Happy to see this. Overall I’m pretty excited about this area and would like to see further work here. I think my main concern is just that I’d like to see dramatically more capital being used in this area. It’s easy for me to imaging spending $10M-$100M per year on expanding donations; especially because there’s just so much money out there.
I’m a bit curious about the ROI number. “We estimate a weighted average ROI of ~4.3x across the portfolio, which means we expect our grantees to raise more than $6 million in adjusted funding over the next 1-2 years.”
1-2 years really isn’t that much. I’m sure a lot of the benefits of this grant will be felt for longer periods.
Also, of course: 1. I’d expect that IRR would also be useful, especially if benefits will come after 2 years out. 2. I’d hope that it wouldn’t be too difficult to provide some 90% bounds or similar.
To give more clarity on what I mean by imagining larger spends—it seems to me like many of these efforts are sales-heavy, instead of being marketing-heavy.
I can understand that it would take a while to scale up sales. But scaling up marketing seems much better understood. Large companies routinely spend billions per year on marketing.
Here are some figures a quick Claude search gave for car marketing spending, for instance. I think this might be an interesting comparison because cars, like charitable donations, are large expenses that might take time for people to consider.
(I do realize that the economics might be pretty different around charity, so of course I’d recommend being very clever and thoughtful before scaling up quite to this level)
I asked ChatGPT about the average marketing spend of auto manufacturers was (it said 7-8%) and the average fundraising spend of the largest US charities (it said ~10%, which is consistent with my intuition). While I’m not endorsing these percentages as optimal for auto manufacturers or non-EA charities—much less advocating that they should be applied to EA charities—they could provide some sort of ballpark starting point.
Automotive marketing, as I understand it, is considerably about creating vague positive brand associations that will pay off when the consumer is ready to make a purchase decision. That’s a viable strategy in part because there aren’t too many differences between (e.g.) a Ford and a GM truck. It’s not obvious to me that would-be EA donors would respond well to that kind of campaign, and this may limit the extent to which their marketing budgets and strategies serve as a useful guide here.
Frustratingly, the links that Claude found for these went to Statista, which is mostly paywalled, but the public bits mostly seem to verify these rough numbers.
I think 1-2 years is a reasonable window to test for 1 year of funding. I think some benefits of the grant would remain beyond that, but only a small percentage. Direct networking, marketing, website improvement etc. need people working directly to increase funding and I struggle to see how those benefits would persist if no-one was working and the money stopped?
How do you imagine the benefits might continue past 2 years?
I agree that there will likely be some benefits beyond the grant period (which is 1-2 years depending on the grant). Those will especially be felt in cases in which the grant helped seed an org that might not get started or might get started many years later otherwise. That wasn’t the case for many of the grants though, in general we’re providing ops support for 1-2 y for an existing org.
Even though I made most of these grants non-renewable, in our core effective giving portfolio we’re a stable funder for most organizations, which means that I’ll reassess them every 2y or so to determine if we should renew funding, and at what level. We then use every grant period to look at (adjusted) money moved and how that compares to the orgs costs. This is a simplified view and I think we’ll need to adjust it in some cases, e.g. now that a lot of the organizations are forming partnerships with GWWC, some of the wins they land in a given grant period through pledges will be seen for many years, so we should consider that, but avoid double counting in future periods.
Ozzie, to your point of expecting the area to be able to absorb more money, I think that’s true. We did discuss with some orgs if it was worth them scaling further, but most are being cautious and want to hit certain milestones/make sure they’re on a sustainable growth path before doing so, which I appreciate. The two ways in which I currently imagine the ecosystem could absorb more funds is: (1) by seeding new efforts (there are still many gaps, so I’m excited to see other orgs get started), (2) by scaling existing efforts if some marketing strategy really pays off and/or if they tap into a new segment and need more, or dedicated, staff (e.g. for national chapters that start doing more (U)HNW advising). I should also state that the amount of funding that we’re able to provide for the ecosystem will vary depending on the year, considering my program’s budget and other grants on the table (both funding tied to existing grantees, and other potential opportunities).
How do you imagine the benefits might continue past 2 years?
If any of these can be high-growth ventures, then early work is mainly useful in helping to set up later work. There’s often a lot of experimentation, product-market-fit finding, learning about which talent is good at this, early on.
Related, I’d expect that some of this work would take a long time to provide concrete returns. My model is that it can take several years to convince certain wealthy people to give up money. Many will make their donations late in life. (Though I realize that discounting factors might make the later stuff much less valuable than otherwise)
Happy to see this. Overall I’m pretty excited about this area and would like to see further work here. I think my main concern is just that I’d like to see dramatically more capital being used in this area. It’s easy for me to imaging spending $10M-$100M per year on expanding donations; especially because there’s just so much money out there.
I’m a bit curious about the ROI number.
“We estimate a weighted average ROI of ~4.3x across the portfolio, which means we expect our grantees to raise more than $6 million in adjusted funding over the next 1-2 years.”
1-2 years really isn’t that much. I’m sure a lot of the benefits of this grant will be felt for longer periods.
Also, of course:
1. I’d expect that IRR would also be useful, especially if benefits will come after 2 years out.
2. I’d hope that it wouldn’t be too difficult to provide some 90% bounds or similar.
To give more clarity on what I mean by imagining larger spends—it seems to me like many of these efforts are sales-heavy, instead of being marketing-heavy.
I can understand that it would take a while to scale up sales. But scaling up marketing seems much better understood. Large companies routinely spend billions per year on marketing.
Here are some figures a quick Claude search gave for car marketing spending, for instance. I think this might be an interesting comparison because cars, like charitable donations, are large expenses that might take time for people to consider.
(I do realize that the economics might be pretty different around charity, so of course I’d recommend being very clever and thoughtful before scaling up quite to this level)
I asked ChatGPT about the average marketing spend of auto manufacturers was (it said 7-8%) and the average fundraising spend of the largest US charities (it said ~10%, which is consistent with my intuition). While I’m not endorsing these percentages as optimal for auto manufacturers or non-EA charities—much less advocating that they should be applied to EA charities—they could provide some sort of ballpark starting point.
Automotive marketing, as I understand it, is considerably about creating vague positive brand associations that will pay off when the consumer is ready to make a purchase decision. That’s a viable strategy in part because there aren’t too many differences between (e.g.) a Ford and a GM truck. It’s not obvious to me that would-be EA donors would respond well to that kind of campaign, and this may limit the extent to which their marketing budgets and strategies serve as a useful guide here.
Frustratingly, the links that Claude found for these went to Statista, which is mostly paywalled, but the public bits mostly seem to verify these rough numbers.
https://claude.ai/share/941fbda6-2dc5-4d15-bb31-99fcfc4d0a8b
I think 1-2 years is a reasonable window to test for 1 year of funding. I think some benefits of the grant would remain beyond that, but only a small percentage. Direct networking, marketing, website improvement etc. need people working directly to increase funding and I struggle to see how those benefits would persist if no-one was working and the money stopped?
How do you imagine the benefits might continue past 2 years?
Thanks Ozzie and Nick!
I agree that there will likely be some benefits beyond the grant period (which is 1-2 years depending on the grant). Those will especially be felt in cases in which the grant helped seed an org that might not get started or might get started many years later otherwise. That wasn’t the case for many of the grants though, in general we’re providing ops support for 1-2 y for an existing org.
Even though I made most of these grants non-renewable, in our core effective giving portfolio we’re a stable funder for most organizations, which means that I’ll reassess them every 2y or so to determine if we should renew funding, and at what level. We then use every grant period to look at (adjusted) money moved and how that compares to the orgs costs. This is a simplified view and I think we’ll need to adjust it in some cases, e.g. now that a lot of the organizations are forming partnerships with GWWC, some of the wins they land in a given grant period through pledges will be seen for many years, so we should consider that, but avoid double counting in future periods.
Ozzie, to your point of expecting the area to be able to absorb more money, I think that’s true. We did discuss with some orgs if it was worth them scaling further, but most are being cautious and want to hit certain milestones/make sure they’re on a sustainable growth path before doing so, which I appreciate. The two ways in which I currently imagine the ecosystem could absorb more funds is: (1) by seeding new efforts (there are still many gaps, so I’m excited to see other orgs get started), (2) by scaling existing efforts if some marketing strategy really pays off and/or if they tap into a new segment and need more, or dedicated, staff (e.g. for national chapters that start doing more (U)HNW advising). I should also state that the amount of funding that we’re able to provide for the ecosystem will vary depending on the year, considering my program’s budget and other grants on the table (both funding tied to existing grantees, and other potential opportunities).
If any of these can be high-growth ventures, then early work is mainly useful in helping to set up later work. There’s often a lot of experimentation, product-market-fit finding, learning about which talent is good at this, early on.
Related, I’d expect that some of this work would take a long time to provide concrete returns. My model is that it can take several years to convince certain wealthy people to give up money. Many will make their donations late in life. (Though I realize that discounting factors might make the later stuff much less valuable than otherwise)