Will Wealthy Donors Rescue Underfunded Science?

Will Wealthy Donors Rescue Underfunded Science?
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When the Ice Bucket Challenge went viral this summer, the ALS Association raised $100 million from more than 3 million donors in only one month. More than $20 million of this windfall has already been allocated to fund medical research into new treatments for ALS. The jaw-dropping success of the Ice Bucket Challenge is a vivid example of how small-dollar donors can work together to transform the funding landscape for struggling areas of science virtually overnight.

It’s important to remember, though, that the way in which the Ice Bucket Challenge went viral was a black swan event that is effectively impossible to replicate by design. Instead, most fundraising efforts to support scientific research succeed due to persistent outreach that builds long-term donor support for foundations and research organizations. The emergence of online fundraising platforms like crowdfunding portals makes is easier than ever for individual scientists to launch their own fundraising campaigns, and many have done so, raising under $10,000 on average. Unfortunately, while $10,000 may be enough to support a pilot project that could help in getting a larger grant from traditional funders, it certainly isn’t enough to support a full research program.

$1,000 and $10,000 donations add up a lot faster that $50 donations

If scientists hope to consistently raise larger amounts of funding, they’ll have to focus on two challenges. First, scientists need to view online fundraising as a part of a broader long-term public outreach effort. By building a large online following, researchers could, for example, raise enough money to fund a graduate student and some lab materials each year. As part of these outreach efforts, though, they face a second challenge that they share with every other fundraiser in the research arena – how to attract wealthy donors. It’s true that some projects, like the campaign to crowdfund a Phase I trial for a gene therapy for Sanfilippo Syndrome, which has raised over $1.8 million dollars to date, will manage to do so primarily by attracting a large number of small donations (only about $250,000 of the $1.8 million were donated in amounts of $1,000 or more). That said, $1,000 and $10,000 donations add up a lot faster that $50 donations. For most ambitious campaigns, then, attracting donors who are able to make gifts at this level will be a crucial task.

So who are these high-value donors? And what do they want?

Top 5 Characteristics of High-Net-Worth Donors

The 2014 U.S. Trust Study of High Net Worth Philanthropy is a good starting point in answering this question. The study reports data from a survey of 630 respondents belonging to high-net-worth (HNW) households (defined as those with an income greater than $200,000 per year and/or a net worth of more than $1,000,000 excluding the value of their primary residence). Unsurprisingly, respondents were highly educated (96.7% held a university degree, with 35.5% holding a doctorate or professional degree) and older (37.4% were retired). Modal income was in the $200,000-$499,999 range (46.6% of the sample), and modal net worth was between $1,000,000 and $2,999,999 (36.7%).

The survey aimed to measure respondents philanthropic behavior in 2013, as well as their general beliefs and attitudes regarding philanthropy. Five findings were particularly relevant to those seeking to attract financial support for university-based science.

1. They like higher education

Higher education was the most common beneficiary of HNW donors’ philanthropy in 2013, with  73.1% giving to higher education, as compared to the 67% who donated to health-related causes and the 44.4% who donated to environmental causes. Donors’ preference for higher education was more marked when viewed in terms of total dollars donated. Higher education attracted 22.9% of the money donated, compared to 3.4% for health and 5.4% for environmental causes. Higher education also featured the largest average ($23,552) and median ($1,870) amounts donated by HNW households in 2013.

Given that scientific research is largely a university-based endeavor, this is very good news for those researchers hoping to crowdfund their work, since those donors with the ability to donate $1,000 or more are very positively disposed towards higher education institutions.

2. They’re not into crowdfunding (yet)

In the not-so-good-news category, only 6.2% of respondents planned to donate via crowdfunding in 2014-2016. On the other hand, the rate of online giving has grown from 14.6% in 2004-2007 to 49.5% in 2010-2013 in the U.S. Trust samples, which suggests that crowdfunding may have room to grow. It may be that HNW donors are simply not aware of the opportunity to fund specific projects that are offered by the crowdfunding approach and that they will embrace these opportunities once awareness increases. Even this optimistic interpretation, however, suggests that scientists may face a challenge in convincing HNW donors to support their specific research project, rather than a larger research institution or foundation.

Given the older skew of the HNW population, the low rate of crowdfunding engagement may also reflect a generational divide. According to Blackbaud, 47% of Gen Y donors report being likely to give via crowdfunding in the future, whereas only 13% of Boomers and 4% of Matures report the same. Unless the older generations grow more enthusiastic about crowdfunding, it may take a while before HNW donors embrace this avenue to giving. The rapid adoption of online giving among HNW donors, however, suggests that attitudinal change within cohorts is possible, so there is room for optimism.

3. They donate to have an impact on specific problems

HNW donors are highly focused in their giving.  93.1% of respondents to the U.S. Trust survey reported being “somewhat (46.8 percent) or highly (46.3 percent) focused on a defined set of issues, organizations, and/or geographic areas”. Most HNW households (53.4%) also reported making an effort to monitor the impact of their donations, and those who did monitor their donations gave much more ($104,265) on average than those who did not ($28,543). Indeed, 81.3% expected that the recipients of their charitable dollars limit their spending on administrative and fundraising expenses to a an “appropriate amount”. When asked what drives their donations, the number one response for HNW donors was “When you believe your gift can make a difference” (73.5%).

In short, HNW donors appear to be driven by the desire to have an impact in their chosen fields of interest. For those HNW donors who care about supporting university research (likely a significant proportion, given the high levels of support for higher education), crowdfunding may present a great opportunity to engage in impact philanthropy. By donating to support a specific project and/or researcher, measuring deliverables is simplified (e.g., number of publications, experiments completed), while transaction costs and overhead are kept to a minimum (0% for many university-based crowdfunding portals).

4. Their donations are not crowded out by government dollars

Crucially for scientific research projects, which tend to be supported by government research grants, HNW donors do not tend to be crowded out by government funds. 83.1% of respondents indicated that they would not decrease their current level of support for an organization if government funding for that organization increased. This may facilitate the use of crowdfunding by granting agencies in creative ways.

5. They find satisfaction in supporting the greater good

Most HNW donors are not motivated by a personal connection to a specific issue. Only 44.6% reported donating “[t]o remedy issues that have affected you or those close to you”, such as cancer or drug addiction. In contrast, 73.5% reported donating “[w]hen you believe your gift can make a difference” and 73.1% “[f]or personal satisfaction”. This suggests that, in general, appeals based on the potential impact of scientific research to the public good will be most effective in motivating HNW donors, though it is possible that appeals to a specific personal connection to an issue may be effective in motivating large donations for some types of research (e.g., the wealthy cancer patient who helped the iCancer campaign meet its fundraising goal).

Building Awareness is the Key Challenge

Overall, the U.S. Trust survey suggests that high-net-worth donors are likely to be a receptive audience for online fundraising efforts to support specific scientific research projects. The main challenge for those interested in crowdfunding science is to build awareness among prospective HNW donors about how donating through crowdfunding can facilitate their ability to evaluate and monitor their gifts’ impact.

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