# GiveWell Labs: Our criteria for giving opportunities

[Added August 27, 2014: GiveWell Labs is now known as the Open Philanthropy Project.]

We’re starting a new initiative, GiveWell Labs, an arm of our research process that will be open to any giving opportunity, no matter what form and what sector.

This post lays out, very broadly, what qualities we are looking for in giving opportunities. Future posts will elaborate on each of these criteria, and we will also discuss how we think these criteria apply to specific areas of philanthropy. Readers will hopefully be left with a strong sense of our beliefs and biases and what we’re looking for.

The main things we’re looking for in a giving opportunity are:

1. Upside: we’d prefer to fund projects that have the potential to go extremely well. Projects aiming to demonstrate a model that can be scaled up, generate new scientific knowledge that can be used by many others, or put a program in place that eventually becomes self-sustaining independent of philanthropic support all have “upside.” Simply aiming to deliver insecticide-treated nets using established delivery methods does not have much “upside” (though it may score well on many of these other criteria).
2. High likelihood of success: we’d prefer to fund projects that are very likely to do a respectable amount of good per dollar. The “evidence base” of a project – i.e., the set of past well-understood events that can be used to put its likelihood of success in context – is key here. Obviously this criterion will often be in tension with the “upside” criterion; the ideal for us is a project that has both, i.e., a project that’s both very likely to do some good and has some possibility of doing enormous amounts of good (we think that giving to VillageReach in 2010 fit into this category).
3. Accountability. We’re OK with funding a project that might fail, but it’s very important to us that we be able to recognize, document, publicly discuss, and learn from such a failure if it happens. We thus have a strong preference to fund projects with specific and meaningful deliverables that will give us a strong sense of whether things are going as hoped (as well as permission to publish updates on these deliverables).We are relatively new to giving and plan to be doing a lot more of it in the future, so making sure that early projects are learning opportunities is crucial.
4. People we’re confident in. We prefer to fund projects where we are impressed by and confident in the people involved. However, our take on how to evaluate people seems to be different from that of some other funders; we’ll elaborate in a future post.
5. Room for more funding. We prefer to fund projects that would not happen without our funding. This means that we aren’t actually looking for the “best ways to spend philanthropic funds”; we’re looking for the “best ways to spend philanthropic funds that aren’t already on the agendas of other funders.”

We don’t have an explicit formula for weighing the above criteria above against each other. Broadly speaking, we’d prefer to fund an opportunity that is strong on all of the following: (a) at least one of #1 and #2; (b) at least one of #3 and #4; (c) #5. (Note that we do not feel the approach of estimating ‘expected good accomplished’ for each project, and simply ranking by this metric, is a good way to maximize actual expected good accomplished; for more, see the body and comments of a recent post on expected-value calculations.)

One more consideration is leverage: we prefer projects where our funding mobilizes more funding from other givers as well, thus multiplying the impact of our funds in some sense. However, we think this is far less important than the criteria listed above. We’d rather fund a great project all on our own, and leave other funders to spend on their own projects, than get a 5:1 or 100:1 funding match from others on a project that is weak on the above criteria.

If you think we’re missing any important impact-related criteria, please let us know.

• Brigid on October 12, 2011 at 5:36 am said:

Wondering how many funding opportunities you’ll seek, particularly in regards to upside and potential failure. I’m thinking of the venture capital model, where funding goes to a bunch of different projects, with the expectation that a third of them will fail but the couple percent that succeed will have such extraordinary upside it covers the other outlays of cash. (Of course all the projects pitch that they will be the ones with the extraordinary upside). On the flip side, if you fund only a handful of projects, and two or three of them failed, than the whole Labs idea itself might look like a failure. Funding many projects might make you more interested in the wilder but potentially game-changing ideas, just because you’ve built in the ability to be risky in your model.

Then again, there may not be that many projects out there to even consider.

• Brigid, good question. I don’t mind “looking bad,” but it is important that we learn as we go, so taking on projects with very small probabilities of success (and no visible output if they fail) is not appealing unless we’re going to take on a lot of them – and we probably won’t have the funds to do that, in the first year or two at least. However, we’ll be happy to take big risks that also generate the kind of tangible short-term output that we can learn from.

• Noor Ahmed on October 22, 2011 at 4:40 pm said:

Well, we found new NGO that will deal terrorism and piracy through awareness in Somalia.We therefore would like to know if that is in the list you fund.
Director,
Noor Ahmed.
xiindheere100@gmail.com

• What about financial projections in your criteria ?

If the idea of developing credible financial projections makes the project’s team wince or wail, or if they think it’s a meaningless exercise, they cannot be funded and shouldn’t ask investors for money. Even if they are good at first sight. Projections demonstrate that people understand the economics of their business. They should tell their story in numbers—what drives their growth, how they will make profit, even if it’s not much, and how the company will evolve over the next several years.

• David Kit Friedman on March 18, 2013 at 3:38 pm said:

Another question related to the previous comment that I posted is:

How much of the total donations flowing to large non-profits in modern American society are coming from donors at the range of $1 to$100 per month? (what I have called “small-scale” donors)

The full report from GiveUSA may have some more detail, and some more recent figures:

http://store.givingusareports.org/2012-C8.aspx

Cost is $49.95. However, it looks like this blog post from GiveWell has a figure of about 36% of total giving from households with income less than$100,000.

A bit more detail on individual giving

If for example one takes a figure of 2% of household income going to non-profits then this would be in the range of about $1 to$2,000 per year.

One might imagine that a similar communication dynamic occurs between donors in the range of $1 to$2,000 per year and large non-profits as occurs for donors in the range of $1 to$100 per month.

(I haven’t defined here “large non-profit”, but I’m thinking in the range of more than $150 million in revenue per year — GuideStar and Charity Navigator have the revenue figures for some of the names that I’m aware of) At this level I don’t think there would be much in the way of individual attention or discussion — but the donor just responds to the appeal which I would imagine is created by a team that is trained in non-profit marketing. I wonder though if another dynamic is occurring within American religious congregations. The leaders in the religious organization may encourage people to give to a particular charity or the religious organization itself can allocate some of its budget to non-profit donations. But on the other hand many religious organizations may feel that if money is being raised it is going toward construction or teachers or outreach, etc. – internal costs. At any rate — as one gets into the higher ranges of donations then I would assume that a large non-profit will allocate employee time to talking with the potential donor and seeking to answer questions about various projects. While I’ve been thinking here mostly about large non-profits a smaller non-profit can get along with less layers of bureaucracy and even if the amount of potential money is less may still have the time to talk to a potential small-scale donor. David Friedman • David Kit Friedman on March 18, 2013 at 3:41 pm said: (I originally posted this first, but for some reason it didn’t go through) Holden writes: “If you think we’re missing any important impact-related criteria, please let us know.” One suggestion for another criteria is something along the lines of credibility. In particular I’m thinking about some of the non-profits that GiveWell has called out for making statements which are exaggerations or distortions: The non-profit should be honest and forthright both in dealing with charity evaluators such as GiveWell, and also in its marketing materials. At the same time there can be an appropriate balance. A telephone call or e-mail between an employee of the non-profit and a GiveWell employee is a different situation than mass marketing material sent out to a large number of people. If many of the people in the cohort are donors who might give in the range of$1 to \$100 for the project then the vast majority are not likely going to spend hours going through figures and checking calculations.

Non-profits will use inspiring pictures, individual stories, dramatization, videos, music etc. in a campaign to raise money, and I think most people don’t object to that.

On the other hand — there can be tension between an interest in running campaigns which succeed in bringing capital to the organization, and maintaining the credibility of the organization in its public statements.

There are other aspects to campaigns that one can consider as well:

-The issue of gruesome or disturbing imagery in mailings, and other marketing materials. I don’t think it is a stretch to imagine that a lot of the people who get on and remain on various non-profit mailing lists are people who have certain psychological characteristics in greater frequency than the general population.

These images may be disturbing and counterproductive for a wholesome relationship between both donors (both large scale and small scale) and the organization — and the mailings may have other effects beside just transferring money between parties.

One might also consider that non-profit solicitations have the potential to misinform, and miseducate people about the reality of a conflict or a situation.

-The issue of respecting a donor’s right to not be contacted.

This is a matter that CharityWatch raised with respect to SmileTrain:

SmileTrain said in its marketing materials that if a donation was made that it wouldn’t contact the donor again (CharityWatch mentioned that already this very message is itself a red flag about the organization)

At any rate — according to the report from CharityWatch it doesn’t seem that SmileTrain even honored this request not to be contacted after a donation was made:

http://www.charitywatch.org/articles/smiletrain.html

-The issue of the frequency and aggressiveness of solicitations. I remember that I got a (what seemed to me) large number of solicitations from the same non-profit at one point (looks like I received about 8 in a single month in 2011, and I received 6 the next month). A year or so later I got an e-mail from the same non-profit speaking about how to add them as a Gmail contact. I’m not sure exactly how that happened, but it could have to do with the frequency of the solicitations leading to their messages being classified as spam.

On the other hand — I recall that during the U.S. Presidential campaign my recollection is that both the Obama and the Romney campaign sent e-mails out just about daily or even more frequently than that. I remember asking my mom about that, and she said that it didn’t really bother her that much.

Anyway, I think there could be more topics on the relationship between a large non-profit organization and a large quantity of small-scale donors.

Perhaps it could be summarized as:

Credibility and respect.

GiveWell may not have the time to go into detail on exactly how the non-profit conducts its marketing, but a number of questions or investigations in a review could be focused on topics in this area if they aren’t already part of the process.

David Friedman