How to be an effective donor

You want to make the world better. Where do you start?

Let’s look at what donors with the most resources choose to do. Major donors – those giving over say, $100 million per year – generally follow these three steps:

  1. Build a framework for their goals and mission
  2. Determine what actions and interventions will help them achieve those goals
  3. Find top nonprofits that can achieve these actions at a reasonable cost and with a reasonable degree of effectiveness (or pay groups to set up new programs if nothing currently exists).

This is called developing a Theory of Change.  

This process is costly and time intensive.  The largest 30 private foundations last year spent, on average, 19.6% of their annual budget on research and administration of their grants, according to their 990s. In addition to being costly, the information required to conduct this process – global statistics as well as internal individual nonprofit data – is often not accessible to individual donors, who would have a hard time getting a nonprofit to send them bespoke reports and data on progress for a $50 donation.  And, this process requires iteration – major funders are continually tracking progress, adjusting, and learning by giving.

Breakdown of usageSource: 990s, 2012/2013

Our goal is to make the individual dollar donated by an individual – you, your friends in finance, your grandma – as high impact as a dollar donated by the most well-informed, wealthy philanthropist.  Think about that for a second. In the investment world, that would be like saying we want a mom and pop investor to have the same return on investment (ROI) as the most sophisticated investor.  And we want that process to be easy, fun, and free for everyone to use.

We know that’s not the case right now.  Every few months, we see the heartbreaking news stories of charities wasting millions of hard earned dollars from individuals on ineffective solutions and outright scams.  And we know that major philanthropists like Bill Gates and Cari Tuna have been able to invest $680 million and $36 million per year (respectively, 2014) on their own research and have created some pretty amazing global changes as a result.  So how can we make an individual donor more effective?

Based on our current understanding, there are three things that the biggest donors (those giving $100 million plus per year) have that give their grant making a leg up:

  • Knowledge. Major donors have access to high quality information that individual donors don’t.  They receive custom data reports, updates, and information directly from nonprofits that’s not publicly available.
  • Guidance.  They are able to work with sector leaders to develop a perspective not only on whom to fund, but how to fund – what causes, what interventions within those causes, what types of funding structures, how to evaluate the best nonprofits, and how to develop a ‘theory of change’ around their overall approach.
  • Active management.  Major donors have longitudinal data which allows them to learn by giving.  Individuals send a check and then get bombarded with spam mail without any new information on impact.

And, the dirty secret behind all grant making is that we are all – continually – learning what works.  Cari Tuna, one of the largest new funders in the field of evidence based grant making, who has invested $75 million to date, says, “it’s not at all obvious from charities’ marketing which are the best buys.”  Even Mark Zuckerberg, who donated $100M to US public schools, was recently criticized for his lack of impact.

We are trying to change all of that.  Our mission is to connect donors with exceptional nonprofits by creating a more transparent, equitable marketplace for giving.  

We’ve designed Agora to help you wherever you are in your philanthropic journey:

  • If you are just starting out and want recommendations on the most important causes to fund,
  • If you have a cause in mind and want to find the best way to solve it,
  • If you already have a portfolio of charities you give to and simply want to better manage your gifts and track your impact; and anything in between.

We strive to provide the three things above – knowledge, guidance, and active management – to donors of every size.  We are continually learning and evolving this process (link to Blog on How it works), and we would welcome you to learn with us.

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