I know I did the right thing? We found in surveys that nearly 50% of people felt unsatisfied with their giving.
There is a staggering number of nonprofits. In San Francisco alone there are over 5,000 non-profits; 400 that are involved with helping people experiencing homelessness. That’s 102 non-profits per square mile.
Foundations don’t have a magic answer for quantifying impact. When we started ALMA we imagined there was a secret algorithm or dataset big foundations had to make effective grants. That they could input a set of variables and get out a score. Turns out, it’s mostly relationships and institutional knowledge combined with hard work and judgement. Do these outcomes seem to be leading to something? Does this organization spend money the way they say it will? This is the same insights and feedback we’re brining to everyday donors at ALMA.
Further, many nonprofits find themselves at the mercy of big foundations, who can impose different reporting requirements and stipulations on how the money should be spent. Whilst good in theory, this can lead to nonprofits having a huge amount of work tailoring reports to each foundation.
Charity Navigator metrics are pretty much useless. Everyone wants to know how much of the money they give ‘goes to the people who need it/the programs’ and not to the ‘greedy staff who want to earn a livable wage’. This creates perverse incentives for nonprofits:
- You’d do anything you can to put as little as possible in the ‘fundraising’ column in your tax return (990). Even if you’re good at fundraising, and doing so gives you greater impact. The bigger the amount here the less effective your organization looks. This also promotes very short term investing (< 1 year).
- You struggle to pay staff and retain talent. It costs a single person $43k a year to meet basic needs in San Francisco, $93k for a family. The average program co-ordinator at a San Francisco non-profit makes $77k a year (~$50k after tax). So many nonprofits see high turnover each year, losing highly talented people.
People don’t actually want a ranked list of nonprofits. I expected people wanted a dollar by dollar report on the precise return of their donation, and then a ranked list of every nonprofit. In fact, most people just wanted to know which organizations were doing great work, well regarded and well run. They want to know something tangible and credible they contributed to. But everyone has a different perspective or feeling for what they’d like to support. It’s impossible, and unhelpful, to rank family homelessness against youth homelessness — both need support. People don’t care if a nonprofit is perfect or the best, just that’s its great.
Society (and for sure the tech world I come from) has double standards in how we think of investments in for-profit and non-profit ventures. As Jeff Bezos said in his annual shareholder letter, to invent you have to experiment, and if you know in advance that it’s going to work, it’s not an experiment. And yet we expect completely different approaches from the two sectors.
Non-profits: tell me the return on every $ today, and waste none.
For-profits: take risks, innovate, losing $$$ is fine in the short term.
Impact/outcomes (real change) is best measured at the macro level. Inputs/outputs are better for the micro. For example, ‘what’s the impact of my $10 donation?’ is nearly impossible to answer in any meaningful sense. ‘What impact has this organization had in the last 6 months?’ is good, as is ‘what did the organization use my $10 for, and is it believable that it contributed to the outcome?’ We’re working at ALMA to help people understand clearly where their money went, and then the longer term outcomes they are helping support.
Thanks for reading! I’d love to hear your experiences and thoughts on giving to charities in the comments 🙏.