A product that improves DAF donor experience and behavior is the most actionable, near term solution - Chariot is charging at the opportunity.
There are $234 billion that have been donated to charity, according to the IRS, but no nonprofit has received those funds.
You might be asking “What now?! How is that possible??”
The answer lies in the fastest growing financial vehicle in philanthropy: Donor Advised Funds or DAFs. This instrument allows any individual to “donate” cash or securities to a charitable fund, get associated tax write offs up front (including capital gains), let it grow tax free and then donate from that fund to charity whenever they like over time - there is 0 payout requirement. The only requirement is that funds can only go to 501(c)3 nonprofits if and when they are used.
It is fairly obvious why this is attractive to anyone that is philanthropically inclined, especially the wealthy. You can optimize taxes in any given year and maintain the utmost flexibility with your charitable support in the future. The requirements for opening a DAF have also become incredibly accessible - with new mobile-first apps, low minimums and fees, and many employers offering DAF accounts as an employee benefit. This all explains why the total number of DAF accounts has nearly tripled in the last four years to more than 1.3 million.
What it doesn’t explain is why so much of the money donated is not actually being deployed for nonprofit work. In 2021, there was $159 Billion still sitting in DAFs that needed to be donated to charity - that rose by over 47% by the end of 2022. Donors are benefitting right away while nonprofits, tackling mounting crises across the country in an incredibly challenging fundraising environment, have to wait.
There is a powerful movement of activists pushing for more regulation of DAFs such as payout requirements called The Initiative to Accelerate Charitable Giving. I say yes, policy changes should be assessed and tested, but it can’t be the only answer.
We can and need to make a meaningful impact on this problem with technology that improves DAF donor experience and behavior, thereby moving billions more to nonprofits & communities in need.
My name is Mitch Stein, I’m a social entrepreneur that recently spent 3 years working to connect thousands of nonprofits with better tools and services through a marketplace startup I founded called Pond. I’ve researched hundreds of tech products and had thousands of conversations about what is or isn’t working for nonprofits.
It became clear to me that the most impactful way I could help bridge the gap in the nonprofit market is to dedicate my time to founders and products going after specific, discrete problems in the social impact space that great tech and smart business models could effectively tackle.
I’m partnering with Chariot because I believe deeply in the team and the tremendous opportunity to incorporate DAFs into every fundraising channel.
A major reason money sits in DAFs longer than it should is because DAF giving exists in isolation from all other nonprofit fundraising activities.
What is the primary reason donors give to charity? It’s because they are asked.
And yet that moment of inspiration - a friend running a marathon, an in person event, a mailer - have historically (before Chariot) had no way to incorporate DAF gifts as an integrated means of support. A donor with a DAF - who is likely a high-value donor that gives more money, more often, to more organizations - can’t use the funds they’ve set aside for giving. They have to go into their DAF portal later, completely separate from the nonprofit’s platforms and the gift makes it to the organization days or weeks later, often without identifying details.
This introduces an outrageous amount of friction in the user experience that limits or prevents donation volume, significantly delays proper stewardship and adds operational burden to overworked nonprofit staff.
Imagine if you were going to buy a pair of shoes online from Nike, but instead of clicking to pay with your debit card where your money was, you had to go log into your bank account, search for Nike and the specific type of shoe you wanted, wait days or weeks to hear back from Nike… it sounds absolutely ludicrous compared to the ease of online shopping these days, but that’s exactly what a DAF donor’s experience is - without even getting new shoes at the end of the process!
Chariot took a simple (but far from easy!) step - integrate with all the providers of DAFs, bundle them into one button that can be embedded into any giving form. That means DAF donations made in 3 clicks and 15 seconds without ever leaving a nonprofit’s website vs. the 15 steps and 3 minutes it takes without Chariot.
It means any donor with a DAF will use it instead of a credit card, make a larger gift (DAF gifts are 24x as large on average) and be better stewarded to give more in the future.
The team put in an incredible amount of work so far to:
Develop an inspiring user experience for donors
Incorporate over 70% of the DAF provider market
Structure their external API for any fundraising platform to integrate in a matter of hours
And, Chariot is just getting started. We’re only scratching the surface on the multibillion dollar impact this technology can have on social impact and I couldn’t be more excited to support their strategy & growth.
Fundraising platforms, nonprofits and community foundations - pay attention to how quickly this space is evolving, get excited about the ease and impact of this technology and please reach out if you want to discuss!