The Rise of the Middle Man in Fundraising

On January 20th, Henry Green was born to John & Sarah Green. Henry’s parents, the generous spirits that they are, asked their friends, family, and well-wishers to forgo the standard deluge of baby presents. Instead, they asked people to make a donation to help fight malaria through Malaria No More.

Malaria No More is one of the world’s leading charities fighting malaria in Africa. For exactly $10, they can protect an entire sleeping site from malaria for up to five years. As of the writing of this post, donations on behalf of Henry Green are now enough to protect over 250 sleeping sites (or an estimated 1,000 people).

That’s the good news. The bad news is that, of the 250 sleeping sites that Malaria No More could be helping with this donation, only 231 sleeping sites will be served. That’s an estimated 75 people (most likely much more) that won’t be (but should be) sleeping under a mosquito net.

Find out more after the jump…

How could this be?

The reason actually has nothing to do with Malaria No More – and everything to do with the way in which the donations were collected. John Green, like many Americans trying to raise funds for charity, decided to use the website FirstGiving.com.

FirstGiving.com allows anyone to create a custom donation page for their favorite charity. Anyone making a page can set a fundraising goal, provide a deadline, and allow donors to leave comments and rally others to donate. It’s interactive and a very “Web 2.0” way to fundraise.

What makes FirstGiving.com great is that it avoids the mess of having to handle the money yourself. FirstGiving processes all donations for you and sends the funds to the charity of your choice. No need to worry about accounting or wiring funds. FirstGiving is essentially your trusted middle man.

FirstGiving allows anyone to fundraise for their favorite charity. Progress bars, custom images, donor comments, and more make this a very interactive and community-based way to fundraise.

But what’s the catch?

The thing that gives me pause about FirstGiving.com is that, for the mere privilege of acting as a middle man, they take $7.50 from every $100 donated. For anyone who has raised funds for charity via PayPal, you’ll know that FirstGiving is charging more than double what it would cost to raise the funds yourself.

But it’s just 7.5%, right? Well, think of it this way. For every $133.33 donated to Malaria No More via FirstGiving.com, one family that could have received a mosquito net will have to go without. That’s one family that’s at risk of dying when they shouldn’t be. Hate to say it but it’s true: 7.5% is the difference between life and death.

But what is fair compensation for a middle man?

Don’t get me wrong. I believe everyone in this world has a right to earn a living. The staff at FirstGiving.com are no doubt highly passionate and hardworking people that deserve to be compensated for their work – even if that work is helping to raise funds to help charitable causes.

But how much should it cost to be a middle man? Let me put this in context: Save the Children is one of the biggest charities in the world. They take a cut from every dollar they receive. With that cut they can hire engineers to do water projects, rent warehouses to store emergency relief, and have offices right in the communities they serve.

How much does Save the Children take from every dollar to fund this vast international operation? Eight percent. Why does FirstGiving.com, a small 20-person company based in Massachusetts, need to have nearly as big a percentage cut as Save the Children?

In fact, why isn’t FirstGiving.com (the US site) at least as competitive as their counterparts in the United Kingdom? I am a huge fan of the UK version of FirstGiving – called JustGiving.com. Why? Because 100% of every dollar donated (by UK citizens) goes straight to the charity.

If you are not a UK citizen, JustGiving will still handle your donation – but they will just charge a mere 5% fee. This needs to be emphasized: if you are American, more of your money reaches the charity of your choice if you use the UK site instead of the American site.

The Need for the Web 2.0 Middle Man

Efficiency aside, the reason why sites like JustGiving, FirstGiving, and Facebook Causes (which charges 4.75%) need to exist is because most charities simply don’t get it. John Green could have easily pointed people to Malaria No More’s own official donation page. While that does guarantee 100% of the funds go directly to the charity – it is fundraising without community interaction.

Using only the official donation form, John could not set a fundraising goal, time limit, or give an explanation as to who the donations are in honor of. In turn, donors could not track how many donations were made nor would they be able to interact (via donation page comments) with other supporters.

With so many of us engaged in “Web 2.0”, why is giving money to important causes stuck in “Web 1.0”? It’s because most charities don’t have any impetus to change. Their biggest donors are still baby boomers and most charities fail to see the value in investing to become more accessible to a tech savvy generation.

In many respects, FirstGiving, JustGiving, Facebook Causes, and even what I’m doing are ways to try and push old fashioned charities into the 21st century. The problem is that many charities are dragging their feet, kicking, and screaming every step of the way. Although the tragedy in Haiti is pushing many charities forward, there is still a long way to go. The charities that adapt the fastest will be the ones to survive.

Survival of the Fittest

Even though Save the Children has been around since the great depression and is able to build clean water wells at a price few charities can beat ($2,500 per well), most of my friends tend to donate to Charity: Water instead. Why? Charity: Water makes it easy for you to donate and bring your community with you.

If I wanted to, I could setup a donation page at mycharitywater.org in under five minutes. I can have a custom logo, fundraising goal (at the cost of $5,000 per well), and give an explanation for my fundraising. Donors, in turn, can leave messages and track the progress in real-time. And, unlike FirstGiving, JustGiving, or Facebook Causes, there is no transaction fee.

Similarly, in the face of the crisis in Haiti, on the ground charities like Partners in Health have made it easy for people to setup a custom donation page right on their own official website. Sure, you could use middle men instead – but then part of your donation will never reach the shores of Haiti.

Wake-Up Call to Charities

I once told staff at Save the Children that their organization’s capacity to adapt to the needs of my generation in the next five years will determine whether or not they will survive fifty years down the road. That isn’t an exaggeration – and that statement is by no means limited to any one particular charity.

The socially conscious in my generation are making it clear that they value convenience and community-interaction over cost-efficiency. The more charities embrace this kind of fundraising, the quicker this doesn’t have to be a choice between efficiency vs. interaction. And, the charities that embrace this first are the ones that will earn the loyalties that will last years to come.

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