One of the most challenging things facing a donor is that the quality of a nonprofit’s website or annual gala often has nothing to do with the actual impact they are having on the ground. We’re used to consumer markets, where if you see a nice storefront or website you expect the quality of the product you purchase to be high. But in those markets, the payer is the same as the end recipient of the product, so companies have to invest in ensuring their output matches their marketing materials. The nonprofit sector is much harder to navigate, because the payer (donor) is not the person who receives the end product.
As a result, where do you give? After asking donors of all levels that question, I found that many of us give less than we could, or we give haphazardly: to our school because it’s a place we know, to charities where we’ve met a member of the team, or based on rough proxies for impact, like ‘overhead ratios’. Would you invest in a company just because you know someone who works there? Would you expect a company to grow and develop new IP without ever spending more than 10% of its budget on research, management, PR, marketing, accounting, and more? Yet we hold nonprofits to these arbitrary standards because no good metrics on ‘impact’ exist yet.
We started Agora in order to improve the philanthropic sector by bringing the transparency, rigor and ease of for-profit investment platforms to charitable giving. We apply an asset management approach to giving by taking each donor’s unique goals and vision, developing a custom portfolio of nonprofits, and facilitating the allocation of capital directly. Our goal is to support a dialogue around impact by moving away from proxies like overhead ratios and building a universe of metrics focused on real outcomes. Together with donors, we empower the highest-impact nonprofits to achieve their goals.
How does it work? We allow individuals to act as philanthrocapitalists—basically, allowing them to to treat their charitable capital like an investment. Similar to a mutual fund, we help individuals support causes based on their preferences, rather than individual nonprofits. Individuals can set up funds with less risky, ‘blue chip’ stocks, or innovative, ‘venture’ philanthropy and individual nonprofits such as their alma mater. It’s a very cool and convenient way to manage your whole donation portfolio in one place, and you can give to any nonprofit in the world through our system. Our recommendations are based on extensive research by our partners: major foundations and impact evaluators. Every nonprofit recommended by Agora is top quality. This allows individuals to support the causes they care about as a whole, like water and sanitation, with diversified risk and a comprehensive set of interventions.
How do we know these nonprofits are great? One of our focuses is to develop ‘industry indexes’ in each of the cause areas we support. For example, if you want to end poverty, you would want to know what the ‘return on investment’ is for each donation – for every dollar given, how many additional dollars does that poor family have after one year? In poverty specifically, we compare the ‘return on investment’ of our funds to an index defined by just handing out cash to poor people directly (‘unconditional cash transfers’). An amazing nonprofit called GiveDirectly specializes in unconditional cash transfers in East Africa, and partners with researchers to study the results. They found that giving a poor family $1000 results in about $1280 in income by the end of the year, as they invest that money, or roughly a 28% ROI. Therefore, each of our funds in poverty alleviation has to perform better than that index. We’re working with experts to determine the appropriate index in each sector – education, equality, the environment, etc. (Stay tuned for more on this.)
Our work is still at the early stages – we are taking on a major goal — and we are so grateful to each and every donor who is embarking on this journey with us.
Author: Angela Campbell, Agora Fund