Helen Brown Group

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European-style foundations come to the United States

Bethlem Hospital, London, 1677. Engraving.
Credit: Wellcome Library, London. Wellcome Images (http://wellcomeimages.org)

Foundations have existed in Europe for over 600 years. The oldest is likely Bethlem (aka “Bedlam”) Royal Hospital, which has been taking care of the mentally ill without interruption since the 1400s in London. Even though it’s a charitable organization, it’s called a foundation because that’s the legal way it was set up.

The way foundations are set up in Europe is different in the law than the way foundations (as we know them) are set up here in the US. (At least, until now – I’ll get to that in a minute).

The foundations we’re familiar with are required to give away at least 5% of their assets yearly to beneficiaries that are nonprofit organizations. The purpose of the giving has to be charitable, and if there’s too much monkey business, like commissioning and buying self-portraits or giving grants to pay for a trustee’s kid’s tuition or what-not, the authorities tend to take notice and shut it down. US foundations have to file a report annually saying how much money they have, what their charitable priorities are, who their trustees are (and how much they pay them), and what they gave their money to in that year.

In Europe, a foundation can be set up for charitable purposes but, depending on the country, it doesn’t have to be. As mentioned above with Bethlam Hospital in England, that foundation was established for a very charitable purpose. UK law states that if you’re going to incorporate as a foundation, it has to be for public-benefit purposes only. That said, there really aren’t that many entities known as “foundations” in the UK – most grant-making organizations are called grant-making trusts or charitable trusts.

In the countries where it’s not required that a foundation has to be charitable (like Austria, Belgium, Germany, The Netherlands and Liechtenstein, just to name a very few), a company founder, let’s say, can establish a foundation entity that could contain their actively-operating company, their home(s) and artwork, their yacht, or any other asset that they want to protect from taxation or transfer to future generations without the encumbrance of pesky death taxes.

For example, flat-pack furniture mega-company IKEA’s ultimate corporate parents are two foundations, Stichting INGKA Foundation (based in The Netherlands) and Interogo Foundation (based in Liechtenstein). Neither foundation makes grants; they are a tax-efficient structure holding the various divisions and subsidiaries of IKEA and entirely benefitting the Kamprad family. When IKEA founder Ingvar Kamprad passed away, his family members were already on the board of the foundations, so the transition of assets was smooth and unencumbered.

So why am I going into all this? Because that kind of European-style non-grant-making foundation now exists in the US.

In late 2017, the New Hampshire Foundation Act was passed in Concord, NH. Written largely by a wealth management attorney named Todd Mayo, the law allows for the establishment of foundations in NH that do not have to be either charitable or philanthropic. The purpose of the law was to appeal to high net worth individuals (HNWIs) outside of the US (but anybody is eligible) who want to park their assets in a stable country but maintain control over it.

Here’s what I mean by that. Let’s say you’re a HNWI that wants to place assets in a country that is not where you reside to avoid taxes or protect your assets in case you divorce. Usually this might be done in an offshore trust, but a trust that’s established in Bermuda or Panama is required to have as its manager a Bermudan or Panamanian. You’re effectively signing away the rights to your assets and trusting that the Bermudan or Panamanian isn’t going to run away with it (that’s generally a fairly safe assumption since by law they’re required to provide a duty of service to the trust founder. But still – it’s got to give you pause as you sign away hundreds of millions.).

The New Hampshire law allows someone to create a non-charitable private foundation (NCPF) where you get to keep control over your money. Like a trust, a person can use a NCPF to park assets to provide for themselves or their family during their life and after their death and protect it from taxation. But with an ordinary trust, the beneficiaries have a say in the management of the trust. With a NCPF, the ownership of the assets is with the NCPF. The beneficiaries have no ownership or rights to ownership of the assets. The NCPF is managed by a board or council, and the board’s duty is to the NCPF and not (necessarily) to the beneficiaries.

According to some trust and estates legal experts, the law is sloppily written but it’s a start in creating European-style foundations here in the  US.

Meanwhile, in Wyoming

In 2019, Wyoming went one step further. Wyoming’s Statutory Foundation Act allows that establishment of foundations that can be a trust, a business entity (like an LLC), or a hybrid of the two.

The Statutory Foundation has to file an annual report, benefit at least one person (and you can use the term “benefit” loosely here), and have a board of directors. However, the identity of the founders, directors, beneficiaries, or protectors of a Wyoming Statutory Foundation do not need to be filed or recorded for the public to see, so there’s a good chance – like Donor Advised Funds – we’ll never know the names of those behind their establishment.

These new entity types are fairly new and, as far as I was able to find, still untested. Still, for those of us researching foundations and perhaps finding something that doesn’t add up, one of these non-charitable private foundations might be the reason why.

Much more information here:

 

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Interview with a prospect development crypto miner

This week we have a real treat of an article: HBG’s Associate Director for Consulting, Tara McMullen-King, interviewed Amy Begg, former NEDRA board president and an Ann Castle Award recipient. Amy is also an active cryptocurrency miner (with a heart of gold!). Tara and Amy had a fascinating discussion about crypto mining, and Amy generously shared her knowledge and experience about what it means to mine cryptocurrencies. Huge thanks to Amy for taking the time to explain it all for us! ~Helen

tara

Tara McMullen-King

It is clear that the demand for cryptocurrency and crypto mining is not subsiding any time soon – as of August 2021, the combined value of the world’s cryptocurrencies stood at about $2 trillion. Not only are more people investing in crypto, but an increasing number of donors are using cryptocurrencies like Bitcoin to fund their charitable contributions. According to a recent article in the New York Times, there has been a significant increase in cryptocurrency donations to donor-advised funds – for example, Fidelity Charitable received $150 million in cryptocurrency in 2021, up from $28 million in 2020 and only $13 million in 2019. And in May 2021, it was reported that a $5 million anonymous gift in the form of Bitcoin had been made to the Wharton School at the University of Pennsylvania – the largest cryptocurrency gift ever made to the University.

Amy Begg

While many nonprofits are still not set up to accept gifts of cryptocurrency, more and more are beginning to put the internal infrastructure in place to do so, or signing up to accept crypto gifts through donation platforms like The Giving Block – in part because of some of the benefits. Donors can benefit from tax write-offs since cryptocurrency is classified as property (which means no capital gains tax and a fair market value deduction). They are also cost-efficient for organizations involved in international transactions since they eliminate the usual costly associated international banking fees. And with close to half of Millennial and Gen-Z investors owning cryptocurrencies, making the choice to accept crypto donations will also potentially provide an opportunity for nonprofits to engage with a new generation of younger donors in the future.

But how does cryptomining work? How do people get started in the field? And what even IS cryptocurrency? To try to get some answers to these questions, I sat down for a conversation with Amy Begg, Managing Director of Prospect Management at Harvard University, who is a miner with a wealth of knowledge and insight about all things crypto!

Tara McMullen-King: How do you see cryptocurrency impacting our work in nonprofit fundraising? Do you see a need for more nonprofits to set themselves up to accept Bitcoin and other digital assets?

Amy Begg: There is just a LOT of wealth creation going on right now, at different levels. More and more people are becoming interested in cryptocurrency and are finding ways to mine and invest in things like Bitcoin and Ethereum – and I don’t see this stopping any time soon! You are also seeing more family offices offering Bitcoin to clients. I definitely think there is a need for more nonprofits to get into the crypto space, because I think crypto is the future of money. For example, you take something like the Bitcoin Beach project where an anonymous Bitcoin HODLer made a donation to help create this entire Bitcoin economy in this little village on the coast of El Salvador…. and it has completely changed the village and people’s lives there. Most of the population didn’t have easy access to banks, and most of the local businesses couldn’t accept credit cards since they didn’t qualify for merchant accounts. Now they can pay for things – and get paid themselves – in Bitcoin in this tiny little village. They have also seen that it is teaching them about finance and how to save money, since they don’t want to spend their Bitcoin (as they are able to watch it increase in value). And now El Salvador just passed a bill in June making it the first country in the world to adopt Bitcoin as legal tender!

Tara: What does it mean to “mine” cryptocurrency? What types of cryptocurrencies can someone mine?

Amy: The term “cryptocurrency mining” or “cryptomining” means gaining cryptocurrencies by solving cryptographic equations using computers. This process involves validating data blocks and adding transaction records to a public record (a ledger) known as a “blockchain.” (Here is a good video from the New York Times: https://youtu.be/0B3sccDYwuI)

Some of the most popular coins to mine are:

  1. Bitcoin
  2. Ethereum
  3. RavenCoin
  4. Monero
  5. LiteCoin
  6. Ethereum Classic
  7. Zcash
  8. Grin
  9. Metaverse
  10. Bitcoin Gold
  11. Dogecoin
  12. DASH
  13. Vertcoin
  14. DigiByte
  15. Monacoin
  16. Aeternity
  17. Cardano
  18. VeChain
  19. BitTorrent Token

Most of today’s coins are mined by GPUs and ASIC miners. GPUs are video card-based mining, which is typically used for gaming – these miners are flexible and have the potential to mine different cryptocurrencies, enabling you to switch between coins (in case the market is bearish or bullish). However, GPU mining consumes lots of power and involves complex computation. ASIC miners work on particular algorithms and have the sole purpose of mining cryptocurrency – these can run much faster than GPUs and can lead to greater profits!

There are a lot of different coins that can be mined –if someone is considering getting into mining, they should investigate the profitability of a coin. There are many sites that can help with this – my personal favorite is WhatToMine. Some of the factors you want to take into consideration include your electricity costs, the type of equipment you plan to use (ASIC miners versus GPUs), and the calculated hash rate.

Once you enter the total hashing power of your mining rigs, you can check each GPU, CPU, or ASIC chip’s rate. The next step is to enter the total power consumed by your rigs in watts, and then the price of your electricity in kWh (kilowatt-hours) – if you are not aware of the prices per kw, you can ask your electricity provider. If you have joined the paid mining pool, you then enter its fee. After deducting all these expenses, the mining calculator will calculate the net profit you would expect to make per day, month, or year.

There are two ways to generate coins: Proof of Work (PoW) and Proof of Stake (PoS). Any coin that is generated by Proof of Work is minable; Proof of Stake can be done by staking your coins. Most recently, Ethereum has been the most profitable coin to mine – the Ethereum community and its creator, Vitalik Buterin, are in the process of attempting to move from PoW to PoS.

From https://www.bitdegree.org/crypto/tutorials/proof-of-work-vs-proof-of-stake:

Tara: Can someone mine crypto on their personal computer, or do they have to build a separate set-up? What does it take to build a mining setup– is it difficult or expensive? What does your daily mining process look like?

Amy: Each coin has a specific algorithm associated with it – and in order to mine that coin, you need to have a processor that can handle not only the algorithm, but the size of the blockchain associated with that algorithm (which grows over time). A data structure called a DAG (Directed Acyclic Graph) is used – it is like a database that connects different pieces of information together. In cryptomining, a DAG records transactions and makes mining secure – without a DAG, a mining algorithm has no way to track, notate, or reward you for your mining. But any processor used for mining must have the capacity to support the size of the DAG file – which can be large (Ethereum, for example, is over 4.3GB). Most CPUs don’t have the capacity to support this – GPUs, on the other hand, contain enough memory to support the size of the DAG file.

I primarily mine Ethereum, and my set-up (see below) includes both ASIC miners and rigs with GPUs from NVIDIA which I purchased on eBay. On a day-to-day basis, there is not much to do! My machines run 24/7, and I can access them via remote desktop.

It does cost quite a bit to get started in mining crypto – and it requires a good deal of electricity. Currently, there is also a shortage of GPUs – so they are hard to come by! For anyone who is interested in purchasing equipment for mining, I would recommend that they do a lot of research. It is also worth noting that it can take up to a year to recover the set-up costs.

Tara: What advice do you have for folks who might want to get started in cryptomining? Are there good resources out there for people to learn more?

Amy: Bits Be Trippin’, Red Panda Mining, and Son of a Tech all have YouTube channels that I highly recommend watching – they break down the profitability of coins and the different types of GPUs that are out there.

Another factor that someone needs to consider is which mining pools to join – I have used Nice Hash, Nanopool, and Ethermine. You can always solo mine, but the difficulty for mining a block requires a much higher combined hash rate for all of your GPUs and ASIC miners in order to be successful in solving the block.

One main piece of advice I would give is to spend some time learning about the different cryptocurrencies that are out there. Also worth noting is that to mine, you will need a cryptocurrency wallet to mine to – there are a lot of options out there, and not all of them have the same coins. I personally use quite a few wallets for my crypto, such as Binance.US, Gemini, Coinbase Wallet, and Atomic Wallet. Coinbase is particularly great for beginners because it offers videos for people to watch about specific tokens – and then rewards you in cryptocurrency for watching them!

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The overlooked generation

There’s a puzzle that I’m trying to figure out. Maybe you’ve got some insight and can help me.

When I got started in my career in prospect research, it didn’t take me long to figure out that we were concentrating on people (okay, mostly men) who were in their 40s to 70s. These were the donors who were in their prime earning years or recently retired, finally able to spend their spare time on volunteering and their spare cash on donating.

We didn’t ignore their kids, of course, but since there’s only so much time in the day, it was the Boomers that got the majority of our prospect identification and research attention. It’s just Sutton’s Law.

So, okay, those Boomers are aging out of prime giving now. Most are now fully in retirement mode, so it makes sense that we look to the next generation who are in their prime earning years or recently retired.

In the press (fundraising and general audience), you can’t open a newspaper or magazine without seeing articles like Millennials And Charitable Giving: A New Approach To Philanthropy, How Millennials Are Changing Philanthropy, and How to Appeal to Millennial Supporters.

Which is great.

But that’s not the next generation after the Boomers. Gen Xers are.

Mackenzie Scott’s generation. And Jennifer and David Risher’s. Also Pam and Pierre Omidyar. John and Laura Arnold. And probably at least half of the donors who are giving large gifts to your nonprofit right now. They’re Xers. Not Millennials.

In fact, when you look at the Forbes list of 25 most philanthropic billionaires, there are only two Millennials on that list and they’re married to each other – Zuckerberg and Chan.

 Sure, Boomers and Gen Xers are giving more in terms of dollars ($732 and $1,212 per year, respectively),” writes Justin Wheeler in Forbes, “but at an average of $481 given each year, Millennials are quickly gaining influence over the philanthropic space (source: The Next Generation of American Giving, 2018).

Considering that Millennials earn less than their counterparts did and are often riddled with student debt, years away from owning a car or a home, these numbers are significant. If people become more generous over their lives and are more likely to give if their parents give, Millennials will become the most generous generation in history. One can easily imagine this reaching 95 or even 100 percent by the time they reach midlife.”

So let me get this straight: Boomers and Xers are giving about twice as much per year right now, but we should be paying special attention to this generation that’s riddled with student debt and years away from owning homes? Who graduated college smack in the middle of the Great Recession and then, just as they were getting their feet under them, had to live through another economic tank-a-thon, with a pandemic thrown in for good measure?

Honestly, can we just give them a break for a few years? And (thanks for being patient on my getting to the point here) why exactly is the press (as well as several fundraising conference sessions) focused on Millennials to the exclusion of Gen Xers?

Please don’t misunderstand me. I am not saying that Millennials are not philanthropic and that they don’t volunteer and that they’re not super-involved with nonprofits and/or that we should ignore them.

It just seems that Millennials are the press’s shiny object and, for some reason, despite all of their truly radical global-changing philanthropy we’re not talking about Gen X as the great philanthropic generation they are.

I mean, great Scott, look at them! Melinda Gates is an Xer, too!

According to a report by Fidelity Charitable, Gen Xers volunteer 8 hours on average per month (Millennials 9 and Boomers 6).

57% of Millennials say they give to a broad range of causes, while 63% of Gen X focus their giving on a limited number of nonprofits. Maybe Millennials are still looking for that special cause or two that they want to devote their time to, but what that says to me is, if you have a Gen X donor/volunteer involved with your nonprofit, chances are you will have them for life if you pay attention to them and steward them right.

Also, Gen X donors are more focused on their local communities, according to Fidelity Charitable. So for prospect identification purposes, that provides some helpful geographical focus for you to consider, too.

In prospect development, we have to remember Sutton’s Law. Today’s shiny objects may well be tomorrow’s philanthropists, and, yes, we should always keep our eyes on the periphery and pull it into focus over time. But we need to stay focused on what will work for our nonprofits now, and keep the philanthropic power generation in focus. Because that’s where the money is.

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Making remote work work

They’re calling it “The Great Resignation.” Millions of folks who have worked from home productively through the pandemic aren’t ready to give up their new quality of life for employers who will require them to go back to an office. According to the US Labor Department, a record 4 million people quit their jobs – and that’s just this past April.

For some professions it’s really not an option. It’s difficult for a surgeon and her team not to be in the presence of the patient, although not impossible, apparently.

But for fundraising, it’s a no-brainer. Old school ways of insisting that everyone has to be in the office all the time are losing their credibility. And for good reasons.

Keeping great staff

Staff retention, particularly for talented frontline fundraisers, is a perennial problem. When the average tenure of a fundraiser is 18 months and the average time from hello to major gift is 2 years, it doesn’t take a math degree to see that there’s an inherent problem in that equation. Offering flexibility gives your nonprofit a strategic staff retention advantage, and not just for frontline fundraisers, but for the rest of the team as well. Losing a talented data entry officer, or a campaign strategist, or insightful prospect development pro leaves a huge gap, creates recruiting and onboarding costs, and leaves you with weeks or months of lost opportunities.

True connections

The myth that you can’t foster a sense of team or build relationships with donors remotely is nonsense. You just have to create an infrastructure that supports connection, and encourage everything you can that helps people bridge those distances in large groups and small pods. Just because colleagues or fundraisers and donors are not in the same room doesn’t mean the relationships they build are any less meaningful.

Our team is 22 strong and growing, and we’ve been a remote company since 2005. I feel lucky that we have lots of experience in successfully working from home, but that doesn’t mean we’re not constantly thinking about ways to better support communication and foster that sense of team. It’s never perfect, but keeping an open mind and experimenting with the technology available are two secrets to our success.

One example I’ve mentioned before: we use Zoom for group and side chats. We have an all-team chat room which is basically like the running commentary going on in any open-plan office, except in silent mode.

On any given day there will be discussion of an interesting article, a mega donation, some good-natured teasing, celebration of a work anniversary or birthday (love the Zoom rain of cakes!), lots of gifs, really bad puns, kid pictures, puppy pictures, cake pictures…it’s a lot like being in an office. Except kind of better, somehow. Everyone’s in on the joke. Nobody’s left out.

We also have project-specific and topic-specific chat rooms, like the one created in March 2020 for the parents on the team they dubbed “New Reality.” HBG parents banded together in that room to provide advice, sanity, and a helpline early on in the pandemic when they were figuring out home-schooling and activities to keep kids occupied during the work day.

The group continues to be active during the pandemic’s long tail. “I like hearing about how my colleagues have navigated challenging situations with their families when everything is in flux” shared Kristina. Jen added: “As difficult as it was at times finding a balance between work and being a parent, I took comfort in knowing not only that others on the team were in the same situation, but that they were always readily available to listen if (when) I started to feel overwhelmed.”

Besides Zoom, we also encourage relationships by partnering new employees with a buddy who isn’t their supervisor – someone they can ask those real questions as they find their way around their new job. For prospecting projects, we ask that the lead consultant gather a ‘Council of Three’ to help brainstorm ideas before beginning. And we mix-and-match small teams to work with clients on special projects so that everyone has a chance to work closely with others they might not have worked with before.

And finally, we do fun non-work stuff, too. For example, Jayme is our Manager of Fun Swaps. She’s organized swaps of coffee, pastries, and jams-and-sauces – and it’s a little like getting a Secret Santa care package. You delight in packaging goodies up for someone (or ordering them to be delivered) and then receiving them from someone else. Not everyone participates in each swap, but they’re a great way for us to get to know each other through our favorite things.

What about building strong donor relationships – virtually?

Think you can’t forge real relationships with donors when you work remotely? I attended the RAISE conference last week by Evertrue, and when I saw this video telling the story of a connection built by a donor experience officer (DXO) with a prospect who became a donor because of their virtual relationship, I knew that technology has gotten us to the place where we can create meaningful donor relationships and experiences beyond just the top of the donor pyramid.

Not only did they forge a strong bond, but the proof of concept also created a new job, and you can’t help but smile when you watch it. (Full disclosure: I’m not an Evertrue client or partner and they didn’t pay me to write this. I think their DXO concept is forward-thinking for this new remote world we’re living in.)

Using a combination of technology that helps us communicate and encouraging and supporting a strong personal work ethic, we can build and expand our donor-facing teams with a new corps of fundraisers making those connections and provide new leads for the prospect development team to discover, research, rate, and assign into portfolios.

Side benefits to a remote team

As I think about other incidental benefits that remote work brings that help retain employees (like quality of life) one thing springs to mind that’s a major benefit to the employer: office space. Chances are good we won’t need as much of it anymore going forward, and it’s a major budget sink hole.

Wouldn’t you rather put the office-rental budget line toward hiring staff, funding initiatives, sending people to a conference where they learn something, providing benefits that help retain staff, buying resources for your team to be more efficient, doing a once-a-year all-staff blowout picnic… instead? Maybe the space you need for essential on-site work or shared desks could be a third or a quarter of the size. What could you accomplish with that budget savings?

There are lots of ways to turn the reality of remote work into an advantage for your department and your nonprofit. If others are terminating creative employees because they choose not to work in an office, your potential talent pool will grow and so will your nonprofit’s opportunities for innovation.

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Hope and Charity

In the Before Times, we were more at leisure to have philosophical discussions about the nature of philanthropy and income inequality and taxation and due diligence and ethics and the confluence (or colliding impact) of all of those things.

With the daily grinding worry of every sorry aspect of the COVID pandemic starting to recede for many of us (in countries with leisure classes), those discussions have started anew – but with the added grit-filled lens of 20/20 in our hind-sight.

It’s a time of social upheaval we’re living through right now, and maybe we’re lucky to be living through it, because after the awfulness, we can hope that good things will come. World wars, influenza pandemics, suffrage, civil rights, gay rights – you can’t say that those were good times for the people who moved them forward, but they were working with hope for a better future. And better things did happen.

Philanthropy is about nothing if it’s not about hope. I have said that phrase so many times over the years and it has only ever had one meaning to me. But looking at our sector now I see with more clarity that it’s actually about two things.

It’s about when philanthropy is about nothing. And when it’s about nothing but hope.

I have two things that I want to tell you about that led me to that realization, because I was struck by how philanthropy can actually be about nothing.

Earlier this month, the Boston College Law School Forum on Philanthropy and the Public Good released a report called “Impact of the Rise of Commercial Donor-Advised Funds on the Charitable Landscape 1991-2019.” (Honestly, take a look. It’s not a boring report. Ray Madoff and James Andreoni wrote it, and there are awesome visualizations by Helen Flannery).

Here are some meaty takeaways:

  • Since 1981, charitable giving in the United States has stayed steady at about 2 percent of disposable income.
  • Fidelity established the first commercial donor-advised fund (DAF) sponsor, Fidelity Charitable, in 1991. At that time, about 5% of giving went to foundations with the rest – 95% of giving – going directly to charities.
  • By 2019, 13% of all giving went to donor-advised funds and 15% went to foundations, so that means only 72% went directly to nonprofits.
  • Private foundation assets have grown over 500% over the past 30 years, from $165 billion in 1991 to $996 billion in 2019. From 2007-2019, total donor-advised fund assets grew over 300% from $32 billion in 2007 to $142 billion in 2019.
  • Madoff and Andreoni, in collaboration with analytics firm Data Lake LLC, crunched numbers from Giving USA and form 990s to find out what would have gone directly to charities if it wasn’t for DAFs and foundations. Their calculations show that between 2014 and 2018, nonprofits missed out on about $300 billion.

Three. Hundred. Billion. Dollars.

So there’s money moving into “philanthropy” but it’s not going to the nonprofits that do the work. This is when philanthropy is about nothing, and certainly not about hope. This is about amassing assets and control. It’s the business of philanthropy.

A really interesting overview

The second thing I wanted to point you to today is a piece from BBC Radio 4 in the UK called “Tainted Money.” It’s well worth your 27 minutes and 45 seconds.

It’s presented by Dr. David Cannadine, a specialist on the history of business and philanthropy and professor of history at Princeton.

Cannadine distils the concerns and struggles within the charitable sector today – the growing importance of due diligence research, ethics in fundraising, income inequality, and the nature of unequal power in philanthropy.

Along the way he interviews or features audio clips from several people who are well-known within philanthropy circles including Dr. Beth Breeze, Prof. Rob Reich, Anand Giridharadas, and billionaire philanthropist Stephen Schwarzman, among others.

The segment brings up some great questions, including:

  • If we put on our nonprofit’s no-fly list anyone who could possibly be (or have been) tied to some form of tainted business, at what point is there no one left for us to ask?
  • What causes should billionaires (not) be allowed to influence with their largesse? Who decides?
  • Are tax evasion/avoidance, income inequality, and the business of philanthropy inextricably interconnected or are they separate but concurrent problems?

These are fascinating and difficult issues for us to be aware of and we all, from our unique perspectives, have a part to play in figuring out how we move forward, whether that’s in our own department, our own nonprofit, as leaders within our regional and national professional associations, and as caretakers for the future of our sector.

We have to work with hope, and we have to work at it.

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Is your nonprofit missing out on a huge crypto-tunity?

Want to know who’s cooler at using technology to raise money than your average well-funded university or nonprofit?

Malala, that’s who.

Also, the United Way.

The Count Basie Center for the Arts, Wake Forest University, Cushing Academy, and 200+ other nonprofits that have signed up with The Giving Block to accept cryptocurrencies.

“Oh, cryptocurrency. Pfft!” you might be thinking. “That’s not going to be a thing.”

If you were working in fundraising in the late 1990s, you might remember that the same thing was said about taking donations online. Using credit cards! Over the internet! Like it was space age tech from Mars. Online giving? No way.

Way

Accepting cryptocurrencies is the same thing, and it’s already old news for some (especially considering the length of the news cycles these days).

Back in December 2017 an anonymous philanthropist called “Pine” set up the Pineapple Fund to give away their 5104 bitcoin that had exploded in value to $55 million. Although cryptocurrency donations weren’t unheard of then, Pine’s announcement that nonprofits could apply to be grantees was a turning point moment. Applying for funding from a foundation-y sort of entity was familiar. Some nonprofits started to see the opportunities in being ready to receive cryptocurrencies.

Like UNICEF. Since the UNICEF Crypto Currency Fund was launched in October of 2019 it has received over $5.5 million. That’s during a pandemic yet.

Accepting crypto is an already large and yet still rapidly growing opportunity for nonprofits. According to Alex Wilson, co-founder at The Giving Block,

Cryptocurrency donations really took off in 2017 after bitcoin hit $20,000 for the first time. In 2017, we estimate that over $100M in crypto was donated to the few organizations who were ready to accept bitcoin. Since then, we’ve continued to see cryptocurrency donations increase and estimate that $200M-$300M per year is being donated in crypto. This year is on track to break those records.”

Wow.

The donor advised funds at Fidelity Charitable is one of the places where all of those bitcoin, bitcoin cash, Ethereum and Litecoins are being warehoused. Paul D’Allesandro, author of The Future of Fundraising: How Philanthropy’s Future is Here with Donors Dictating the Terms, said in a recent podcast with Andrew Olsen that Fidelity’s stack of coins is $100 million tall.

One hundred million is just…a lot.

But it’s not as much as a billion. Which is the amount reported yesterday that Ethereum crypto founder / billionaire / philanthropist Vitalik Buterin donated in one fell swoop in coins to help with Covid relief in India. Depending on if the coin retains its value, of course.

Starting the conversation

If you’re a nonprofit fundraiser, you might be wondering: how do we open up this conversation with donors who have cryptocurrency? (or who we don’t know have crypto?)

In a CASE podcast featuring Jay Goulart, former VP for Institutional Advancement at Gulliver Schools, now founder of the consultancy Big Philanthropy, Goulart describes what happened when his school approached a donor – a commodities trader – who had mentioned owning cryptocurrencies.

 We realized with this guy that we had to speak in terms of coins and not in money. So in other words, he didn’t see things in the same way as, you know, would you do a million, would you do five million, or whatever the number is.

We asked him for what was the equivalent of five million dollars in coins, which was about 500 coins. That’s not what he wanted to end up doing, he did about half of that. But he said I’ll do it over a period of time. Now when we first met him, bitcoin here in the States was just under $10,000 a coin…so…we’re just shy now of what’s left of 8 figures in terms of a gift from this person.

Now, it’s really not the way that most people would venture into this because, you know schools want to liquidate and they don’t want to hold and they don’t want to speculate. [It’s] all very logical and it all makes a ton of practical sense. But sometimes there’s moments when you meet someone and they’ve never really played in our arena, and you’ve got to find a different avenue. And sometimes we have to take a little bit of risk ourselves.”

So part of the answer is being open to trying a new way of receiving donations.

A first step could simply be getting a wallet set up to accept cryptocurrencies and publicizing it on your website’s giving pages so that donors can see that it’s even an option.

Another way is being more purposeful about it.

Marketing your Mission

United Way Vice President of Innovation Edwin Goutier recently published an engaging article on the nonprofit’s blog highlighting how easy it is to donate a variety of cryptocurrencies to the organization. For each currency he directly tied a donation level to its very specific mission impact at United Way. It’s a brilliant, effective piece of marketing.

What does the average cryptocurrency holder look like? Maybe not what you’d think. According to a study by London-based crypto custodian Copper.co, 56 percent of bitcoin holders are investors and 80% of those are long-term holders. So that means, for them, cryptocurrencies aren’t a fluke – they’re a part of their investment portfolio and they take it seriously.

It also means that when a long-term holder divests of some their cryptocurrency, they will likely incur capital gains.

Unless, of course, they donate them.

We know that tax incentives aren’t the main reason why people give to nonprofits, but they’re certainly a consideration. If people donate cryptocurrency under their real names (as opposed to anonymously), they can claim a tax deduction. If they can avoid capital gains tax as well it’s a double win. Being able to help a mission they care about? Win-win-win.

Finding prospects

The question for us in prospect research is, how do we identify cryptocurrency holders? Especially when they go by names like Cryptochristoff, Madgreek, Twobadour, and MetaKovan.

Well, you can start with The Crypto Giving Pledge members – people who have pledged to give 1% of their cryptocurrency annually – and see if you have a match in your database. There aren’t a lot of them yet, but the list is sure to grow.

You can also use a search engine, search in social media, and check out forums to see what you can find. A quick Google search found that MetaKovan is actually Vignesh Sundaresan, CEO of Singapore consulting firm Portkey Technologies. Twobadour is Anand Venkateswaran. On Twitter I found two crypto-enthusiasts who go by the handles Madgreek and Cryptochristoff. Could it be that simple? Maybe.

See if you can match names to social media handles you already have on constituents in your database. And, of course, as you’re researching someone generally it’s a good idea to see if they follow or knowledgeably discuss cryptocurrency on their social channels. This could be a clue that they hold crypto.

Primary source prospect research is key here also. This is a great topic for frontline fundraisers to bring up in face-to-face meetings with donors and board members. “What do you think about our nonprofit accepting cryptocurrencies?” could be a good opener for a discussion.

It’s certainly not a bad thing to ask for advice about. And you know the old fundraising adage about asking for advice, right?

Further resources:

 

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Musings on the digital economy and what it means for prospect research

Rick SnyderThis week we welcome HBG Senior Researcher Rick Snyder to the blog. I always appreciate Rick’s thought process and insight, and this week he shares what he’s been thinking about – about the economy, people who find themselves newly high-net-worth as a result of their investments in digital currencies, and what’s happening with all that money. ~Helen

In my last blog post I mused about my career in prospect research and the enjoyment I continue to find in learning about a broad variety of topics that shed light on how our prospects earn and spend their money.

A year ago, I was looking at the cost of hiring domestic staff.

Fast forward to today and researching the salary of a nanny seems downright quaint compared to what I’ve been reading lately. I’ve been focusing a lot on the economy and some of the changes we’ve seen over the past year. It seems that the pandemic has not only upended many parts of our personal lives, it’s also scrambled and rearranged how people are spending their money. It’s grabbed my interest and I’m trying to make sense of it all. What I’m offering here isn’t an explanation (I don’t have one), but a few observations and thoughts about what’s going on.

A recent cover of New York Magazine captured the spirit of our current times with the title “Can I SPAC My Stonks With NFTs?” The article inside, “There’s Nothing to Do Except Gamble”, referred to the “new money weirdness” and I can’t think of a better way to describe our current economy and our increasingly strange relationship to money. I believe that we are living through a transformation of our economy that is both exciting and a little bit scary, at least to me.

The SPACs and NFTs mentioned in the magazine were covered well by Helen in these pages already, so I won’t travel that road again. Not only did she explain them better than I can, but I have to admit that, try as I might, I still can’t wrap my head around NFTs well enough to offer a cogent explanation of them. I’m also not going to dive into the world of Reddit-driven “stonks,” though that’s also intriguing and entertaining. These are relatively new phenomena and indicative of how fast our economic world (and the language used to describe it) is changing.

My personal and professional interest in today’s economy is two-fold: First, I want to understand how we’ve reached the point where a person can spend $69 million for a piece of digital art (the buyer, a cryptocurrency billionaire who goes by the name MetaKovan, said he was prepared to pay even more and thinks it was a steal since it should be worth $1 billion).

Second, I can’t help but think the indicators are flashing red that we are somewhere near the peak of a bubble economy and wonder when that bubble is going to burst.

The first interest is almost voyeuristic – I can’t tell if we’re watching the prelude to a car crash or a butterfly emerging from its chrysalis – but the second is more serious and existential.

There are scores of brilliant people who understand the economy far better than I ever will and they don’t all agree on what we’re seeing. Some are warning that we’re cruising for a bruising and others are claiming there’s little to be concerned about.

The traditional indicators – things like the U.S. Treasury bond curve or the P/E ratio of stocks – either don’t apply any longer or aren’t as reliable as they once were. Unemployment is decreasing and GDP is rising, but there are still millions of people struggling with the economic effects of the pandemic. And in the midst of all of the good news/bad news, we’re seeing the creation of new ways for people to spend astronomical amounts on things that barely existed just a year or two ago.

The easiest explanation is that the economy is awash in money and it all has to go somewhere. Billions of dollars have been injected into the system over the past year. We are still living under varying forms of COVID restrictions, but that isn’t stopping us from spending what we’ve got.

The New York Times reported that Deutsche Bank analysts have estimated as much as $170 billion from the most recent round of federal stimulus will go into the stock market. Mortgage rates are at historic lows and house prices are rising. Redfin reports that 42% of homes have been selling for more than their list price – 16% higher than the same period last year – while at the same time Google reported that the search “When is the housing market going to crash?” had spiked 2,450% in the past month.

Bitcoin was trading at $6,853 a year ago. As of writing, it is at $53,545 and by the time this posts it could be thousands of dollars higher or lower. I assume that a good bit of what is driving the NFT market is that people are sitting on mounds of crypto that has appreciated wildly since they bought in. As a personal example, a few months ago I realized that I’d forgotten about a crypto wallet I’d left a small amount of money in a number of years ago. When I looked at it, I literally laughed out loud at the value. It wasn’t enough to be life changing, but for people who invested earlier than I did and paid just a few bucks for some Bitcoin, I can easily imagine why they’d have no problem spending some highly appreciated digital currency on a piece of digital art.

I also discovered that people are breeding and selling digital horses on the NFT market – one sold for $125,000 – and they’re participating in digital races. I had to check the date on the article to make sure it wasn’t an April Fools’ joke. If this isn’t a sign that people have more money than they know what to do with, I don’t know what is.

Along with the sea of money sloshing around in the system, we’ve seen over the past year that life is short and it should come as no surprise that people are willing to make riskier financial bets than before. Might as well YOLO your stimmies into some stonk while you can.

What does any of this have to do with our work? I can think of at least several ways.

First, the top tier of earners has done extraordinarily well over this past year, so we need to keep tabs on what they’re doing – that’s what we do every day, so there’s no change there.

Second, the flow of money into SPACs, NFTs, and retail stocks shows that there are a number of new players who are spending freely. How are we finding, researching, and qualifying them? Are you developing new ways of looking at people with names like MetaKovan and Roaring Kitty? We know they have millions to spend, so how can we add them to our prospect pools?

Third – and this is what I was thinking the most about when I began writing – if we are indeed in a bubble economy, that bubble will burst at some time and quite possibly in a very dramatic fashion.  Though we can’t really predict when the economy will take a downturn, it most certainly will.

When it does, it will affect charitable giving* and that affects each of us in our jobs as researchers. When development budgets shrink, prospect researchers may seem to some as an extravagant expense to some managers. It behooves us all to be proactive in researching or at least giving some thought to those in our donor pools who work in sectors that fare better than others in a down economy. Helen wrote about this in blog posts in April and December of last year, as well as in a white paper. They merit re-reading as you ponder economic trends.

* The Lilly School of Philanthropy and Vanguard Charitable wrote a 2019 report, “Changes to the Giving Landscape” [PDF], that shows a decline in charitable giving that began in 2000, but the drop accelerated at the time of the 2008-2009 recession. From 2000 to 2008, roughly 65% of households reported giving to charity. Total giving dropped by 7.2% in 2008, then by another 8% in 2009.

 

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Don’t miss these 3 things – International Research, Justice, and Seismic Fundraising Shifts

Hi there! Thanks for coming by the blog today. There are three really interesting and important things that I’d like to amplify this week because I really didn’t want you to miss them.

New newsletter!

The first is a brand-new newsletter by a prospect development colleague I recently met, Nan Nielsen Zhang. Nan is a due diligence / prospect research expert building a relatively new consulting business called Astra Due Diligence focusing on Asian individuals, companies, trusts, and foundations. Nan speaks Chinese (Mandarin and Wu dialect), Japanese, and Korean, (as well as English, Russian, and Spanish) and has built a thriving business because of her talent and unique access to due diligence/research resources in those languages. You can sign up for her free bi-weekly newsletter, China Philanthropy News, at the bottom of her company’s web page.

Bold article

Veteran fundraiser Armando Zumaya has written an important op-ed that was published in the Chronicle of Philanthropy last month. The article, To Achieve Racial Justice in Philanthropy, We Must Invest in Fundraising and Make It Inclusive, provides a roadmap with 5 key on-ramps of action, including making a long-term and deep investment in fundraising, and working to build diversity in the whole nonprofit ecosystem: staff, board, and donor base. In the article, Zumayo boldly and publicly poses a question that many in our sector have been reluctant to ask because of the power differential between donors and recipients: Why don’t foundations make grants that support a nonprofit’s infrastructure – including fundraising?

Seismic shifts

It’s a question that’s critical to the long-term… well, not even growth, but viability of our sector, and that Ford Foundation head Darren Walker is actually doing something about. In this 60 Minutes interview with Lesley Stahl, Walker makes a statement that probably wouldn’t have been uttered 5 or 10 years ago, and even now has not bubbled up into the consciousness of many foundations:

“It is both arrogant and ignorant to believe that you can give money to an organization for your project, and not be concerned about the infrastructure that makes your project possible.”

As a self-described capitalist and former bond trader, Walker views philanthropy from a business perspective, but he is also philosophical about philanthropy’s role in inequity, politics, and ultimately in the future of our country. But it’s not all talk – the Ford Foundation has made bold, extraordinary changes in the past few years to try and change that power differential between the foundation and the nonprofits it supports. Don’t miss the interview – it’s worth your time.

Thanks for letting me share those important and helpful voices with you today – please do check them out. Have a great rest-of-the-week!

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What the heck are NFTs (and why should you care)?

Reflections. Photo by Julie Kahn (c) 2021

Research Pride is a celebration of all aspects of our wonderful profession, and the thing I probably love most about prospect research is that we’re constantly learning. Lots of times it’s about odd things that you never knew existed but discover quickly that they are an up-and-coming thing. Take for example today’s topic, NFTs – non-fungible tokens.

I started seeing the acronym NFT flying through my social media feeds about a month ago. The articles were relating to wealth and art, and just like with SPACs a few months ago, when I start seeing a mystery acronym that pertains to wealth, naturally I have to know more.

What I found was that there is an increasing amount of digital artwork being traded via blockchain for astonishingly high amounts of money.

Okay, let me back up and start at the beginning.

I first saw the term “non-fungible token” or NFT in relation to an auction that Christie’s is doing of a work of digital art, The First 5000 Days, by Mike Winkelmann, an artist who goes by the name Beeple. Christie’s website touts that it is the first time they are offering at auction a piece of digital artwork, and it’s also the first time they’ll be accepting cryptocurrency – Ethereum, specifically – as well as more standard forms of currency from the eventual buyer.

Now, you might be thinking, “Wait. If it’s a piece of digital artwork, what’s to prevent it from being copied a billion times or displayed on the internet for free?” and in fact that’s a very good question because The First 5000 Days currently is being displayed on the internet and you can go see it for free. Go ahead and check it out. I’ll wait here ‘til you get back.

Here’s how it works: this specific piece of digital artwork is being sold as a token, a small piece of digital real estate on a blockchain, which forever authenticates it as being a unique thing, an intangible, tangible thing, in the same way that Bitcoins (and Ethereum, and Dogecoin, and all cryptocurrency) are also things – tokens on a blockchain with a value that’s determined by the market.

Because they’re tracked on a blockchain, these specific things can’t be forged or hacked. But while there are more than 18 million interchangeable (aka “fungible”) Bitcoins, there is only one original of any single piece of artwork, which is why they’re non-fungible: one piece of artwork can’t replace another one on a 1-to-1 basis. It’s apples to oranges – they’re both fruit/both art – but not the same thing.

So why do we care about NFTs?

Well, for one thing, within one hour of going up for auction on the Christie’s website, bidding on The First 5000 Days went from $100 to $1 million. As of March 5th bidding was up to $3.5 million but the auction closes today, March 11, so we’ll know the final price as soon as Christie’s publishes it.

UPDATE: It sold today for $69 million. SIXTY. NINE. MILLION. DOLLARS.

It’s clearly a hot new market for art lovers who are also tech savvy, like Elon Musk of SpaceX and Tesla, and Chamath Palihapitiya, the chief executive of the technology holding company Social Capital and former Facebook executive. Both are NFT collectors, and it’s clearly a fast-growing market, too.

In fact, the market for NFT art was $342 million. Last. Month. That’s more than all of the NFT sales in 2020 combined and up from $12 million just in December. NFT art sales are hot and moving like a high-speed train on a 700 mile-long prairie. People are even burning extant art to make NFT art!

But back on the ground, and perhaps more importantly for our purposes: nonprofits are benefiting. A Banksy-style artist (is it actually Banksy? He says not but the works are verrrrrry Banksy-like) created NFTs that recently sold for $900,000 and a portion of the proceeds went to Save the Children.

Also, part of the sale of a lightly-animated Wonder Woman NFT created by veteran comic book artist José Delbo recently sold at auction and netted a $23,196 donation to the nonprofit Girls Who Code. So philanthropic tech art-philes are finding creative ways to fund their favorite charities!

So check out NFTs and do some mining to discover if you have any prospects that love them. This might be a good time for your nonprofit to look into accepting cryptocurrency, too, if you haven’t already.

FURTHER READING

Post-sale explainer from The Washington Post: https://www.washingtonpost.com/technology/2021/03/12/nft-beeple-christies-blockchain/

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Celebrating Research Pride Month: Elevating Prospect Development & Celebrating Community

Happy International Prospect Research Pride Month! This week to officially kick off Pride month I am beyond delighted to invite my friends and colleagues, Misa Lobato and Melissa Bank Stepno to cut the virtual ribbon and to share what Research Pride means to them and to our professional association, Apra. Welcome and thank you, Misa and Melissa. ~Helen

March 2021.  Some might be marking this month as the one-year anniversary of when COVID rocked our world and began to turn 2020 into one of the most tumultuous years in modern history.  Rather than focusing on the profound misfortunes that challenged us over the last year, as the current President and President-Elect of Apra, and Trustees of the Apra Foundation, we would rather focus on the 7th anniversary of Research Pride month.

To celebrate, we could not find a more appropriate place to do so than on the blog that birthed International Research Pride.  On March 6th, 2014, Helen proclaimed: “I officially declare that from now on, March is International Research Pride month.”

We are Apra

For readers who are unfamiliar with Apra, Apra is the association for all professionals who strategically harness information and data to drive fundraising for philanthropic institutions. This, of course, includes Prospect Researchers but also people who work in data science and data management, relationship management, annual giving, advancement services, consulting, campaigns, and many, many others who serve data intelligence functions within fundraising and philanthropy.

Comprised of more than 1,800 members across the globe, Apra is committed to serving, representing and advancing both the professionals and the practices that enable the philanthropic success of institutions that rely on fundraising for achieving their missions. Apra fosters a collaborative environment for sharing and discussion, while leading the development, dissemination and advancement of best practices, resources, thinking and trends.

Why is Research Pride so important to us?

In an age where so many in society move around from job to job without finding a meaningful career, how many could say that they find their chosen path invigorating, energizing and stimulating? We would venture a guess that a higher percentage of Apra members would choose these words than in many other professions. We are mission-driven professionals who show up with passion, intelligence and focus in our interactions with each other and to our work in the fundraising industry.

As a community, we are advocates for the vital role of data in informing the future of philanthropy, and we continually evolve and learn to meet changing demands and technology.  As a community, we have supported each other through comradery, mentorship and training. We have both learned, and continue to learn, so much from Apra leaders, volunteers and mentors.  Even when we chose to follow a less-than-traditional career path, Apra still continued with us on our journey. We find fulfillment in giving back to the community that supported our professional growth.

Apra is a uniquely collaborative community of lifelong learners, where members are always willing to share best practices and help one another problem solve. This community orientation was on full display over the past year, when Apra members immediately stepped up to help one another navigate personal and professional hardships, connect and build networks, and master new skills. Apra members have shown up for one another in ways that are both inspiring and inspired.

These are the reasons we choose to serve on the Apra Board, these are the reasons we celebrate Research Pride month, and these are the reasons that we choose to give back financially to support our fellow Apra members.

Giving Back

Earlier this year, the Apra Foundation launched the Apra Foundation Professional Development Assistance Fund, initially established from the sales of our digital cookbook, Data Driven Deliciousness: The Apra Cookbook. The fund has a singular goal: to support prospect development professionals who have experienced financial hardship due to COVID-19 or other factors.  The fund will provide grants of $200 for Apra members to use toward any Apra-hosted educational event or Apra University content. The Foundation Board is currently reviewing the first round of applicants and will be providing the first awards this month. We plan to award another round of awards later this year.

We want to support as many Apra members as possible through this fund, so the Apra Foundation has set a fundraising goal of $2,000 for Research Pride Month. This will fund 10 Professional Development Assistance awards!

And now the appeal (since we are fundraisers, after all!): We know that many of you have experienced the learning and community benefits of Apra. Would you show your Research Pride by donating what you can to help support your fellow Apra members?

100% of Apra Foundation Trustees have pledged commitments. Join us in providing professional development opportunities for Apra Members and DONATE NOW! Thank you!

Misa Lobato

President, Apra

Director, Prospect Management & Analysis, Rhode Island School of Design

 

Melissa Bank Stepno

President-Elect, Apra

Director, Analytics & Business Consulting Services, Blackbaud

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