It's a new age for philanthropy: people have more to give, so charities have more to do. A new group of start-ups is ready to help nonprofits become more professional.
Serving Nonprofits: The New Philanthropy
People have more to give, so charities have more to do. And these start-ups are glad to help
Your local United Way or grassroots nonprofit may not look like a hot business opportunity, but a host of new entrepreneurs are banking that it is.
A quick look at the numbers explains why making money off those who give it away is becoming an increasingly popular business model. Last year charities in the United States took in $190 billion, $15.8 billion more than they collected in 1997, according to the American Association of Fund-Raising Counsel, in Indianapolis. As Tom Riley, research director of the Philanthropy Roundtable, a national association of charitable foundations in Washington, D.C., is quick to point out, "Any way to get in on this market is a good idea."
Largely -- but not exclusively -- inspired by the transformative powers of the Internet, new companies are encouraging nonprofits -- a historically low-tech lot -- to turn over some of their precious dollars to them. Notes Jimmie R. Alford, founder, chairman, and CEO of the Alford Group, which has been a consultant exclusively to nonprofits for more than 20 years: "The nonprofit community is no longer seen as incidental but as a major line of business. The new economy has 'discovered' that the nonprofit sector represents more than 6% of our gross domestic product."
As in any rush to take advantage of a hot niche, all kinds of start-ups are trying to tap into the vast philanthropic kitty, in a variety of ways.
Impulse giving
Wouldn't it be nice if people would make impulse donations just as they make impulse purchases? Four months after being struck by that thought while reading an issue of the Chronicle of Philanthropy, philanthropist and entrepreneur Steve Grossman launched a company to fulfill that vision. Givenation.com, in Medford, Mass., is one of at least 17 so-called e-charity portals, which are dot-coms designed to be one-stop Web sites for charitable giving. Like its competitors, Givenation allows visitors to its Web site to perform any number of giving-related tasks with the click of a mouse -- from donating to a favorite charity to setting up a personal-tribute Web page that benefits a cause in the name of a loved one.
Like a checkout counter chockablock with film, candy, and celebrity magazines, Givenation's site is loaded with eye-catching graphics and messages designed to inspire the impulse gesture -- in this case, making a donation. For example, some heartstring-tugging news stories about disease victims or environmental disasters conclude with a "How You Can Help Now" button that links readers to relevant Web sites.
Noble as its mission is, Givenation is not above appealing to customers' appetites for celebrity and pop psychology, with links to the Britney Spears Foundation, for example, or invitations to take a "What Gives?" quiz, wherein philanthropic surfers can match their giving "personalities" with various categories of nonprofit organizations. Givenation cofounder and senior vice-president of marketing Faith Brown Kerr is unapologetic about the site's cutesy tactics. She's convinced that people would give more often if they were better informed and if the process were easier. "Right now, donating to a cause you care about isn't always straightforward," she says. "We want people to be able to do something the minute they learn about a cause, and we provide them with the means to do that."
Like most E-giving sites, Givenation charges nonprofits a transaction fee for each donation it steers their way. However, in contrast to many of its competitors, Givenation caps that fee at $5, no matter how large the donation. It also processes the contribution within 48 hours, and the money goes directly from the credit-card processor to the charity's bank account, instead of sitting in a separate -- interest-bearing -- account. Givenation launched its site in February and projects it will attract 165,000 donors making an average of 4.5 contributions each in its first year.
Nonprofit efficiency
Sometimes the best way to nurture a pet cause is to help it run more efficiently. That's the idea behind DonorNet LLC, a Denver-based company founded in February 1999. As an application service provider (ASP) for nonprofits and corporate philanthropy programs, DonorNet launched .orgSolutions, a suite of Web software tools that enable nonprofits to automate their day-to-day business functions such as events management, membership renewal, and product sales, in addition to fund-raising.
"Nonprofits have the same technology needs as small and medium-size businesses," notes DonorNet director of marketing Brian Geoghegan. Taking into account the fluctuating budgets and needs of disparate nonprofits, DonorNet rents its software in modules (the event piece, the E-commerce piece, and so on), so that customers can pick and choose and graduate to other products as they need them.
For example, a Southern ballet company uses DonorNet to sell tickets and register season subscribers online. A children's health-care organization uses DonorNet's E-commerce module to sell through its Web site holiday cards designed by hospitalized children.
Geoghegan is particularly enthusiastic about a recently released DonorNet product called Give@Work, which facilitates and automates employee giving and should drastically reduce the amount of paper, time, and hassle (read: cost) associated with corporations' workplace-giving campaigns. Give@Work makes the process paperless by enabling employees to make pledges online and then creating a database that is uploaded into a company's payroll system.
DonorNet charges nonprofits setup fees ranging from $250 to $1,000 depending on the level of customization required, as well as a $29 monthly maintenance fee to host and operate the software. Like other E-charity portals, it also collects a per-transaction fee of 10% or $10 (whichever is less). President and CEO Janice Kercheville predicts the company will be profitable within 12 to 18 months -- "maybe sooner," she adds.
Monster.com for nonprofits
The Alford Group's Jimmie Alford noticed a few years back that the demand from the nonprofit community for executive recruitment and temporary-employee placement was going through the roof. The portion of revenues that his company derived from such services doubled from 1998 to 1999, "and that growth came without any promotion," Alford explains.
