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How New Nonprofits Are Thinking Like Startups To Tap Internet-Powered Giving

How millennial-led nonprofits have used social media, big and open data, collaborations, and crowdfunding to scale like high-growth startups

How New Nonprofits Are Thinking Like Startups To Tap Internet-Powered Giving

Scaling a charity is statistically harder than it is to grow a business. According to the National Center for Charitable Statistics, there are more than 1.5 million nonprofit organizations registered in the United States, including public charities, private foundations, and other types of nonprofit organizations, including chambers of commerce, fraternal organizations and civic leagues. Despite their large number, the social impact consulting firm The Bridgespan Group reported in 2005 that only 144 nonprofits had gone “from founding to at least $50 million in revenue since 1970.”

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Concentration at the top

According to Charity Navigator, 86% of charity dollars go to the top 1% of charities. Ken Berger, who served as Charity Navigator’s President and CEO from 2008 through mid-2015 says that this figure has “remained relatively static.”

“The number of charities that are actually able to scale up each year is pitiful,” he says. “It’s less than one quarter of 1%, some minuscule number. I mean it is really quite pathetic.”

Yet the nonprofit sector remains large: In 2010, the nonprofit sector accounted for 9.2% of all wages and salaries paid in the United States. The nonprofit share of U.S. GDP was 5.3% in 2014.

Technology plays a greater role than ever before in the nonprofit industry and can make the difference between anemic growth and rockstar nonprofit success. As in other industries, technology gives distinct advantages to younger nonprofit organizations that don’t have to overhaul antiquated systems, allowing them to leapfrog over established competitors.

Philanthropy in the 21st century will be less wasteful than it has been historically. Yes, thousand dollar a plate dinners may make some people feel good, but there are far more effective ways to raise (and spend) charity dollars than this–especially when modern philanthropists take data driven approaches to how they can deliver impact.

Today, we are armed with tools that make taking data driven approaches to solving problems comparatively easy, methods that are both measurable and trackable. This means that nonprofits can make more informed decisions when tackling–or deciding whether to try to tackle–problems.

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Case Study: Pencils of Promise

Adam Braun, who founded Pencils of Promise, a high-growth nonprofit that builds schools in the developing world, in 2008 says, “The way that you did philanthropy, you mailed somebody a manual letter with a sad looking child on the front and you asked them to open up their checkbook and they wrote you a check and they mailed it in.”

Braun says: “2008, if you remember, was a really really bad time especially for philanthropy and so all these people were saying, you know ‘why would you start an organization now?’ They felt there was not a lot of capital out there, but I felt like there’s never a better time to start an organization because I saw the rise of social media happening.”

Braun was an early Facebook user. He says that this fueled his belief that organizations could use “visual social media in ways to engage audiences that had never been done before in the nonprofit sector.”

He attributes his organization’s fast growth to the “rise of crowdsourcing and the value to aggregate large amounts of small donations to create larger composites than you could do otherwise through traditional philanthropy.”

When Braun started explaining his theory behind what would come to typify millennial philanthropy, “they all said to me ‘oh that whole Obama thing’ because, back then, Obama was the candidate collected numerous small donations, but otherwise it was really unheard of.”

Prior to the rise of the Internet, Pencils of Promise would likely never have gained such rapid traction, as the organization would have been unable to leverage its impressive social media following for support that includes (as of this writing) 248,000 Twitter Followers, 136,000 Instagram Followers, and 203,000 Facebook “Likes.”

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Braun also uses Salesforce data extensively, saying that Salesforce underpins his entire organization. “[Our teams in rural Ghana] go out and collect data on our students and then the first thing they do is they come back and offload those qualitative measurement or qualitative surveys into Salesforce, and that is all offloaded into an app that can tell how many students are in our schools right now.” Real-time data enables Pencils of Promise to convert additional donors with speed.

Without the ability to use Salesforce, Pencils of Promise would likely be much less successful in its ability to make real-time changes based on data. Without a data analysis platform, it is unlikely that the organization would have been able to use regression analysis and other statistical means when deciding which countries, cities, and villages to enter for new projects, and what specific financial resources would be required to do so.

What DonorsChoose Chooses To Do

Charles Best, founder and CEO of DonorsChoose, an organization that uses crowdsourcing to fund classroom initiatives, loves open data. He publicly opened up much of his nonprofit’s data (collected by a team of professional data scientists). In the 21st century, this is smarter marketing to attract smarter donors.

“We do a lot of research with our data science teams,” says Best, “to uncover what drives ‘citizen philanthropy,’” his terminology for the giving that takes place on the site. This open data policy is in stark contrast to older nonprofit organizations that often lacked detailed data and didn’t want to share the data they had for fear of giving it to competitors or it not being robust enough to please major donors.

Best thinks of DonorsChoose, founded in 2000, as “half charity, half web company.” As a pioneer in the field of crowdfunding, he says his firm tries to be “every bit as focused on performance minded, agile, and user-centric” as any for-profit company, adding, “We have a luxury in that we can boil our performance down to a single statistic, which for us is year over year growth and dollars given to classroom projects at public schools and low income neighborhoods.”

Before the rise of crowdfunding, DonorsChoose would have likely relied on traditional distribution of images of impoverished American children in classrooms that are similar to the ones that Braun mentioned. While crowdfunding critics state that the Internet is now used as a begging platform, teachers with real needs regularly thank Charles Best for his site, as successful crowdfunding empowers them to make valued additions to their classroom.

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Oldies but goodies

But don’t count out older nonprofit organizations that continue to be the backbone of the charitable sphere. David Bornstein, author, writer for The New York Times, and nonprofit guru, believes that with age comes wisdom: “Some of the older nonprofits are amazingly innovative. They’re not as edgy as the newer ones. There’s been so much focus on these new, dynamic organizations that we often forget some of this older organizations that have been around for hundred years are doing extraordinarily good work.”

“If you look around the world, there are certain groups that are religiously organized and religiously-affiliated nonprofits around the world that millennials don’t like as much because they are associated with Christianity or something like that,” he says. “And some of them are doing extraordinary work. There have been real innovations in groups like the Girl Scouts, like the Boys and Girls Clubs over the past couple of decades.”

How have organizations, founded since the year 2000, succeed in capturing millennial minds–and Baby Boomer dollars–where others have failed? By simultaneously utilizing social media to leapfrog growth, mastering crowdfunding, taking control of their data, making their data open to the world, and building partnerships that have allowed for collaborations with both depth and breadth–allowing them to rapidly scale.

As millennials have stated time and time again, they want to be doing good for the world, yet they want to be doing this good on their own terms, using their own methods and technology.

New “business models” within the nonprofit sector have made it possible for young charities to rise at rapid speeds compared to their predecessors. This is because these new organizations are able to quickly and reliably measure their impact, and then share this information with both big-time philanthropists and small-time donors alike.