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Startup Ideas for the Post Covid World: Managing Philanthropy

Posted on Monday, Aug 10th 2020

In a world economy devastated by Covid, threatened by climate change, ravaged by simultaneous natural disasters like tropical cyclone Amphan, the need for philanthropy has never been higher.

This is also a world in which at least a quarter million people have a net worth above $25 million. At least 50,000 people have a net worth above $100 million.

While wealth redistribution is considered a vile phrase, philanthropy is palatable. The Giving Pledge has many takers. MacKenzie Scott, who was married to Amazon founder Jeff Bezos, is worth $60 billion in the virus-dominated summer of 2020, her fortune growing in leaps of Amazonian scale. She has just donated $1.7 billion.

This startup idea is a philanthropy management software solution (SaaS) that would be sold to banks with wealth management practices. The assumption is that banks would white label the offering to their clients and charge a markup.

Philanthropy is a deeply personal exercise. In America, the most common form of giving is donations to alma maters. Beyond that, philanthropy is aligned with people’s passions. It could be poverty eradication, it could be chamber music, it could be climate change, it could be a cure for a disease. Philanthropy also has geographical nuances. Home towns and ethnic roots have major sway.

The software needs to take all of these into account.

If a donor moved by widespread hunger decides that Sikh Gurdwaras are a good channel through which he can help feed the poor, the software should be able to present 500 Gurudwaras that can feed half a million people at the click of a mouse. All the procedural details of transmitting money should be worked into the solution, as should all the accounting to support appropriate tax deductions.

Avoiding taxes is a major driver of philanthropy in the United States. The tax system is set up to incentivize giving. Banks and their wealth management practices often set up tax-free donor advised funds from which philanthropic giving is managed. Therefore, relevant accounting is a key part of this software.

What is of higher value, however, is a well-researched, and well-integrated network of nonprofits that donors can contribute to. An art lover may want to contribute annually to 100 contemporary art museums. A classical music aficionado may want to support 100 chamber music festivals. 

Even within the common practice of giving to an educational institution, there needs to be provisions for more granular focus. Instead of giving to MIT, I may want to give specifically to EdX, or to the poverty lab run by Esther Duflo and Abhijit Banerjee, two Nobel laureate economists. Across thousands of universities and their respective disciplines and initiatives, this alone is a major improvement for managing philanthropy.

Then there is K-12. As Covid has exposed, the lower economic strata of society isn’t equipped to buy laptops and broadband to access distance learning. I expect the world to be awash with digital learning tools that would need to be purchased by parents. Well, we need ways for donors to support schools and their ability to finance the low-income students’ technology needs. What if a donor wants to finance 100 middle schools in California to the tune of $100K each? She needs to be able to do so seamlessly, through our software.

International reach is another key driver. Many donors have roots in countries with deep needs. Their passion for supporting their causes need to be accounted for in thinking through the specs for this solution. An example may be the response to Amphan, the deadly tropical cyclone to hit Eastern India and Bangladesh in the middle of Covid-19. A few excellent organizations like the Ramakrishna Mission, Bharat Sevasram Sangha and others had the ground game to evacuate, shelter and feed millions of affected people. These organizations should be set up to receive donations through the system.

Some Numbers

Let’s assume a price-point of $10K per donor per year. This would allow the bank to charge $30K per donor per year by white-labeling the solution.

Let’s also assume that this software is specifically focused on high net worth individuals with $1M+ in annual philanthropic budget.

With 10k donors, we’re looking at $100 million in ARR, and a legitimate billion dollar valuation.

The ROI for banks is straightforward. The $30K per donor fee structure generates $3M in annual revenue across 100 clients. $1M a year out of this is their cost to acquire the software. In addition, they could be charging a percentage in management fee for the assets under management.

Competition

There are products out there for managing foundations and their grant making activities. However, what I am proposing here is something that banks manage directly, and without a large body of operational staff.

Most importantly, what I am interested in is a fast, seamless way of building a deeply personalized philanthropy program for a donor that is seamlessly integrated into high impact organizations internationally.

Publicity

Different donors have different sentiments on publicity. More often than not, however, people like to be recognized for their donations. This platform should provide a built-in feature to publicly celebrate donors. 

In summary, if this startup can seamlessly process upwards of $10 billion a year of philanthropic donations and get it to the hands of high impact organizations, it would create value, not just valuation.

If you want to work on these ideas and are looking for mentoring, start by going through our free Bootstrapping Course, especially the Bootstrapping with a Paycheck module, and then come to our Free Public Roundtables. We hold them weekly.

Photo credit: Pitch Perfect/Flickr.com

This segment is a part in the series : Startup Ideas for the Post Covid World

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