Four strategies for scaling effective giving (MCF 2024 memo)

By Sjir Hoeijmakers🔸 @ 2024-10-02T13:32 (+52)

This memo was originally written for the Effective Giving Summit 2024, and slightly adapted/updated for the Meta Coordination Forum 2024. I’m sharing this here (with very minor edits) in the hope it will be useful for others as well. (my other MCF memos are here: 1, 2, 3)

TL;DR

• We’d like to find ways to scale the current ~$1 billion to (say) 10s of billions of dollars moved to high-impact funding opportunities (HIFOs) each year
  • Note that this would still only be ~10% of the $500B of donations made in the US every year; this seems like an ambitious but achievable goal.
• I think it’s useful to categorise current approaches to fundraising into 4 (2x2) candidate strategies, each of which can be applied to different target groups:
  • Broad direct
  • Broad pledge
  • HNW direct
  • HNW pledge
• These strategies can (and likely should) be combined by organisations, but some may ultimately scale much better than others.
  • I think the jury is out on this, but we're starting to get at a point where we have useful data to compare them.
  • I go into a few (still quite speculative) comparisons between these strategies
• GWWC is planning to test the broad pledge strategy for scale by aiming for 1M 10% Pledges (by current estimates, coming with a lifetime value in the order of ~$100B to high-impact funding opportunities) by 2040.
  • We’re collaborating with other EG and non-EG organisations on this through pledge partnerships.  (If this is something you’re interested in, please reach out via email to james.rayton@givingwhatwecan.org)

Defining the categories

Table: Examples of organisations implementing the four scaling strategies

Broad vs HNW

• The difference here is in whether you are trying to reach scale mainly through the amount of people you onboard vs the amount of money donated per person onboarded
• Broad fundraising generally means trying to find a large-to-very-large group of people giving small-to-medium-sized amounts of money effectively
• HNW fundraising means trying to find a small-to-medium size group of people giving large-to-very-large amounts of money effectively
• Obviously, in reality these are continuous rather than discrete distinctions, and the exact boundary we use in our definition is always somewhat arbitrary, but for the purpose of this post let’s say HNW fundraising targets donors to give $100k+ effectively per year, whereas broad fundraising targets all other donors.
• Note that we can make further sub-distinctions by defining e.g. UHNW fundraising to target donors that give $1M+ or $10M+ per year, or define “medium-sized donors” to give between $10k and $100k per year.
  • To give you a sense of how this distribution is for GWWC, over the past few years we’ve seen a roughly equal total amount of donations recorded (made or reported through our platform) by each of the four groups <$10k, $10k-100k, $100k-$1M, >$1M.

Direct vs pledge

• The difference here is whether you are trying to reach scale mainly by getting donors to give effectively in the short-to-medium term vs via inspiring them to commit to giving effectively in the longer-term or at a later point in time, using the tool of a (semi-)public pledge to give.
• Direct fundraising generally involves promoting specific high-impact funding opportunities (HIFOs) or advising on specific grants or grantmaking strategies.
• Pledge-based fundraising involves asking donors to commit to a giving pledge, often alongside education about effective giving more broadly and/or specific advice or support for them to implement their pledge.
• Note that again this is a (IMO useful) simplification and there is actually a spectrum here. For instance, many direct fundraising organisations try to get people to commit to longer-term effective giving as well (e.g. through setting up recurring donations or making longer-term plans).
  • For GWWC, over the past few years we’ve seen about ~70% of donations made or recorded through our donation platform come from pledgers, and we expect this to increase given our renewed focus.

Most organisations in the EG ecosystem can be quite straightforwardly put into one or multiple of the quadrants above.

It’s worth noting that it can make sense for an organisation to implement multiple strategies alongside each other, even if they only expect one of these to ultimately help them scale. This could be done in order to test multiple approaches before specialising, or because there can be positive interaction effects between strategies and/or low costs of maintaining them alongside each other. For example, Effektiv Spenden and legacies.now merged after they found that ES’s broad fundraising helped generate leads for legacies.now’s HNW fundraising work, and they found it wasn’t worth the cost of keeping a separate brand and organisation in Germany. Similarly, at GWWC, even though we’re currently looking to scale our impact through pledges, we’re still planning to keep our donation platform and research available for non-pledge donors as well, as this can be done at relatively low cost and can serve as a lead generator for pledges as well.

Relatedly, it’s worth noting that one can apply these strategies across different target groups, e.g. by geography, occupation, affiliation. Some of these strategies may make more sense for certain target groups than others. I think it’s a good thing that we currently have organisations specialising per target group and experimenting with different (combinations of) strategies for their target group, e.g. Ayuda Efectiva experimenting with both a direct and pledge strategy and Doneer Effectief experimenting with both a broad and HNW strategy.

Comparing the four strategies

Which of these strategies -- if any -- can help us scale our impact to billions or even 10s of billions of dollars donated to HIFOs per year? I personally think the jury is still very much out on this, but that we’re at a point where we can start usefully comparing these strategies along various dimensions, which may give us hints e.g. on what might work best for which target groups, which experiments we should run next / which gaps there are to fill, and how we can each best distribute our focus and resources over the various strategies we’re testing out.

Below I give some examples of comparisons one can attempt to make between strategies to give an idea of what I have in mind here, and what might be possible longer-term. Please note these are mainly for illustrative purposes and are often just early hypotheses/quite speculative/off-hand, given the sparse data yet available and the limited time I had to prepare this memo. I would love to get other people’s views on these, particularly where they disagree / have seen evidence of something different.

Limiting factors

• It’s too early to tell which approaches will hit strong limiting factors first, and to what extent these can be overcome, but by looking at the money moved data of different organisations over the past few years we can already see some hints of limiting factors being hit. For instance:
  • GiveWell, which takes a combined broad and HNW direct fundraising approach, seems to have hit some limiting factors in 2022 after having grown rapidly for more than 10 years.
  • Similarly, growth of The Life You Can Save, Effektiv Spenden, Animal Charity Evaluators, and Giving What We Can (all largely broad direct fundraising organisations at the time) seems to have stagnated somewhat at around the same time, suggesting this may have had something to do with external factors (e.g. the economic downturn and/or the FTX crisis), but there could also be other factors at play here, e.g. target groups becoming saturated.
    • We’ll likely learn more about this in the next 1-2 years as the external factors change and these organisations try out various ways to break through the current barriers.
  • Interestingly, Founders Pledge, a HNW pledge organisation, managed to keep growing during this time..
    • This was mainly due to success with a very small set of large donors. It remains to be seen whether they can keep this going and either help these donors scale up their giving further or find similar large donors over the coming years.
  • More early-stage direct fundraising organisations such as Ayuda Efectiva and Doneer Effectief also managed to grow quite rapidly during this time, though this could be because they were still picking low-hanging fruit in their target groups.
    • It’ll be interesting to see whether these organisations can maintain their growth rates in the coming years or will hit similar barriers like the other direct fundraising organisations mentioned above.
• I think it’s important to figure out (1) what the actual limiting factors at play are and (2) whether they are temporary/external and/or can be overcome or present somewhat fundamental limits on what an organisation or strategy can achieve.
  • If we want to scale our impact as an ecosystem by orders of magnitude, it’s easy to be distracted by low-hanging fruit, idiosyncratic situations, and external factors, but what we should be after are the pathways towards longer-term growth, which could e.g. include strategies with longer lag times such as HNW and pledge-based ones.
    • Founders Pledge could be a good example of this, if they manage to continue scaling.
    • Similarly it’ll be interesting to see whether organisations like Longview will be able to scale their grantmaking / money advised over the next few years, after working on HNW strategies with longer lag times for a while.
    • At GWWC we will attempt something similar with our new broad pledge-based strategy (see below).
  • That said, longer lag times obviously aren’t a good thing intrinsically, and there may be ways to overcome current limiting factors and scale our impact via broad direct fundraising strategies (as well).

Sustained giving

• To scale our impact long-term, one challenge we have to overcome is how to not just inspire people to give effectively and significantly, but to do this in a sustained way.
• Pledge- and HNW-based strategies seem to have a bit of an advantage here, as they naturally encourage longer-term giving (through a pledge or through building close relationships), and at GWWC we’ve seen evidence in our impact evaluation of people sticking to their pledges.
• For broad direct fundraising, one can do this e.g. by promoting recurring donations; by trying to make giving more of a habit; and by establishing recurring touchpoints with donors (e.g. around giving season).

Value drift / Incentives

• It’s also worth comparing these strategies by the incentives they bring to the organisations implementing them.
• I think a broad pledge-based approach is a bit less risky than the other few in terms of organisations moving away from effective giving principles / lowering their standards, because it
  • Requires less of a tailoring to preferences of individual donors
  • Requires less of a pushing of specific charities or causes
• That said, pledge-based approaches bring with them a risk around whether pledgers actually end up giving (effectively).
  • Our impact evaluation again provides some promising historical data here, but this is something we’ll have to continue to monitor as we’re trying to scale the pledge (see below).

Spreading EG principles

• In addition to trying to directly scale the money moved to HIFOs, I’d argue there’s significant value in more people understanding effective giving and effective altruism principles and concepts (rather than just deferring to whatever people/organisations say is “most effective”), and ultimately for these principles to become “normal”. (see also my memo on the role of EG in EA)
  • This is both because this can lead to people applying these principles in other parts of their lives and because it’s a more robust way for the ecosystem to grow (e.g. there’ll be higher-quality feedback from donors to the ecosystem).
• HNW strategies often include more education on EG principles and concepts than broad strategies (as HNW donors tend to want to be more closely involved with their giving), but by their nature reach a smaller part of the population with these concepts.
• Direct strategies have a bit more of an incentive to promote specific HIFOs (rather than EG principles) compared to pledge-based strategies. With pledge-based strategies, OTOH, one needs to ensure that people fully understand the principles behind a pledge when taking it, and act on these when giving at a later point.

Diversification of funding/perspectives

• Broad strategies arguably have an advantage here over (U)HNW ones, but only if they (1) truly spread effective giving principles rather than donors just deferring (see above) and (2) avoid becoming fully centralised (e.g. there need to be multiple evaluators/grantmakers).

Example: the broad pledge strategy

• GWWC is planning to test this strategy for scale by aiming for 1 million 10% Pledges by 2040.
  • Using our most recent best guess estimates of the value of the Pledge, these 10% Pledges would come with a net present value of ~$100B to high-impact funding opportunities (note this figure isn’t adjusted for attribution and the value of a Pledge is likely to change over time / with scale, but this gives a sense of the potential order of magnitude).
  • Please see here for more on our high-level strategy.
• We’re collaborating with others on this via pledge partnerships.
  • We’ve repositioned the GWWC Pledge to the more neutrally-branded 🔸10% Pledge to make it easy for others to test this strategy for their own target groups.
  • So far, we’ve launched partnerships with 10+ EG and non-EG organisations, and are in exploratory talks with others. (Please reach out via email to james.rayton@givingwhatwecan.org if your organisation is interested in exploring this as well.)