Thanks for thinking of this! My experience is that, in both for-profit and nonprofit spaces, the limiting constraint is not knowledge that fundable projects exist. Rather, itâs the lack of due diligence on the projects (and people who can do that sort of DD).
In for-profit angel investing, usually one investor will take the âleadâ, meaning that they do a full examination of the startup: speak with customers, audit the financials, do background checks on the founders, etc. Other investors will invest conditional on the lead signing off. Certain groups will usually prefer to lead or not; some of them will make investments into hiring lawyers, accountants etc. to help them do this due diligence, whereas others will prefer to just defer to other lead investors.
Iâm not aware of any entity similar to a lead investor in the EA community. People sometimes suggest just following on with OpenPhil (i.e. only donating to organizations which OpenPhil grants to) â this doesnât seem unreasonable, but it does mean that many organizations will be left unfunded.
I agree with this point. Even in the startup world, where due diligence is common, most projects fail after spending a lot of money, achieving very little impact in the process.
In the case of EA projects, even a project that doesnât have negative value can still lead to a lot of âwasteâ: Thereâs a project team that spent time working on something that failed (though perhaps they got useful experience) and one or more donors who didnât get results.
Hits-based giving (which focuses on big successes even at the cost of some failure) is a useful approach, but in order for that to work, you do need a project that can at least plausibly be a hit, and no idea is strong enough to create that level of credibility by itself. Someone needs to get to know the teamâs background and skills, understand their goals, and consider the reasons that they might not reach those goals.
Side note: I hope that anyone who independently funds an EA project considers writing a post about their decision, as Adam Gleave did after winning the 2017 donor lottery.
Thanks for thinking of this! My experience is that, in both for-profit and nonprofit spaces, the limiting constraint is not knowledge that fundable projects exist. Rather, itâs the lack of due diligence on the projects (and people who can do that sort of DD).
In for-profit angel investing, usually one investor will take the âleadâ, meaning that they do a full examination of the startup: speak with customers, audit the financials, do background checks on the founders, etc. Other investors will invest conditional on the lead signing off. Certain groups will usually prefer to lead or not; some of them will make investments into hiring lawyers, accountants etc. to help them do this due diligence, whereas others will prefer to just defer to other lead investors.
Iâm not aware of any entity similar to a lead investor in the EA community. People sometimes suggest just following on with OpenPhil (i.e. only donating to organizations which OpenPhil grants to) â this doesnât seem unreasonable, but it does mean that many organizations will be left unfunded.
I agree with this point. Even in the startup world, where due diligence is common, most projects fail after spending a lot of money, achieving very little impact in the process.
In the case of EA projects, even a project that doesnât have negative value can still lead to a lot of âwasteâ: Thereâs a project team that spent time working on something that failed (though perhaps they got useful experience) and one or more donors who didnât get results.
Hits-based giving (which focuses on big successes even at the cost of some failure) is a useful approach, but in order for that to work, you do need a project that can at least plausibly be a hit, and no idea is strong enough to create that level of credibility by itself. Someone needs to get to know the teamâs background and skills, understand their goals, and consider the reasons that they might not reach those goals.
Side note: I hope that anyone who independently funds an EA project considers writing a post about their decision, as Adam Gleave did after winning the 2017 donor lottery.