We have tentatively decided to move towards a more mixed fundraising strategy. This means we will continue to apply for high value grants and might work with other top GiveWell charities in grants fundraising, but we will also be expanding our fundraising to different approaches.
To explain the other possibilities we are considering, some understanding of how traditional fundraising works is necessary. Typically the donor base of a nonprofit is established in stages, moving over time from a large number of individual supporters each making a small contribution to a much smaller number of donors granting large sums, as illustrated in the pyramid below. The best return rates for a charity generally come from the top of the pyramid, by means of high net-worth and legacy gifts. The worst return rates come from the acquisition phase, the stage in which the charity's main goal is to get donors, for instance through door-to-door or direct mail solicitation.
1. Charity investment and time
Our first concern was with the much larger amount of time a more traditional fundraising strategy would take from the charity. Grant-writing could be done much more independently than many other forms of fundraising. Other forms of fundraising take more time from the charities. This happens particularly as donors move up the pyramid, increasingly wanting to work more with the charity they are donating to, and taking up more time from higher level staff. The charities we work with are highly effective and thus we value their time very highly and are adverse to starting a donation system that requires considerable time on the charity’s part.
2. Location concerns
The second concern we had was with location. As we have previously mentioned, many people prefer togive to organizations close to them, even if they are helping an international cause. This is often more important to larger donors, as they want to personally interact with the staff at the charity. There are also issues with tax benefits if the charity is not registered in the same country as the donor. Because of this it is generally more effective to fundraise in the same location(s) as your target charity's office(s). This is tricky for Effective Fundraising, as we are currently working with two different charities located on two different continents. But even if we were only working with a single charity, it would be difficult to move every time top charity recommendations changed, if not impossible due to immigration laws.
3. Charity branding and simplicity
The third concern we had was with charity branding and simplicity. The charities that are the most effective are not necessarily those with the easiest idea to explain or the best looking website from a donor perspective. This means for a more traditional donor acquisitions it would either take time to improve the charity’s marketing and website, or it would be more difficult to raise funds.
4. Longevity of charity’s recommendation
The largest concern we have with more traditional fundraising strategies is that they are often built upon developing a long term connection with the charity because people tend to develop attachment to the charity. This is fine if your goal is to get money to one charity, as most fundraisers’ goals are, but quite problematic if you want your donors to update where they donate based on new evidence. This would require time and explanation, and could also be inconvenient for the donors. The other option would be to start creating a new donor network when a new charity is recommended. This is problematic for two main reasons:
- All the best returns come from long term recurring donors, so if Effective Fundraising were to switch charities even every three years, we would still not get the best returns possible.
- If a large number of donors were acquired from one charity and then Effective Fundraising switched to building a different network, the old donors might drop off and stop donating without the extra support and contact that Effective Fundraising was providing them.
There are a few solutions to these problems
1) Team up with a currently effective charity for the long term
We have considered this option as it’s much more like the traditional way for fundraising to work. Normally a hired staff member works for the charity doing the fundraising with no intention of moving based on recommendations or impact evaluations.
This plan has the benefit of being simple but possibly at the cost of a lot of impact. We generally hold the view that new effective charities will be found and old charities will be changed due to a variety of reasons we find important. We also think new research might substantially change our views, particularly in animals rights. Due to these reasons, we think this option is weaker than the other three at this time
2) Using non-location-specific methods, such as continuing with grantwriting or moving into areas such as peer-to-peer fundraising
This was our original plan and we have done some research into peer-to-peer fundraising and other online possibilities.
This has the large benefit of not being location specific but puts a larger pressure on branding and simplicity. It also maintains the problem that once you build a donor network and a charity got switched there would be a dropoff rate in people updating to the new charity. Additionally peer-to-peer does not have as high returns as the higher levels of location-specific fundraising (e.g. legacies). This plan might be modifiable to be effective given more thought and time.
3) Teaming up with an intermediary type of charity
Teaming up with a intermediary such as a foundation or charity evaluator is a new option that we have been considering a lot recently. Effective Fundraising could raise money directly for the intermediary who would then donate it to top charities.
The main problem with teaming up with an intermediary is that we would have to deeply trust this intermediary and think that we could trust them over a long timespan. We currently do not have this level of trust with an intermediary although it’s possible it could happen in the future. Another concern with teaming up with an intermediary is they would ideally be registered in Canada so as to offer tax deductibility to our donors.
4) Creating an intermediary type of charity
The final option we have been considering is creating an intermediary type of charity, more specifically a private foundation. We think this is possibly our strongest current option.
For location we could base the foundation in our current home of Canada, and fundraise there, then grant the funds to effective charities. From a branding and website perspective we could deliberately make a website with a simple and clear brand that we could can use for fundraising. It would take virtually no time from the charity we would grant to as the foundation would be a separate entity that simply gives grants to it. Finally the foundation would have a much larger degree of flexibility in moving its grants to other top charities very easily and without losing its donor base. There are also some benefits to EA’s in Canada as this would give them a way to donate to any top charities tax deductibly, and in particular would help those doing earning to give.
The main problem with this option is that it is time consuming to set up a private foundation and would require a complete re-branding of Effective Fundraising (logo, website, name etc). Although we are not attached to the Effective Fundraising brand we are aware of the time that proper branding takes (even if done efficiently). Additionally it would take considerable time to fill out the required paperwork to become a foundation in Canada, although some of this time would be required for any nonprofit or charity status registration. Despite these issues, establishing a private foundation is our tentative plan for the near future.