This post provides an update on GiveWell’s operating budget and funding needs. It is aimed at close followers of GiveWell, particularly those who have a high degree of trust in and alignment with us and are primarily seeking to make the highest-impact gift according to our (admittedly biased) opinion.

In brief:

• We are in a relatively stable financial situation. We anticipate projected revenues remaining in line with projected expenses over the next 12 months.
• This relies on the assumption that (a) most donors who have supported our operations in the past will continue to do so and that (b) some new donors choose to support our operations.
• We spent $3.0m in the 12 months from December 1, 2014 to November 30, 2015. We currently project expenses of $4.9m for December 1, 2015 to November 30, 2016.
• The overall effect of our growth over the last couple of years has been to substantially grow the Open Philanthropy Project (which now accounts for approximately 70% of our overall budget), while maintaining (or slightly increasing) the amount of capacity we put into top charities. Much of our staff growth is also fairly recent and hasn’t yet translated into increased output, but it’s likely that this pattern (substantial growth in the Open Philanthropy Project accompanied by less growth for our work on top charities) will continue to hold.
• We plan on separating GiveWell from the Open Philanthropy Project financially in the next year, at which point they will be separate organizations, but we haven’t gotten there yet. We currently ask Good Ventures to provide 50% of Open Philanthropy’s budget. It is possible that once we separate GiveWell from the Open Philanthropy, we will ask Good Ventures to provide additional support. Funding for GiveWell’s operations now gives us flexibility as we figure out (over the next year) how we should support each entity. Update: August 2016. At our June 2016 board meeting, we told the board that we had asked Good Ventures to cover 100% of the Open Philanthropy Project’s costs for the period covering April 1, 2016-September 30, 2016. We expect that the Open Philanthropy Project will be an independent organization (separated from GiveWell) within the next year, possibly by the end of 2016 and are tentatively planning to continue to ask Good Ventures to cover 100% of the Open Philanthropy Project’s costs in the future.
• For donors who have a high degree of trust in us and are looking to give as effectively as possible from our perspective, we recommend donating to support GiveWell’s operations. Such donations allow us to maintain a diversified donor base and continue operating as we wish to with minimal distractions. Note that we have a policy in place to ensure that we don’t accumulate reserves excessively (we don’t expect this policy to come into play).

Below, we provide more details on our current funding situation. For more background on our philosophy on fundraising, see our October 2013 post. We are planning to make a future post – in a month or two, while doing our annual self-evaluation – that goes into more detail on the past and future effects of our increased staff size.

Details

We currently project expenses of $4.9m for December 1, 2015-November 30, 2016. We project $4.9m in revenues over this period.

We currently hold about $3.3m in reserves (and project holding $4.4m after December’s “giving season”).

This file (.xlsx) provides more detail on our forecasts.

Revenue projection

Our revenue projection includes (the numbers below don’t add up due to rounding):

• $1.8m from Good Ventures, consistent with our request that Good Ventures fund 50% of the costs of the Open Philanthropy Project and 20% of non-Open Philanthropy GiveWell costs.
• $1.9m from donors giving more than $10,000, of which:
  • $1.5m comes from donors who have given previously. The largest 11 of these donors (including two institutional donors) account for approximately 85% of this total. Based on our knowledge of each donor, we estimate the likelihood that each will give again.
  • $0.4m from new donors (projected based on past growth).
• $0.8m from many donors giving less than $10,000
• $0.1m in “one-off” gifts, i.e., donations that are due to special circumstances. We do not anticipate any of these donations recurring, but we project receiving $0.1m of this type of donation based on past experience.

The above implies that if donors who have supported us in the past continue to do so and new donors continue to support us at rates similar to what we have experienced in the past, we will remain in a stable financial position.

Expenses

Our expenses have grown significantly over the past year.

We spent $3.0m in the 12 months from December 1, 2014 to November 30, 2015. We currently project expenses of $4.89m for December 1, 2015 to November 30, 2016. In brief:

• As of December 1, 2014, we had 18 full-time staff members, of which 5 were dedicated to the Open Philanthropy Project. Several other staff members spent some time on Open Phil-specific work, adding up to an equivalent of approximately .75 additional full-time staff.
• As of December 1, 2015, we had 31 full-time staff members, of which 9 are dedicated to the Open Philanthropy Project, and we are working with two full-time trial hires that we hope to convert to full-time employees. Many staff members spend some time on Open Phil-specific work, which now adds up to 3.5 additional full-time staff. We currently estimate that the Open Philanthropy Project accounts for approximately 70% of our total expenses.
• We are planning to make a future post – in a month or two, while doing our annual self-evaluation – that goes into more detail on the past and future effects of our increased staff size. In brief, the overall effect of our growth over the last couple of years has been to substantially grow the Open Philanthropy Project, while maintaining (or slightly increasing) the amount of capacity we put into top charities. Much of our staff growth is also fairly recent and hasn’t yet translated into increased output, but it’s likely that this pattern (substantial growth in the Open Philanthropy Project accompanied by less growth for our work on top charities) will continue to hold. We plan on separating GiveWell from the Open Philanthropy Project financially in the next year, at which point they will be separate organizations, but we haven’t gotten there yet. We currently ask Good Ventures to provide 50% of Open Philanthropy’s budget. It is possible that once we separate GiveWell from the Open Philanthropy, we will ask Good Ventures to provide additional support.

At what point would we consider our funding gap closed?

At the point where we hit our excess assets policy, we would regrant any funds given to GiveWell to our recommended charities.

Using a conservative revenue projection (which we believe is appropriate when considering granting out funds), we project 12-month-forward expenses as of November 2016 (i.e., expenses we would incur from November 2016 to October 2017) of $5.0 million more than what we project holding in reserves. Therefore, we would require $5.0 million in additional funding before we would begin to grant out funds.

What will we do if we raise more or less funding than we anticipate?

Raising more funding than we anticipate would reduce the likelihood that senior staff have to spend significant time fundraising in the next year. Staff time put into fundraising is currently quite low (approximately 10 hours/year for each of Elie, Holden and Natalie and some additional support from more junior staff). We currently plan to maintain this limited time commitment to fundraising and are optimistic that posts like this enable us to raise the funding we need without devoting more time to fundraising.

If we raise less funding than we anticipate, Elie and Holden would spend more time on fundraising. If this step didn’t succeed in raising the funding we need, we would consider the following options (likely in this order): (a) slowing or halting planned staff expansion, (b) requesting additional funding from Good Ventures, and (c) laying off staff. Note that we believe these scenarios are highly unlikely given our current situation, but we require continued, growing support to ensure that we avoid them.

Are GiveWell’s projected operating expenses reasonable or excessive in light of its impact?

In 2015, we anticipate more than $90m moved to top charities and anticipate the Open Philanthropy Project funding approximately $16.5m of grants.

We spent $3.2m in 2015 and project total expenses in 2016 of $4.9m. We estimate that 70% ($3.4m) of the 2016 figure is attributable to the Open Philanthropy Project and 30% ($1.5m) to GiveWell. We previously wrote that we believe expenses that are 15% of money moved are well within the range of normal.

What is our recommendation?

For donors who have a high degree of trust in us and are looking to give as effectively as possible from our perspective, we recommend donating to support GiveWell’s operations. Such donations allow us to maintain a diversified donor base and continue operating as we wish to with minimal distractions.

For donors who want to support our work because they value it but are otherwise primarily interested in supporting charities based on neutral recommendations, strong evidence, etc., we recommend giving a portion of the donation to GiveWell. If you’d like to give GiveWell a 10% “tip” to support our operations, you can do so by selecting the box labelled “Add 10% to help fund GiveWell’s operations” on our donations to charities page or by sending us a check and filling out our check donation form with the allocation for your donation. Admittedly, in light of the role the Open Philanthropy Project is playing in our budget, it’s possible that the right figure this year for a “tip” this year is something under 10%.