Dot Calm

Copyright 2001 by Adam Corson-Finnerty

Permission is given to forward or copy this article, so long as the author's name, email address, URL, and copyright notice are included. (They are given at the end of this article.) This article first appeared as an email message to the Cybergifts listserv on April 19, 2001. Readers are encouraged to read the lively debate that occurred in response to the article, which can be found in the Cybergifts archives.

Part 1

The reporter from the Wall Street Journal wanted to know: is there any future in online giving for charities?

Two days later, a free-lance writer, doing a newsletter piece about e-giving, asked the same question. So I assume that we are in for a slew of "fuggadaboudit" coverage on e-philanthropy.

My advice to my non-profit colleagues -- the ones who are advocating and implementing cybergiving strategies -- is relax. Be calm. The bathwater may be rushing out of the tub, but the baby isn't going down the drain. The baby being us, the charities, who were supposed to be benefiting from all the dot.com vendors who popped up like dandelions but now are blowing away.

The vendors, of course, are anything but calm. The dot.com bubble has burst, the VC money is drying up, and the bankruptcies are multiplying. Charitableway, the recipient of over $40 million in backing, has closed up shop. Other charity-focused startups are teetering on the brink. All around them, they see biz dot.coms being shuttered: Northpoint, Kozmo, and even Borders.com (folded into amazon.com). I recently spent two days in meetings with a principal in a venerable VC firm. Their assessment: "eighty per cent of the dot.com companies out there are going to fail by the end of this year."

But 99% of the charities out there will still be here by the end of the year. We may not be hot and sexy, but we tend to be pretty stable. As for our own Internet fundraising futures, the prognosis is excellent. People *are* giving money online, people *will* give money online. And those numbers will only increase. And besides, e-philanthropy isn't just about online credit-card giving. (More on that later.)

The watchword in these troubled times is "steady as ye go." Adopting the tools of e-fundraising is just as important as it ever was. Only the overblown hype and the extreme sense of urgency have changed.

Hype, Hype, Hype

One doesn't have to go back very far to be reminded of the white-hot rhetoric surrounding the dot.com bubble. I happen to have at hand the March 2000 issue of Philadelphia Magazine. On the cover is a golden mouse. The main head screams: "GET RICH CLICK!" The subhead reads: "Philly's New Tech Heroes Made $40 Billion Last Year. Why Them and Not You?"

The lead article tells us that "faith and fear" are what is driving the Internet gold rush:

• "Faith, but also fear… of being left behind. Everyone knows who the big national winners are-the E*TRADEs, the PlanetRxs, the CDNOWs, the fabulously and suddenly wealthy dreamers and doers behind, say Internet Capital Group. Anyone can pick up Time and see Amazon.com CEO Jeff Bezos squinting out as Person of the Year, or page through the Barron's list of those who have already made $100 million in an IPO." ("Goldrush Dot Com," by Beth Kephart, Philadelphia Magazine, March, 2000, page 63.)

Or check out the rhetoric in Harvard Professor Rosabeth Moss Kanter's new book, Evolve!

• Soon there could be only three main types of companies in the world: dot.coms, dotcom-enablers, and wannadots. …Dotcoms are pure Internet companies, operating online businesses. …Dotcom enablers are the technology and service providers who spread the Internet gospel. …Wannadots are everybody else-existing businesses, schools, hospitals, and other established organizations.
• …[D]otcoms and wannadots , with dotcom enablers egging them on, represent contrasting styles, both of which I examine in this book. Ask big companies about their goals for the Web, and they are likely to reply "Cautious experimentation." Ask dot.coms the same question, and they declare, "Total world domination."
• The difference in rhetoric and attitude sums up the contrast between those reluctant to let go of the past and those hurtling into the future at warp speed. For companies that were not born digital, the big problem is change-when to change, how to change, and how to prepare people to live with the consequences of change.
  (Evolve! Suceeding in the Digital Culture of Tomorrow, by Rosabeth Moss Kanter, Harvard Business School Press, 2001, pages 2-3)

How times change. The heated language of Evolve! seems almost quaint in the light of The Morning After. And, exactly one year later, the March 2001 issue of Philadelphia Magazine features local Internet guru Pete Musser (of Safeguard Scientifics) on its cover, with this heading: "How to Lose a Billion Dollars."

Charity.notcom

In my online article, "Charity.notcom," I argued that VC-backed charity vendor pureplays were destined to fail. And that "Any charity that has devoted time, money, and information assets to the schemes of these start-ups will probably end up losing all three." (See http://www.fund- online.com/musings/index.html) Events have confirmed this thesis. But here is the question: Why have so many startups invested so much money and so much time to "making it" in the charitable arena, only to fail? And a second question: does the failure of charity dot.coms mean that e-fundraising is a dead end?

To see why the charity dot.coms have failed and will fail, one need only look at a recent puff piece in the April 15, 2001 issue of Red Herring. The author seems to have written her article in some kind of time warp. The subject is Internet entrepreneur Harry Gruber, and his latest venture, a charity dotcom called Kintera. Between bites of monk's purse, and "tasty dumplings filled with jicama and mushrooms," Dr. Gruber spun out his rationale for success:

• Nonprofits are stereotyped as stuck in the technological equivilent of castor oil medicine and mustard plaster, but Dr. Gruber thinks they're finally ready to embrace Internet infrastructure. The market is a fat one. Americans gave $190.2 billion to charity in 1999 … between 15 and 40 percent of that amount goes to the fund-raising process. Kintera reduces the cost of that process-and takes a cut-by administering it online." (Bait and Switch," by Bonnie Azab Powell, Red Herring, April 15, 2001, page 38)

Sound familiar? It certainly does to me, having listened to pitches like this for the past three years. I remember one startup to which I offered unsolicited advice: their model for online giving was too little and too narrow. Oh no, I was told. Didn't I know about "the hockey stick"? The hockey stick referred to the experience of many dot.coms. Business would start up slowly, and then take off like a rocket. The chart looked like a hockey stick, facing left. I mean, just look at Amazon.com, or Yahoo, or CDnow.

Three months later, six months later, I was still being peddled the same kool-aid, presumably along with the investors. There was no hockey stick, just a gradual rise of very modest proportions. I expect to hear that this firm has gone under any day now.

Interestingly, some of the bruised dot.com vendors are blaming the charities. Apparently, we take too long to make decisions. "Something that should have taken two weeks to decide, ends up taking six months, or longer." Big surprise, but not to those of us who have labored in the NPO vineyards. Decisions come slowly, deliberations are long, and decisions which might pose a public relations or financial risk take FOREVER.

Thus far, online giving has only been a modest success, and is growing slowly. A tiny, tiny percentage of that $190.2 billion is moving online. The bulk of charitable dollars are being given the old-fashioned way-through checks, cash, gifts of stock, and through the collection plate. (The entrepreneurs did realize that the largest area for charitable giving is religion, didn't they? Like 43% of the 1999 total going to church and synagogue? And if they didn't know that, what else didn't they know? See http://www.aafrc.org/press3.html)

If I may take the liberty of quoting myself, again, consider this observation:

• I hate to be a party-pooper, but great sums of money are not sloshing around in the charitable sector. Yes, there are billions involved, but almost every penny is pre-committed or needed in six places. Charities are notoriously tight-fisted, and loath to spend money on goods and services. If anything, charities are overly slow to adopt new technologies and new techniques. They shun risk, and fear being accused of "wasting" money.
• When we are at our most exacting, we expect charities to examine every penny, and we want to be shown that every penny is being spent to fulfill their mission. If it isn't, we damn well want to know why. This is particularly true of every penny spent on fundraising.(See Charity.notcom, Part 2: http://www.fund-online.com/musings/notcom.html)

Restez Tranquil

So why do I advise calm? Primarily because our sluggishness has proven to be an asset. The overheated atmosphere of the Bubble was not conducive to rational thought. But now things have calmed down. Logical thought has returned.

Amusingly, everyone is eager to say "I told you so." In business publications, every pundit and analyst seems to have been a closet conservative all along, sure that the party would end, and worried that all the other folks who were dancing on the table were becoming irrationally exuberant. After all, says Peter Schwartz in Red Herring, people should have remembered that in the first 20 years of the auto industry there were nearly one thousand car companies. During the next ten years, 99.5% went bust or were merged. By 1930, only five major companies survived. "It was only then that solid companies, huge markets, and sustainable growth in shareholder value resulted." ("Boom, Interrupted," by Peter Schwartz, Red Herring, May 1 & 15, 2001, page 135)

Right-O, says Jeffrey Walker, of J.P. Morgan Chase. According to the New York Times:

He does not miss the days of being besieged by companies eeeking instant capital for, say, the 12th Web site devoted to selling pet food. "Companies came in and gave a presentation and wanted an answer in two or three hours," Mr. Walker said. "These were followers, and not great ideas."

Spot-on, agrees James Geshwiler of CommonAngels. "The fair-weather entrepreneurs are out of the market. But there's still lots of room for innovation." (Both quotations from "Raising Funds After the Fall," by Daniel Altman, New York Times, page C4)

In The Music Man, Harold Hill says he is looking for "the sadder but wiser girl." Well, a lot of us are now sadder but wiser girls. Nay, we're Women of the World.

I am certain that someone could delve into my writings of a year ago and fine some breathless do-it-now-or-die sentences. Maybe whole paragraphs. Not no more. I'm a convert from techno-go-go to value investing. Show me a thought-out plan with evaluation markers. Don't try to sell me a hockey stick or an undefined but stupendously large quantity of eyeballs. As Archie the bartender in Duffy's Tavern once said to the patron for whom everything was just "too utterly utter," "If youse utta one more utta, I'll trow youse out in da gutta." (Does *anyone* remember Duffy's Tavern?)

The fact of the matter is this: e-fundraising is in its infancy. No one knows just how it will shape up, or where it will be the most useful. The results from several years of experimentation are few and spotty -- certainly not enough to make sensible projections of cost versus benefit. Non-profits should work together to build their experience in this new area. We should share insights and results, just as we do in our professional conferences and yearly development pow-wows.

My advice-in-a-nutshell goes something like this:

• Think of the Internet as a new fundraising tool. Like the telephone. Just as the telephone aids us with a myriad of fundraising tasks, so will the Internet.
• Don't think of e-fundraising as confined solely to online giving. That's only one application. The Internet can help us raise and steward major gifts, and it can open the door to new types of giving, including microgiving (multiple very small gifts, including digital cash gifts).
• Encourage your staff to experiment with various forms of Internet communication. Watch what others do. Test ideas with sub-groups in your constituency. If they seem to pay off, escalate their use.
• Don't bet the farm on services provided by VC-backed vendors. You have to figure that 80% of them won't be around much longer. Maybe 99.5%
• Don't expect instant results. Allow enough time to involve all the players, and to process the results. By all means, Go For It, but recognize that your e-fundraising platform won't be built in a day.

Permission is given to forward or copy this article, so long as the author's name, email address, URL, and copyright notice are included. Yes! You can print it out, copy it, hand it around, forward it as an email to someone else, and so on. The only things I don't want readers to do are: Sell it, edit it, put your name on it, or take my name off it.

Print and electronic editors who want to reprint or mount any of my electronic articles should contact me directly for permission. Linking to my articles is fine.