5 Proposed Changes to the Funding System to Increase Org Survival and Impact

By Deena Englander @ 2023-04-18T16:29 (+68)

An approach I often use in my coaching is to pick the ONE thing, that if you could change, would have an exponential (or just the most) impact on the rest of your day. I propose that we use that mentality to pick the most easy-hanging fruit to help EA orgs be most impactful. I personally think that the ONE thing for EA orgs is mentorship and support - Charity Entrepreneurship does an excellent job of that, and it's a model that the rest of the funding community should incorporate. At the risk of sounding too critical, I will say that I think it's somewhat neglectful of funders to give people financial support to start their organizations, but not provide them with the right org infrastructure support to help them be successful.

The objective of this post is to highlight key, easily actionable areas that would likely make all the EA funding dollars much more impactful.

A few thought exercises

If you, as a funder, knew that by giving each startup an extra 10% to create a healthier infrastructure, you would increase the survival rate and/or impact on average by at least 30%, would that be worth it?
Say you have 2 organizations with the same agenda. One started with the right resources and guidance to create a healthy infrastructure, and the other without. What would you expect the difference in the overall impact and survival of each org to be?

My Perspective of the Current Landscape

To start with, I want to add a disclaimer that this article is based on my own experiential data with EA and EA-aligned orgs, as well as the experiences and perspectives of many other service providers in the EA space (see this article about EASE). This is by no means inclusive of all orgs and all problems - it is just my subjective perspective of the current systems.

Here's how I assess the current funding landscape:

	Funder	Entrepreneur
Objective	Spawn effective charities.	Take an effective charity idea and bring it to fruition
Methodology (as I see it)	Develop cause areas that should be funded. Attract applicants and initiatives. Vet applications. If the cause and numbers are in line with prior established metrics, approve and transfer funds.	Do initial research, create a financial plan based on knowns, apply for funding, potentially receive funding, and report on progress annually.
What’s often missing	Establishing proper governance and compliance Finding talent that is good at leadership, in addition to research Assurance that funds will be spent most wisely (minimizing investment risk) Metrics for survival rates and causes of failure (if they exist, I'd love to see them)	Incorporating proper governance and compliance Entrepreneurial / business leadership experience Guidance, mentorship and support Supportive community Strategic clarity Well-developed ToC and a plan to implement Accountability and supervision A culture of asking for help Trusted resources to support the org with supportive services and development Willingness to spend money on “non-essentials”, such as training
Risks	Highest impact is often not achieved Low survival rate of young orgs Mismanagement and slow growth in orgs, if any Burnout of talent group Ineffective use of EA funds	Unable to grow effectively Unable to have ideal impact Slow, disorganized / hampered development Higher failure rates Burnout Increased compliance and liability problems Mismanaged staff Mismanaged funds Poorly estimated budget -> not enough funds to implement well

Proposed changes to the system:

Have standard budget items that every startup should be including. For example, accounting, legal, marketing, ops, coaching, mentorship, community groups, HR, software, rent, travel, salary, benefits, healthcare etc. Not everything will apply to all orgs, but this way funders can make sure the orgs have the resources to be successful from the start. It may be helpful to have a budget consultant as part of the approval process.
Encourage startups to seek professional help (not necessarily from within EA) – perhaps partner with a few orgs or management consultants that can support them well. Mentors and supervisors and coaches are all good ideas.
Encourage startups to spend money on developing their community support system and their org support system – this will create a strong ecosystem of effective charities. It’s hard to be an entrepreneur and too many people do it alone.
Implement accountability metrics for compliance. Get proof of a separate legal entity and bank account in that name before transferring funds. Get proof of insurance 30 days later. Require annual P&Ls before continued funding.
Track performance data - how much was funded, how long the org lasted, reasons for success / failure, resources utilized

In order to make these changes happen, I believe it needs to be systemic. I do think it's something the funders need to reinforce for it to be widely adopted. If we want to support our young orgs well, it's a conversation we all need to be having.

Kim Stiens @ 2023-04-18T18:31 (+9)

Thank you for writing this! I agree about all the points you've made. I think 1 and 4 would be especially impactful - I've worked with a few startup groups now that really do not know what they don't know, and even having a checklist with common $$$ amounts associated would be helpful. Accountability metrics around compliance would be good and probably pretty easy (do you have these kinds of insurance y/n, are you duly registered in every state in which you operate y/n, etc).

I'm less concerned with 2 and 3, though that might be idiosyncratic - I always felt I had people I could reach out to for mentorship and coaching in ops, but I rarely felt like I had a reliable place to get concrete recommendations on vendors, internal policies, professional services and other stuff that companies tend to be weirdly secretive about.

One factor that I've seen (from outside the EA space) is that funders are reluctant to be seen as endorsing particular vendors or approaches, and I feel like this leads to a lot of duplicative efforts. I don't think the EA Cinematic Universe needs to have endorsed vendors, but I feel like every organization goes through long processes of vetting various professional services, doing the same research as other orgs have already done, and it feels like duplicative work.

A funder saying "you need a bookkeeper" is good. Providing a thorough rubric for evaluating bookkeepers & bookeeping firms is better. Is "here's our list of trusted bookkeeping firms" even better than that? Or is that overstepping on the funder's side? I could see a lot of value to funders providing a skeleton frame for fundees ("this is how a nonprofit is structured, here's some standard accounting SOPs for your country of operation, here's a list of trusted payroll vendors that meet your needs as an org, here's the EA Standard Benefits & Salary Bands starter kit...") and I think it could be done without being too heavy-handed, but maybe that would result in more orgs losing out on new vendors and systems that haven't been vetted (and thus less innovation in approach / an implicit status-quo bias at a systemic level).

Dušan D. Nešić (Dushan) @ 2023-04-18T20:56 (+3)

EA Mental Health Navigator works like this - you recommend people you worked with, anyone can add people on the list, and it's "open source" so funders don't get some special say. I think the author of this post has a running list of Service providers like that, so that'll fix it too.

James Odene [User-Friendly] @ 2023-04-18T18:34 (+7)

Love seeing marketing in here! New organisations often haven't budgeted for their marketing needs. It would be great to see systemic change in funders making clear what's expected and that includes a marketing spend (in most cases).