1/ After 10+ years in the nonprofit sector, I’m convinced that relying on donations is an ineffective way to scale impact. Here’s why the donation trap is a broken model:
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2/ Fundraising doesn’t scale well. The bigger nonprofits get, the more money / time they spend fundraising, and the less they spend on programs that help people.
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3/ Some people think this is ok. The argument is that while impact per dollar may go down as nonprofits scale, the total impact (eg # people helped) may increase. “Nonprofits should be able to invest in growth for future returns just like Amazon!”
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4/ The flaw in this argument is that donations are a zero sum game. They’ve been 2% of GDP in the US for 40 years. The American Red Cross isn’t expanding the pie. They’re “raising” $2B that likely would have gone to other nonprofits.
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Replying to @ChaseAdam17
Does market size matter that much? Most nonprofits are raising such a small portion of the $400B+ donated annually is sector growth the issue?
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Replying to @barenblat
I don’t think market size matters to this argument (though it’s tiny at $400B vs $4T gov and $18T GDP), what matters is that it appears to be zero sum, meaning the “they might have been inefficient, but at least they helped a few ppl” argument doesn’t hold water.
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Replying to @ChaseAdam17
I think you’ve gone down the rabbit hole of impact measurement. Not everyone sees the world this way. Not all donors are trying to maximize for most efficient impact. Many are optimizing for what makes them feel best. That could be impact, but it’s likely something else
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Replying to @barenblat
I agree with you, but my argument is that "relying on donations is an ineffective way to scale impact." If you want to view nonprofit success as making donors feel good, then yes, most big nonprofits are succeeding, despite not doing much with the donations (which is my point).
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Replying to @ChaseAdam17
I don’t see the argument. I see $400b in donations making impact everywhere. I don’t see why after school programs for kids need to scale. Or homeless shelters. Or churches. Or soup kitchens. Place based solutions have a role in addressing local issues.
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They don't need to scale! In fact, the best way to allocate the $400B may be to support as many small, amazing nonprofits as possible. This was one of my suggestions... stay small and have impact, don't scale w/ donations and turn into a big ineffective nonprofit!
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