Funding for nonprofits
There has been a growing interest in the nonprofit space from Silicon Valley and I wanted to post my thoughts on one specific element. Two main events (one much more recent) sparked this post:
- Y-Combinator accepting its first nonprofit, Watsi, where Paul Graham became a board member.
- More recently, Crowdrise raised a $23M round with notable investors like Fred Wilson.
In both of these cases, there seemed to be an interest due to the nonprofit’s (or for-profit’s) ability to increase the funding in the nonprofit world.
I think that this lens is typical for people who haven’t worked in the area of development. In their lives, the only interactions with nonprofits or development work is through being solicited for donations. Naturally, this is the problem they think is most important.
On the other hand, I think that many serious practitioners would say that this is actually not the main problem in this world. While each individual nonprofit has tremendous difficulties meeting its funding needs, the overall ecosystem has a lot of funding being doled out annually. What we actually need is not an increase in funding (“growing the pie”), but a more meritocratic distribution of funding (“how the pie gets sliced”).
The problem anyone with nonprofit experience tells you is how often the mission is subjugated to fundraising, which creates perverse incentives where often the most well-funded organizations are the ones doing the least impactful work. We don’t need more funding to pet causes – we need more analytical rigor that goes into where funding gets distributed. This is very much along the lines of GiveWell, a nonprofit that is taking this on in a very serious way.
If only the creative engines of innovation in Silicon Valley could create a platform that can align incentives between strong work (i.e. evidence-based outcomes) and increased funding, that would go much further than platforms that continue to make social outreach and donor connections the primary means of successful fundraising.