DonorsChoose.org: An Innovative Internet Philanthropy Goes National

Abstract

In 2000, Charles Best (Yale College ’98), a social studies teacher at an alternative public high school in the South Bronx, found himself frustrated because his school did not have access to many of the resources available in other New York City public schools. Best and his colleagues were able to secure basic materials, but they were unable to bring many creative classroom projects to fruition, because they lacked financial support.

Best believed that there were many people who would be willing to fund small projects that quickly improved classroom performance and educational opportunities; however, the challenge was to connect donors with appropriate projects.

In an attempt to solve this problem, Best founded DonorsChoose.org, a website that would match donors directly with New York City public school teachers who needed funding for classroom materials and activities. Simple in its conception, the DonorsChoose.org model actually required a number of systems to ensure that teachers posted good projects, that donors could easily choose among projects, and that a link was forged between the donors and students. Best believed that this direct link between donors and classrooms would address “the scarcity and inequitable distribution of learning materials and experiences in our public schools.”

After an auspicious start, Best and DonorsChoose.org set their sights on growing beyond New York City. The organization received national publicity and won a prestigious non-profit strategy award. Then in 2005, a group of Silicon Valley executives agreed to provide a $14 million grant to fund national expansion. DonorsChoose.org scaled up its organization and began a step-by-step expansion into various locales. It created an ambitious outreach program to encourage teachers to design projects and donors to visit the site and commit to funding projects.

At the beginning of 2009, as the grant money was coming to an end, the organization had made great strides toward completing its expansion. However, observers wondered whether DonorsChoose.org could reach its goal of providing $100 million per year in gifts to classrooms and whether it would have an impact on the fundamental inequities within the educational system.

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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Resources

Exhibit 1: Number of Funded Projects by Teacher and School

Funded Projects Posted between November 5, 2007 and November 4, 2008

Funded Projects per School

Number of Schools

Number of Teachers

1

4,031

10,955

2

1,390

2,189

3

717

748

4

385

338

5

270

165

6

172

94

7

140

59

8

108

56

9

79

27

10

75

21

11

57

8

12

50

10

13

30

10

14

26

4

15

30

1

16

20

0

17

20

1

18

18

0

19

6

1

20

10

1

21

13

0

22

10

0

23

5

0

24

12

0

25

4

0

26

4

0

27

5

0

28

5

0

29

2

0

30

4

0

31

1

0

33

3

0

34

3

0

35

1

0

37

2

0

40

2

0

41

1

0

48

1

0

55

1

0

61

1

0

Total

7,714

14,688

Note: “Schools” and “Teachers” refer to the number of schools or teachers for which X number of projects were funded. For example 10,955 teachers each had 1 project funded that was posted between 11/5/07 and 11/4/08.

Exhibit 2: Funded Project Cost and Donation Data

Funded Projects Posted between November 5, 2007 and November 4, 2008

Average Cost for a Funded Project’s Materials: $337.15

Median Cost for a Funded Project’s Materials: $283.00

Average Number of Donations Required to Fund a Project: 3.29

Median Number of Donations Required to Fund a Project: 2

Maximum Number of Donations for a Funded Project: 68

Average Days to Fund a Project: 58

Median Days to Fund a Project: 38

Note: There is a long tail at the right end of the graph because during this period DonorsChoose.org instituted a time limit of five months for funding a project. The projects that exceed the five-month limit were grandfathered in.

Exhibit 3: Funded Projects by Category

Funded Projects Posted between November 5, 2007 and November 4, 2008

Resource Usage

Resource Type

Number of Projects

Percentage of all projects

Basic

Supplies

5,062

22.91%

Books

3,574

16.17%

Technology

2,109

9.54%

Trips

13

0.06%

Visitors

2

0.01%

Other

864

3.91%

Subtotal

11,624

52.60%

Enrichment

Supplies

4,192

18.97%

Books

2,780

12.58%

Technology

2,318

10.49%

Trips

102

0.46%

Visitors

28

0.13%

Other

1,053

4.77%

Subtotal

10,473

47.40%

Total:

22,097

100.00%

School Poverty Rating

Number of Schools Applying for Funding

Percentage of All Schools Applying for Funding

High

18,027

81.57%

Moderate

2,761

12.49%

Minimal

552

2.50%

Unknown

760

3.44%

Subject Area of Projects

Number of Projects

Literacy

7,093

Mathematics

2,431

Literature/Creative Writing

2,196

Special Needs

1,305

Visual Arts

1,069

Applied Science

1,018

Health & Life Science

935

Environmental Science

927

History/Geography

709

Music

639

Social Sciences

530

Other

459

English as a Second Language

430

Early Development

406

Gym & Fitness

260

Performing Arts

238

Health & Wellness

227

Foreign Languages

218

Sports

190

Character Education

170

Extracurricular/After School

127

College/Career Prep

124

Civics/Government

98

Student Rewards

84

Parent/Community Involvement

78

Community Service

64

Nutrition

43

Economics

29

Exhibit 4: Screenshots of Donor Experience on DonorsChoose.org

“Visualizing Math” Project, Nov. 27, 2008, Project Proposal

“Visualizing Math” Project, Nov. 27, 2008, Project Added to Cart

“Visualizing Math” Project, Nov. 27, 2008, Donation Confirmation

Exhibit 5: Project Cost Report and Project Fulfillment Report

DonorsChoose.org Project Cost Report

Project: Visualizing Math: Batteries for Calculators (#216307)

Teacher Receiving Resources: Mr. L (abbreviated since this document is publicly available)

DonorsChoose.org Staffer Procuring Resources: Jenni D

This report is based on the price of materials when the teacher submitted his/her proposal. Actual expenditures may differ slightly from the above estimate due to items going on sale at time of purchase; the need to use alternate suppliers when the original items are out of stock; and/or the absence of payment processing charges for donations by check. If actual expenditures turn out to be more than the above estimate, DonorsChoose.org pays for the difference. If actual expenditures turn out to be less than the above estimate, DonorsChoose.org places the savings in a restricted account that is solely used to fund additional classroom project materials. In short, any savings go to students.

Materials Resources:
Item Vendor Unit Price Quantity Total Price

RECHARGEABLE AAA BATTERIES4PK—Duracell Rechargeable “AAA” Batteries 4-Pack Quill

$10.79 13 $140.27

Resources Subtotal

$140.27

Vendor Shipping Charges*(10% of Materials Subtotal)

14.03

Vendor Sales Tax Charges** (0.00% of Materials Subtotal)

0.00

3rd Party Payment Processing Fee (2.5% of Resources Subtotal)

3.51

Camera, Photo Development, and Postage for Donor Thank-You Package

17.00

Project Subtotal

174.80

Optional Donation to Cover Project Fulfillment Labor (15% of Total Project Cost – See Next Page)

30.88

Total Project Cost

205.69

*The shipping fee represents a net average of vendor shipping rates based on an annual evaluation conducted by DonorsChoose.org. Any savings are restricted to funding additional classroom project materials.

**The sales tax fee represents the state sales tax charged with one exception: a 15 percent charge is added by DonorsChoose.org to projects taking place in Hawaii and Alaska to cover the higher cost of shipping resources to these two states.

DonorsChoose.org Project Fulfillment Report

Project: Visualizing Math: Batteries for Calculators (#216307)

Teacher Receiving Resources: Mr. L (Abbreviated since this document is publicly available)

Students Benefited: 60

Instructional and Homework Hours Supplied: 120.00

This report details the labor performed by DonorsChoose.org to turn your donation into a live project. The project fulfillment fee supports this work and ensures “end to end” integrity on every student project. While the cost of fulfilling a student project remains the same, DonorsChoose.org offers a “scholarship” to the highest-need schools. Depending on a school’s poverty level, the fulfillment fee is 25 percent, 20 percent, or 15 percent of the total project cost. The vast majority of schools using DonorsChoose.org have high rates of poverty, so most proposals carry the 15 percent fulfillment fee.

Sep 27, 2008 Mr. L completed the registration process at DonorsChoose.org and identified the school where any project would take place. DonorsChoose.org only lists schools which have been verified by the government, and staff members update school information (such as address and percent of students from low income families) every four months.

Sep 27, 2008 Mr. L submitted “Visualizing Math: Batteries for Calculators” at DonorsChoose.org.

Sep 28, 2008 Donorschoose.org volunteer Karen R reviewed the proposal essay to ensure that Mr. L fully explained the student learning that would take place, and emailed follow-up questions if anything was unclear.

Oct 2, 2008 DonorsChoose.org staff member John C verified the project resources and calculated the proposal price tag.

Nov 27, 2008 “Visualizing Math: Batteries for Calculators” was fully funded. Thank you!

Nov 28, 2008 DonorsChoose.org staff member Brandon C confirmed with Mr. L that the requested resources were still needed, forwarded Mr. L’s initial thank-you email, and established a thank-you package due date based on the project lifecycle.

Nov 30, 2008 Operations team staff with ordering privileges Jenni D purchased the project resources for Mr. L and had them sent.

Dec 29, 2008 When Mr. L returned the completed thank-you package to the DonorsChoose.org office,

DonorsChoose.org staff member Cheyenne J checked it in.

Dec 30, 2008 DonorsChoose.org staff member Di Z packaged the thank you letters, and sent this thank-you package to you. We hope it demonstrates the impact you’ve had on Mr. L’s students and illustrates what a difference you’ve made for this classroom.

Exhibit 6: Email Thank-You

“Visualizing Math” Project, Nov. 28, 2008

Exhibit 7: DonorsChoose.org Project Timeline

Activity

Time to Complete

Classroom teacher posts project & materials list.

Process begins

DonorsChoose.org volunteers screen project using eligibility criteria (resources to be used by students; project not discriminatory or political).

→Project posted for public viewing/donations.

2 weeks

(1–15 business days)

Project fully funded.

→Donors immediately sent initial thank-you email, which also serves as a receipt for tax-deduction purposes.

4 months

(Maximum time allotted for funding is 5 months)

Teacher contacted to confirm student need; teacher must respond in order for project to proceed. Once confirmation is received:

→Email sent to school principal (and sometimes other administrators) to inform them of the project/donation.

→Materials order sent to eSchoolMall for fulfillment.

1 week

Thank-you email sent from teacher to donors; includes teacher-selected date to expect thank-you package.

1 week

DonorsChoose.org sends thank-you kit to teacher.

2 weeks

Materials arrive at school.

1 month*

Teacher returns thank-you package with teacher letter, student letters, and used disposable camera to DonorsChoose.org.

→DonorsChoose.org develops/prints pictures and forwards them, along with teacher and student letters, to donors.

3–6 months after project is funded

*Does not include delay if materials are held during the DonorsChoose.org winter/summer breaks, during which times no project materials or thank-you kits are mailed.

Exhibit 8: DonorsChoose.org Financials

DonorsChoose.org

STATEMENTS OF FINANCIAL POSITION

June 30, 2008 AND 2007

Assets

2008

2007*

Cash and cash equivalents (Notes 1b and 3)

$7,163,959

$7,387,919

Certificates of deposit and accrued interest (Notes 1d and 5)

5,292,614

Unconditional promises to give (Notes 1c and 4)

      Unrestricted

10,400

75,000

      Board designated to national expansion activities

2,387,500

4,250,000

      Temporarily restricted, net of allowance for uncollectible

amounts of $500,000 (2008)

798,455

857,205

Prepaid expenses and other current assets

35,504

2,308

Property and equipment, at cost, net of accumulated

depreciation (Notes 1e and 6)

1318193

1,201,316

Security deposits

44782

29,653

Total Assets

$17,051,407

$13,803,401

Liabilities and Net Assets

Liabilities

      Accounts payable and accrued expenses

$307,974

$178,450

      Salaries and payroll taxes payable

200,552

119,131

      Accrued vacation liability

84,539

35,130

Total Liabilities

593,065

332,711

Commitments (Note 8)

Net Assets

      Unrestricted (Note 2a)

      Operating

1,839,105

1,972,228

      Designated for national expansion activities

8,568,086

6,414,803

      Designated for classroom projects

338,990

413,766

Total Unrestricted

10,746,181

8,800,797

Temporarily restricted (Note 2b)

5,712,161

4,669,893

Total Net Assets

16,458,342

13,470,690

Total Liabilities and Net Assets

$17,051,407

$13,803,401

*Certain amounts have been reclassified for comparative purposes.

See notes to financial statements.

DonorsChoose.org

STATEMENTS OF ACTIVITES

YEARS ENDED June 30, 2008 AND 2007

2008

2007

Unrestricted

Temporarily Restricted

Total

Unrestricted

Temporarily Restricted

Total

Changes in Net Assets

Revenue

Contributions for classroom projects

-

$9,996,644

$9,996,644

$28,215

$5,774,936

$5,803,151

Contributions for program services and supporting services

1,343,824

1,307,716

2,651,540

1,001,736

1,004,423

2,006,159

Contributions for national expansion (Note 2a)

5,800,000

-

5,800,000

7,950,000

-

7,650,000

Provision for uncollectable unconditional promises to give

-

(500,000)

(500,000)

-

-

-

Donated services and facilities (Note 7)

262,842

-

262,842

498,275

-

498,275

Investment income (Note 5)

351,263

-

351,263

239,465

-

239,465

Net assets released from restriction

9,762,092

(9,762,092)

-

6,196,386

(6,196,386)

-

Total Revenue

17,520,021

1,042,268

18,562,289

15,914,077

582,973

16,497,050

Expenses

Program Services

Classroom projects

10,731,667

-

10,731,667

6,303,729

-

6,303,729

Classroom projects advocacy

3,166,531

-

3,166,531

1,597,959

-

1,597,959

Total Program Services

13,898,198

-

13,898,198

7,901,688

-

7,901,688

Supporting Services

General and administrative

963,516

963,516

951,905

951,905

Fundraising

712,923

-

712,923

552,320

-

552,320

Total Supporting Services

1,676,439

-

1,676,439

1,504,225

-

1,504,225

Total Expenses

15,574,637

-

1,574,637

9,405,913

-

9,405,913

Increase in net assets

1,945,384

1,042,268

2,987,652

6,508,164

582,973

7,091,137

Net assets, beginning of year

8,800,797

4,669,893

13,470,690

2,292,633

4,086,920

6,379,553

Net Assets, End of Year

$10,746,181

$5,712,161

$16,458,342

$8,800,797

$4,669,893

$13,470,690

Exhibit 9: Conversion From Site Visit to “Add to Cart” Action

Notes

Date

Note on Data

November 1–14

Site release corrupted Google Analytics tracking, causing a two-week absence in data.

November–December

Typical increase for holiday season peaking in December and then again at end of year for tax redemptions.

February 26–March 2

Major site change broke Google Analytics code again.

March 25

Twitter campaign by Tim Ferris: http://www.fourhourworkweek.com/blog/2009/03/09/tweet-to-beat/

April 8–10

Major GivingCard campaign drop supported by Crate & Barrel (approx. 100K GivingCards distributed via email)

Exhibit 10: Screenshot Showing Bill & Melinda Gates Foundation “Double Your Impact” Donation

Exhibit 11: Sample Screenshots Showing Fulfillment Fees

Exhibit 13: National Board of Directors

Jonathan Alter, Senior Editor and Columnist, Newsweek

Charles Best, Chief Executive Officer and Founder, DonorsChoose.org

Jonathan Beyman, Former Global Head of Operations and Technology, Lehman Brothers

Peter Bloom, Board Chair, Managing Director, General Atlantic, LLC

Michael Brader-Araje, Managing Partner and Founder, SunPocket

Bill Bradley, Former U.S. Senator and Presidential Candidate

Stephen Colbert, Satirist, Actor, Writer, and Host of Comedy Central’s The Colbert Report

Cheryl Dorsey, President, Echoing Green

Edwin A. Goodman, General Partner, Milestone Venture Partners

Dena Jones Trujillo, Investment Manager, Omidyar Network

Joshua Levine, Managing Director, Kita Capital Management

Michael Lynton, Chairman and CEO, Sony Pictures International

Trabian Shorters, Vice President of Community Programs, Knight Foundation

Jeff Weiner, Executive in Residence, Accel Partners & Greylock Partners

Anthony Yoseloff, Partner, Davidson Kempner Partners

Dewey & LeBoeuf LLP, Pro Bono Legal Counsel

Exhibit 14: National Advisory Council

Kevin K. Albert, Managing Director, Elevation Partners

Chuck Beck, Former Chairman and CEO of Fiduciary Trust International of California

J.B. Buxton, Deputy State Superintendent, North Carolina Department of Public Instruction

Bob Daly, Los Angeles Founding Partner, Former Head of Warner Brothers and CEO, Rulemaker, Inc.

Ruthanne Feinberg, Managing Director, Glocap Search

Donna Golkin, Perry & Donna Golkin Foundation

Steve Jones, Market President, Eastern NC/VA, RBC Centura

John Keller, CEO, Keller Group, Inc.

Neeru Khosla, Amar Foundation

Sherry Lansing, Former Head of Paramount Pictures

Dagny Maidman, Managing Director, Lehman Brothers

Lenny Mendonca, Director, McKinsey & Company

Tom Miglis, CIO, Citadel Investment Group

Craig Newmark, Founder, Craigslist

Jeffrey Patchen, President & CEO, Children’s Museum of Indianapolis

Dr. John J. Ramos, Superintendent of Schools, Bridgeport Board of Education (Connecticut)

Dan Rosensweig, Operating Principal, Quadrangle

Carole Bayer Sager, Los Angeles Founding Partner, Singer and Songwriter

Anne K. Shane, Vice President, BioCrossroads

James Slavet, Partner, Greylock Partners

David Snelling, Principal Architect, Walt Disney Interactive Media Group

Dana Stalder, Senior Vice President, eBay

John E. Thompson, Jr. Author

Tom Uhlman, Managing Partner, New Venture Partner

Exhibit 15: Social Return on Investment

(Source: DonorsChoose.org National Expansion Plan)

Over the expansion period, DonorsChoose anticipates delivering well over $60 million worth of materials and experiences to 4,000,000 students in need. Excluding the value added by DonorsChoose and strictly measuring the pass-through, $14 million in national expansion funding will generate a 350 percent social return on investment. Details on the ROI are as follows:

Student Resources Delivered reflects actual purchases, after discounts that DonorsChoose negotiates with vendors. To arrive at the true market value of the student resources delivered, one should increase the number above by 15 percent, the average discount.

# of Students Benefiting studiously avoids double counting. For example, and elementary school teacher who has funded 15 projects (each listed as benefiting 25 students) only contributes 25 students to the number above—not 15 times 25—because it is assumed that elementary school teachers do not teach more than one group of kids. The number above also does not account for the fact that 80 percent of resources funded through DonorsChoose are re-used by future students. Assuming an average shelf-life of 3 years, one would calculate that the education of 10,000,000 students will ultimately be enriched through DonorsChoose.

High Poverty Schools are those where 65 percent or more of students receive free lunch, for which a student’s family must live near or below the poverty line to qualify.

The federal government classifies a school as “high need” if the free lunch rate is 40 percent+.

Exhibit 16: Map of Funded Projects

Funded Projects Posted Between Nov. 5, 2007 and Nov. 4, 2008

Exhibit 17: Funded Projects and Project Giving, 2002–2008

This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.

2024 Sage Publications, Inc. All Rights Reserved

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