Beyond Traditional Giving: How For-Profits Can Supercharge Your Donation's Impact
When thinking about philanthropy and charity, our minds often leap to nonprofits. But what if I told you that donating to a for-profit might sometimes lead to a more significant and tangible impact? A staggering number of nonprofits dedicate a substantial portion of their donations to administrative and fundraising expenses. Meanwhile, certain for-profits, with their inherent efficiencies and niche expertise, are demonstrating a remarkable capacity to channel contributions directly to causes. In this post, we'll delve into the three teased points: the efficiency of donation usage, the potency of in-house expertise and the scalability of companies with profit engines.
The Efficiency Quotient: Where Does Your Donation Really Go?
It's a common misconception that nonprofits use almost all of their donations for the direct benefit of their cause. In reality, renowned nonprofits, including giants like United Way, Salvation Army and Habitat for Humanity spend upwards of 20% of donations on administrative and fundraising expenses. This means that only a fraction of your donation goes directly to helping those in need. This isn’t necessarily a bad thing – charities are businesses too – but it’s simply part of the model.
Contrast this with Flexport, a for-profit global supply chain company (and Rise Together portfolio company).With their impact arm, Flexport.org, they've brilliantly showcased how contributions can be channeled directly to causes. A prime example is their involvement in crises like the Ukrainian situation. Through their fund, they raised over $30mm and provided transportation for over a million pounds of aid, ensuring that 100% of the money donated was used for distributing vital products and goods to the affected people. Charitable initiatives nested within for-profits can leverage the core operating business’ valuable resources (reducing overhead), and in this case, the CEO’s unique and powerful network also enabled Flexport.org to raise millions of dollars for this charitable cause.
Mastery in Action: The Power of In-House Expertise
A distinct advantage that many for-profits hold is their in-depth, in-house expertise. This specialization can significantly amplify the impact of donations. Take the case of DroneDeploy (another Rise Together portfolio company). This company has been a pioneer in drone mapping since 2013. Their thorough understanding of the technology and its applications means they can swiftly and efficiently harness it for good.
A powerful example of this is DroneDeploy's collaboration with Disaster Relief Australia. They leveraged their niche expertise to gather actionable aerial data post-disasters, enabling emergency services to efficiently manage situations, carry out evacuations, and strategize recovery operations. Such rapid, precise responses, powered by their specialized knowledge, undoubtedly saved lives and expedited recovery.
Scalability: Linear vs. Exponential Growth
One obvious difference between nonprofits and for-profits is…profit (surprise!). Nonprofits engage in annual fundraising cycles to hit their target budgets – and then that is the only money they have to spend each year. Many of the largest nonprofits have therefore been built over decades – Feeding America started in 1979, UNICEF in 1946 and the Red Cross was founded in 1881! On the flip side, for-profits are incentivized to make profit to fund their growth, allowing them to scale exponentially. Google and Amazon were founded in the 1990s.
Let’s apply this notion to the support given after the Ukrainian crisis broke out when displaced Ukrainians who fled their homes were in need of shelter. A wonderful nonprofit called ShelterBox, which provides emergency shelter to communities hit by disaster – and was founded in 2000 – has helped more than 37,000 people affected by the war in Ukraine so far. In comparison, Airbnb’s charitable arm, Airbnb.org, which connects people to places to stay in times of crisis – and was founded in 2020 – helped over 100,000 people fleeing the war find places to stay within 6 months. By leveraging the scalability of a large and global for-profit, Airbnb.org was able to create exponential impact in months.
In Conclusion
While donating to nonprofits remains a noble and essential endeavor, it's worth broadening our horizons. For-profits like Flexport, DroneDeploy and Airbnb have demonstrated the compelling advantages of efficiency, expertise and scalability. In certain scenarios, they might just offer a more potent avenue for your contributions to make a genuine difference. The next time you're considering a donation, perhaps think beyond the traditional and explore how your money can have the most substantial impact.
Written in collaboration with our wonderful intern, Pengfei.