Think of it as a worldwide electronic bazaar for philanthropists. You click on a website and scroll down a list of development projects from around the world that need funding. Here’s a solar-powered bakery run by women in India that needs $133,000. Here’s a Masai cultural preservation project in Kenya that needs $29,000. You shop until you find a project you like. You negotiate. And, when you’re ready, you fork over the agreed amount.
This is the idea behind DevelopmentSpace, a new enterprise that describes itself as “an online philanthropy exchange dedicated to fighting poverty in the developing world.” Using marketplace language that defines funders as “social investors” and activists and organizers as “social entrepreneurs,” www.developmentspace.com, the DevelopmentSpace website, serves as a kind of turbocharged global want-ad section where project leaders can advertise their needs, and funders can find them.
The site, founded by ex-World Bank staffers Dennis Whittle and Mari Kuraishi, aims to democratize philanthropy by making more funding available for small-to-medium-sized projects that are beneath the radar of the world’s major development players. Live online since February, the DevelopmentSpace site already has a high media profile. The Atlantic Monthly called it “the application of eBay to international aid.” The Washington Post labeled it “the foreign aid equivalent of the speed of light.” There is even breathless speculation about the Invisible Hand of this new electronic marketplace rendering institutions like the World Bank null and void—a notion that DevelopmentSpace dismisses as overblown.
“We’re not setting ourselves up as competitors to the World Bank,” says DevelopmentSpace spokesman Tim Scheu. “But with the existing institutions, it’s hard for Joe Entrepreneur in Cambodia to find funding. We see ourselves as a complement to the World Bank, a way to get small entrepreneurs and small investors connected.”
Here’s how it works: An “entrepreneur” with a funding need contacts DevelopmentSpace and goes through a screening and planning process, culminating in a business plan (called a “deal sheet”) that is approved for posting on the website. Potential “investors” then scan the site for an appealing project and, upon finding one, negotiate through a defined process to support it. DevelopmentSpace takes a small cut of the deal. It’s not the Wild West; DevelopmentSpace requires approval of all entrepreneurs by a third party of its choosing, has a volunteer corps of graduate students and others to screen every business plan, and says it will soon offer a posted rating system enabling investors and entrepreneurs to rate one another for honesty and expertise. DevelopmentSpace says it currently has eight partially or fully funded projects between about $5,000 and $80,000, and more than 140 additional projects—from 48 countries—that are not yet ready for posting.
When I visited their website recently, I found 26 projects posted as ready for funding. A visitor enters the site by clicking on one of three portals, depending on his or her desired role: “social investor,” which leads to a directory of projects needing funding; “social entrepreneur,” which opens the business planning process, or “service provider,” which opens a directory of projects in need of services. After clicking “social investor,” I scanned a directory that allowed me to search for projects by country, type of service, dollar amount needed, and other criteria. The format was simple and familiar, not unlike searching for a mid-90s Saab on cars.com. I was, however, disconcerted by the continual “no results found” that came up when I tried specific searches (e.g., seeking a “food and nutrition” project in Cote d’Ivoire). The fact is, there just aren’t enough projects in the database for an investor to get that picky. At least not yet.
DevelopmentSpace thinks all of that will change; the company is convinced it is onto something. Says spokesman Scheu, “The trend seems to be that people like to invest in projects that are a little smaller, because they feel their money will go a little further.” So far, he says, DevelopmentSpace users “are just incredibly enthusiastic. We’re doing something that has never really been done. We’re trying to open up the development market to everyone. I think it’s just a matter of getting our name out there and telling investors that we’re a viable alternative.”
While the focus of this group is developing countries, Scheu recognizes that there “has been considerable interest among domestic entrepreneurs and nongovernmental organizations.” DevelopmentSpace welcomes these groups, but will charge a modest listing fee for projects based in the United States.
Wish you had a foundation, but don’t have the time? Is running a foundation just too much of a hassle for your widely dispersed family members? Does the amount of research needed in order to choose your would-be foundation’s charities seem impossible?
Let technology do it for you.
Foundation Source, a Connecticut-based technology company, claims to have found a way to “automate the private foundation.” It offers a web package that, according to the company, combines legal, fiscal, and philanthropic research to create a custom-made foundation that will virtually run itself. For about $5,000, Foundation Source will take your order, design the foundation you want, and have it up and running via the web within 72 hours.
In a world of faster everything, it had to happen. But before you make any McPhilanthropy jokes, consider that Foundation Source has already signed contracts with TD Waterhouse and Bank One—along with eight other major firms it won’t yet name—to provide its foundation product to their clients. And consider that the company receives unsolicited phone calls every week from high-net-worth families who want to buy its package.
Douglass K. Mellinger, co-founder and CEO of the two-year-old firm, says he has seen this coming. For too many well-intentioned people of means, he says, running a foundation is just too hard. It’s too much work, it requires too much help, and it demands too much knowledge and compliance. There is a huge market, he says, of wealthy people who would love to have a charitable foundation but who simply cannot be bothered.
“I want,” he says, “to enable more people who have an interest in having a foundation to have it and to not have to worry about it.”
Enter Mellinger’s company and its quick-foundation product, called Private Foundation. Based on what Mellinger says is years of research and his and his partners’ backgrounds in philanthropy and finance, the Private Foundation package advertises itself as providing everything a philanthropist needs to run a healthy foundation. It will track transactions and assets, disburse grants, research a database of more than 700,000 charities, and add or change officers and directors. And because all of this happens through a custom-built foundation website, the foundation is available to its officers 24 hours a day, anywhere in the world.
The web page itself, which I sampled, has a casual, nonbureaucratic appearance—no doubt designed to ease the minds of paperwork-shy foundation officers—with clear commands displayed in plain language. Categories include “Balance Summary,” “Grant Summary” (including “Last Grant” and “Pending Grants”), and an “Alert” box in which users can display urgent information such as an upcoming deadline. There is even a grant command entitled “Donate Now.” Users can also retrieve grant histories and view and change foundation bylaws and other documents.
Foundation Source, with a full-time staff of 25, will also administer your foundation for you for an additional fee, handling year-end receipts, donor letters, and other management tasks.
Although the company markets Private Foundation mainly through partnerships with banks and other firms (Private Foundation and each firm create a co-branded product for the firm’s clients), Foundation Source will also sell directly to customers. Go to www.foundationsource.com.
(As I write this, the company has discovered, and promised to correct, a contradiction on its website: a claim of 24-hour turnaround instead of the actual 72 it cites in press releases. The error should be corrected by press time, but visitors may want to review the site with care.)