CASE: SI-128 DATE: 9/14/15

DONORSCHOOSE.ORG: HOW TECHNOLOGY FACILITATED A NEW FUNDING MODEL

My colleagues and I were spending our own money on books and pencils and other school supplies, and we were talking about field trips we wanted to take our students on or science experiments that required a microscope. My thinking was that there must be people out there who 1 would want to help teachers like us if they could see exactly where their money was going. —Charles Best, Founder and CEO, DonorsChoose.org

In 2000, Charles Best, a social studies teacher working in a school in the Bronx, New York, scraped together $2,000 to pay an overseas web designer to build a rudimentary website he had designed using pencil and paper. On the website, teachers could post projects that needed funding—from books and paints to field trips and educational software—and individuals could donate towards those requests. By 2014, half of the public and charter schools in the United States had at least one teacher who had used the DonorsChoose.org website,2 more than 10 million students had received classroom supplies, and more than 1.4 million donors had contributed funds to providing these supplies.3

Over time, the organization also found itself with a powerful tool at its disposal—vast troves of data that could be analyzed to provide insights into everything from teaching methods to core education funding needs. “This was one of the breed of start-ups that is scratching a personal itch,” explained Best. “And the solution just started to grow beyond that particular itch.”

1 Interview with Charles Best, founder and CEO of DonorsChoose, August 2014. Subsequent unattributed quotes from Charles Best in this case are from this interview. 2 DonorsChoose.org, National Overview, http://cdn.donorschoose.net/docs/DonorsChoose_org- NationalOverview.pdf (June 7, 2014). 3 DonorsChoose.org website, http://www.donorschoose.org/about/impact.html (June 8, 2014).

Lecturer Laura Arrillaga-Andreessen and Sarah Murray prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

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Best had not set out to influence public education policy. He simply wanted to raise some money to pay for classroom materials and experiences, such as trips to museums and nature preserves, which his school could not afford. But his idea for using the Internet to connect individual donors to teachers who needed extra learning resources was to turn into something far bigger than he had ever imagined.

PIONEERING A CROWDFUNDING APPROACH TO PHILANTHROPY

Best created DonorsChoose.org because of his frustration at seeing colleagues having to reach into their own pockets to pay for the resources and supplementary educational experiences they needed for the students. This challenge resulted from the increasingly tight budgets at many public schools. Since the U.S. Constitution did not guarantee the right to education, funding for public education remained largely the responsibility of individual states. From 2008, the financial crisis and ensuing recession—which lowered the tax revenues needed to finance education—had taken its toll, with many states reducing the amount of public school funding.4

Concerned with the funding gaps and weaknesses they saw in the traditional education system, many wealthy donors became increasingly focused on education, often by funding charter schools. A national study found that 80 percent of wealthy U.S. donors gave to educational causes in 2011, the highest rate of any issue area.5

However, for the millions of Americans wanting to make smaller education-oriented gifts in a transparent, strategic way, no giving channels existed beyond supporting their local school.

This was the philanthropic market need that Best’s new model filled. In 2000, after persuading 11 of his colleagues at the school to post requests on the new site, he went about looking for people to make the donations that would pay for the requests. His aunt, a nurse, funded one of the projects, but Best himself had to fund the other 10 because he did not know any more donors to ask.

While relying on colleagues and family at this nascent stage, Best had established a fundraising model that used crowdfunding, a mechanism through which small amounts of money could be sought from large pools of individuals via the Internet in order to fund a particular project. “Thanks to the Internet and technology, the experience of being a philanthropist was now available to someone with five dollars,” said Best.

In the DonorsChoose.org model, teachers from any U.S. K-12 public school (including public charter schools) could use the site to post their classroom project requests—from protractors and encyclopedias to digital cameras, musical instruments, and science supplies. To guarantee

4 William Zumeta, “States and Higher Education: On Their Own in a Stagnant Economy,” NEA Almanac of Higher Education, 2012, p. 28, http://www.nea.org/assets/docs/_2012_Zumeta_18Jan12.pdf (November 5, 2014). 5 Bank of American and the Center on Philanthropy at Indiana University, “2012 Bank of America Study of High Net Worth Philanthropy,” November 2012, http://newsroom.bankofamerica.com/files/press_kit/additional/2012_BAC_Study_of_High_Net_Worth_Philanthrop y_0.pdf (November 5, 2014).

DonorsChoose.org: How Technology Facilitated a New Funding Model SI-128 p. 3 integrity DonorsChoose.org vetted each request.6 Millions of teachers could seek funding for the supplies and educational experiences that, because their schools were unable to finance them, they were often paying for themselves.

Using the DonorsChoose.org website, individuals could select a project that inspired them. They could give any amount to that project and, when the project reached its funding goal, DonorsChoose.org purchased the materials and shipped them to the school. In return, donors received photographs of their project being implemented, a letter from the teacher, and a cost report showing how their money was being spent. Those giving more than $50 would also receive handwritten thank-you letters from the students.7

But while his organization’s beginnings were humble, Best had come up with a model that had the potential for far-reaching impact. Far earlier than many other new generation social entrepreneurs, he had recognized that technology could create a marketplace for “citizen philanthropy”—an approach in which individuals connected with their peers to define and solve problems themselves and meet social needs (rather than relying on experts or large organizations).

With DonorsChoose.org as one of the pioneers of this concept, the new brand of citizen philanthropy evolved rapidly since the late 1990s, driven by the advent of broader Internet access and the growth of social media. The ability to give online also allowed individual givers to help drive larger grassroots funding movements in which thousands of small gifts could add up to substantial contributions to organizations or causes. It meant donors from all income levels could participate in philanthropy in new ways. Moreover, financial donations were only part of the new citizen philanthropy movement. Online, individuals could contribute to discussions on everything from poverty to climate change through blogs and social media, thereby becoming advocates and building awareness for social issues.

Best saw that by matching donors directly with projects online, he could promote citizen philanthropy and develop a more accountable approach to educational giving, bringing together individual philanthropists and educators in a direct way that would not have been possible without the Internet’s connective power.

It should be remembered, however, that in 2000, Best was simply trying to find funds for classroom projects and did not think of himself as a social entrepreneur or as someone building an institution to reinvent how people engage philanthropically. Nevertheless, the growth of DonorsChoose.org was rapid. By 2014, the organization had raised $225 million and helped more than 175,000 teachers fund over 400,000 projects, contributing to a richer education for more than 10 million students.8

6 DonorsChoose.org, National Overview, op. cit. 7 DonorsChoose.org website, http://www.donorschoose.org/about (June 8, 2014). 8 Peg Tyre, “Beyond School Supplies: How DonorsChoose is Crowdsourcing Real Education Reform,” Fast Company, March 2014.

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A NEW WEB OF CONNECTED PHILANTHROPISTS

When Best was conceiving his idea for DonorsChoose.org, the Internet age was coming into being. Dotcom start-ups were using the power of the Internet to connect buyers with sellers across a wide range of spheres. The Internet had become a new force linking people and organizations in ways that had previously been impossible. In 1993, for example, Match.com was created to connect singles with potential partners. In 1995, Amazon—now one of the world’s largest online retailers—started selling books online.9 And the same year, the launch of eBay allowed people who had never met to connect to buy and sell things from each other, creating what became a vast online marketplace for the sale of goods and services.10 In 1998, Priceline, an online travel company, started helping consumers find discount rates and name their own prices for airfares, hotel, and car rental bookings, and vacation packages.11

In establishing DonorsChoose.org as a way of connecting individual givers to teachers with specific funding needs or projects, Best was applying the principles found in many for-profit customer experiences to philanthropy. For the first time, individual donors could go online and search for projects that needed funding and that met their specific interests—by geography, grade, subject, or activity. The model helped create a fundamental shift in the donor-beneficiary relationship, putting greater control over giving choices into the hands of the individual donor, while breaking down the geographic barriers that impeded the transparent flow of philanthropic funds.

“Back in 2000, crowdfunding was years away from becoming a word,” said Best. “It was a foreign concept to people at the time that someone with $5 could act like a strategic philanthropist and not just write a check and trust the institution to know what’s best, but instead express a personal passion.”

Since Best helped pioneer this model of philanthropy, others have followed with websites that make it possible to give small amounts of money or extend micro-loans directly to beneficiaries anywhere in the world.

In 2004, Kiva was cofounded by Jessica Jackley, a Stanford GSB graduate, and Matt Flannery. The site pioneered online micro-lending, allowing individuals to make loans of just a few dollars to developing world entrepreneurs. Intermediary micro-finance institutions vetted the borrowers who posted their profiles on the website for potential lenders to see. For the duration of the loan, lenders could receive feedback via e-mail updates directly from their borrowers. And in 2014, the repayment rate on loans was almost 99 percent.12

Not only did the Internet facilitate online transactions, it also provided users with the information donors could view to base their giving decisions. For example, the Seattle-based Jolkona Foundation, which launched in 2009, used a similar model to Kiva to allow individuals to make

9 Amazon.com timeline, http://phx.corporate-ir.net/phoenix.zhtml?p=irol-corporateTimeline&c=176060 (November 5, 2014). 10 eBay website, http://www.cs.brandeis.edu/~magnus/ief248a/eBay/history.html (November 5, 2014). 11 “Our History,” Priceline.com, http://careers.priceline.com/about-us/our-history/ (February 17, 2015). 12 Kiva website, http://www.kiva.org/about/stats (November 5, 2014).

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13 small donations instead of loans. Donors could make small gifts to fund the specific needs of individuals or groups, such as $50 to provide technical training for women in Seattle transitioning out of extreme poverty or $250 to provide six months of prenatal care to a woman living in the slums of Calcutta. The site offered an interactive map, giving users an online tour of the projects available globally. To provide donors with feedback on their gifts, each time a partner nonprofit made a gift to a project, the donor received an e-mail and could log on to see a video, photograph, or story about the person or community their money had helped.14

Best and DonorsChoose.org had helped establish the parameters for these types of funding websites. By 2014, the DonorsChoose.org website reported that 70 percent of its projects were successfully funded, suggesting that an ample supply of individual donors were looking to help.15 And, importantly, the model allowed teachers—not donors—to make choices about what was needed in their classrooms. Paymon Rouhanifard, superintendent of Camden City School District, recognized the importance of this when in 2014 the district launched a civic engagement campaign with DonorsChoose.org.16 “We need to provide autonomy to educators and empower them to do what they do best for their students,” he said. “This allows our educators to actually delineate their needs rather than me standing on high and mandating what every funding request is tied to.”17

Best’s approach also represented a radical change in the way donors interacted with the causes and organizations they cared about. The ongoing feedback that was typically reserved for those making substantial gifts was now available to anyone, whatever the size of their gift. Donors giving to other funding intermediaries or traditional non-profits would have to rely on these organizations to make decisions on which individual projects to fund. In contrast, by using DonorsChoose.org as their intermediary, they could make their own choices on which needs to support.

Best believed that by putting giving decisions into the hands of millions of individuals, funds would ultimately flow in the right direction. “We felt that citizen philanthropists using their common sense and personal experience, at least in the aggregate, could make wise choices about which projects were worthiest and ought to be funded.”

FROM TECH START-UP TO FUNDING POWERHOUSE

While technology breakthroughs were key to the success of DonorsChoose.org, no single development represented a turning point in its growth path. For Best, scaling up DonorsChoose.org meant pushing for strong, steady expansion. “If you look at our growth

13 Jolkona Foundation, http://www.jolkona.org/happy-holidays-from-jolkona-foundation/ (November 5, 2014). Jolkona has since transitioned into a nonprofit that brings social entrepreneurs from emerging countries to Seattle for an intensive 3-week new venture accelerator. 14 Laura Arrillaga-Andreessen, “Disruption for Good,” Stanford Social Innovation Review, 2015. 15 DonorsChoose.org website, http://www.donorschoose.org/about (February 8, 2015). 16 Camden City Schools District press release, “Camden City Schools & DonorsChoose Civic Engagement Campaign,” 2014, http://www.camden.k12.nj.us/apps/news/show_news.jsp?REC_ID=299359&id=0 (June 8, 2014). 17 Interview with Paymon Rouhanifard, superintendent of Camden City School District, May 2015. Subsequent unattributed quotes from Paymon Rouhanifard in this case are from this interview.

DonorsChoose.org: How Technology Facilitated a New Funding Model SI-128 p. 6 curve, it resembles a hockey stick rather than any other geometric shape,” said Best. “And yet there was no single moment where I would have said, ‘Ah, this is going to work.’”

Nevertheless, a number of milestones marked the organization’s expansion. These included the following:

• June 2003: On the night Oprah Winfrey described DonorsChoose.org as “revolutionary” on her show, the site crashed because of the number of people trying to use it. The website raised $250,000 when it came back up. • November 2008: A group of supporters formed “Mustaches for Kids,” an annual event where men grew mustaches and raised funds to support classroom projects. By 2014, this effort—which then continued every fall—had raised more than $1.5 million. • 2008: DonorsChoose.org worked with comedian Stephen Colbert to provide a way for donors to support his SC presidential bid. His “Straw Poll That Makes a Difference,” featured on his show, drove viewers to the DonorsChoose.org website. • 2009: DonorsChoose.org created “Leaderboards,” which enabled people to hold competitions (similar to the Colbert campaign) to support classrooms and track their progress. • May 2010: Groupon, an online coupon company, teamed up with DonorsChoose.org to launch its first philanthropic “deal of the day.” • August 2010: A woman in California asked DonorsChoose.org how much it cost to fund every project in the state, and three days later sent the organization a check for $1.3 million. This was the first DonorsChoose.org “flash funding” event—an event that became a corporate partner product, with companies such as Staples, Google, and News Corp launching flash fundings of their own in select cities. • October 2010: 11,459 members of the Reddit online community made $613,549 in donations to DonorsChoose.org classrooms in an effort to persuade Stephen Colbert to conduct his “March to Keep Fear Alive” on the National Mall. • December 2010: Oprah Winfrey named DonorsChoose.org among her “Ultimate Favorite Things” list for the holidays. • 2011-2013: Hurricane Sandy and tornadoes in Joplin, Missouri, and Moore, Oklahoma, prompted DonorsChoose.org to expand its capacity to serve schools after natural disasters. • 2012: DonorsChoose.org launched the INSPIRE code, offering to match dollar-for-dollar every donation teachers received during the first seven days that their project was live. This motivated teachers to become fundraisers. • February 2014: DonorsChoose.org appeared on the Fast Company Most Innovative Companies list for the second time, this time with Best on the magazine cover.

Along the way, Best had taken on a number of challenges. As the organization expanded, he had to learn how to raise money, something he initially found uncomfortable. However, he soon became a successful fundraiser. In 2003, he raised $1.1 million and in 2004, with his team, raised $2.4 million. By 2006, when about $6 million a year was being raised, Best gave up teaching to devote all of his time to building the organization.18

18 Tyre, op. cit.

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For the first 13 years after its creation, much of DonorsChoose.org’s funding for classroom projects was institutional, with about 40 percent coming from individual donors and large gifts from corporate and foundation partners making up about 60 percent. These institutional gifts would also be directed into projects, with donors applying funds to specific matching offers or DonorsChoose.org gift cards for employees or customers.

Initially, the website was only available to serve public schools in New York City. By 2005, schools in the San Francisco Bay area, Chicago, Los Angeles, North Carolina, and South Carolina were able to participate.19 In 2007, a group of investors—including venture capitalist Vinod Khosla, eBay founder Pierre Omidyar, Yahoo cofounder David Filo, and Netflix CEO Reed Hastings—put $14 million into the organization, allowing DonorsChoose.org to go national,20 and allowing any school in the United States to sign up on the website.

As prominent individuals and organizations became aware of what the organization was doing and its impact, corporations became DonorsChoose.org partners as well. Best and his team devised a range of creative options for companies. They could support the organization by giving their employees and customers gift cards to use on the site, for instance. They could offer matching funds for certain projects or create a promotion code that triggered one-to-one matching funds whenever employees, customers, and others used them to donate.

Companies could also integrate the DonorsChoose.org application programming interface (API) onto their websites, enabling them to present a customized version of the DonorsChoose.org website on their own online presence, while simultaneously preserving their corporate branding and website layout.21 This allowed people to search for and support DonorsChoose.org classroom projects without leaving the corporate site.22 The API could also be a tool in companies’ cause marketing efforts, allowing them to issue customer gift cards that could be used to support classroom projects. Companies that used the API included SONIC Drive-In, NBC Universal, Bing, PayPal, and Starbucks.23

Some corporate partnerships involved deeper engagement. In 2009, for example, DonorsChoose.org started working with Chevron24 to bring the company’s Fuel Your School program to 14 markets nationally.25 During the month of October, whenever a consumer

19 “DonorsChoose Asks North Carolina Citizens for Support in Amazon Challenge,” BusinessWire, July 19, 2005, http://www.businesswire.com/news/home/20050719005656/en/DonorsChoose-Asks-North-Carolina-Citizens- Support-Amazon#.VNfPYCguNzQ (February 8, 2015). 20 Tyre, op. cit. 21 DonorsChoose.org website, http://www.donorschoose.org/about/partnership_center.html?key=Partnership-Center- API (July 8, 2014). 22 DonorsChoose.org website, http://www.donorschoose.org/about/partnership_center.html?key=Partnership-Center- Corporate (June 8, 2014). 23 DonorsChoose.org website, http://data.donorschoose.org/docs/overview/ (July 8, 2014). 24 Chevron press release, Chevron Announces California Partnership to Invest in Education and Jobs, October 21, 2009, http://www.chevron.com/news/press/release/?id=2009-10-21 (June 13, 2014). 25 DonorsChoose.org website, http://www.donorschoose.org/blog/2013/11/06/why-does-chevron-want-to-“fuel- your-school”/ (June 8, 2014).

DonorsChoose.org: How Technology Facilitated a New Funding Model SI-128 p. 8 purchased eight or more gallons at a participating Chevron or Texaco gas station, this activated a $1 donation from Chevron for DonorsChoose.org school projects across the United States.26

Working with companies allowed DonorsChoose.org to scale up the rate at which it generated funding for classroom projects. In 2013, the Fuel Your School program raised almost $7.1 million that benefitted more than 940,000 students through some 8,000 public school classroom projects, including more than 4,000 resources to support science, technology, engineering, and math (STEM) curriculum projects.27

For Chevron, the program helped advance its corporate responsibility agenda. There was a new way to make a community investment, but also help the company develop a pipeline of skilled potential employees for the future.

“We’ve seen over and over that real-life science, technology, engineering, and math are coming to life in the classroom through materials that the teachers would never have had access to if it weren’t for DonorsChoose,” said Brent Tippen, public affairs representative and Fuel Your School coordinator for Chevron. “And there’s a place for industry and corporations to help.”28

However, by 2014, the numbers for project funding had shifted, with a greater balance between institutional and individual funding. In 2014, about 55 percent came from corporate and foundation partners (directing their funds to matching offers or employee or customer gift cards) with 45 percent coming from individuals—a trend DonorsChoose.org expected to continue.29

In addition to project funding, DonorsChoose.org recognized that it needed to raise funds to pay for the overhead and management costs of the organization itself. By asking donors who gave to classroom projects to assign 15 percent of their gift amount to support DonorsChoose.org’s operations (everything from staff salaries and office space to IT equipment), the organization became self-sustaining while also maintaining full transparency.30 In 2012, for example, it received contributions of more than $8 million for operating costs.31

Technology was at the heart of maximizing the crowdfunding model. Technology enabled thousands of projects to be screened, posted online, and made visible to users through a series of algorithms.32 Algorithms were developed to promote projects that were about to expire and had not yet received full funding, for example, or they promoted projects that were innovative. The

26 Chevron website, http://www.fuelyourschool.com/Markets/new-orleans/how-it-works.aspx (November 5, 2014). 27 Chevron press release, “Chevron’s 2013 Fuel Your School Program Benefits More Than 900,000 Students in 16 U.S. Communities,” December 16, 2013. http://www.chevron.com/chevron/pressreleases/article/12162013_fuelyourschoolprogrambenefitsmorethan900000st udentsinus.news (November 5, 2014). 28 Interview with Brent Tippen, public affairs representative and Fuel Your School coordinator for Chevron, May 2015. Subsequent unattributed quotes from Brent Tippen in this case are from this interview. 29 Notes sent by Chris Pearsall, special assistant to the CEO, July 11, 2014. 30 DonorsChoose.org website, http://www.donorschoose.org/about/story.html#dec2010 (June 8, 2014). 31 DonorsChoose.org Financial Statements and Supplementary Information, June 30, 2013 and 2012, http://www.donorschoose.org/docs/DonorsChoose.org-FY-2013-Financial-Statements.pdf (February 8, 2015). 32 A process or set of rules to be followed in calculations or other problem-solving operations, especially by a computer.

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DonorsChoose.org team also built a recommendation engine and a system able to send e-mails to about one million people a month with funding suggestions based on their previous usage patterns (donors could opt out of receiving these suggestions, as well).

Armed with screening technology and automated e-mails, the organization could expand its reach while remaining a relatively small unit of about 60 employees. This means that the organization itself did not need to expand to accommodate the rising number of donors. “We’ve automated the heck out of a lot of our processes,” explained Vlad Dubovskiy, a data scientist at DonorsChoose.org.33 “So we’re confident we’ll be able to handle it.”

LOOKING BEYOND CLASSROOM SUPPLIES

As DonorsChoose.org grew, Best saw that his organization could have an impact on public education that went well beyond providing the equipment, resources, books, and specialized learning experiences that schools could not otherwise afford.

First, Best saw the potential for the DonorsChoose.org model to help entrepreneurs and inventors circumvent the official educational procurement system and introduce teachers to new cutting- edge tools. “Inventors and entrepreneurs don’t want to hire a force of lobbyists and sales people to sell into the K-12 educational complex,” said Best. “They want to reach teachers directly.”

One way of doing this was for DonorsChoose.org to make a significant match offer for teachers requesting equipment for scientific research and exploration, such as 3D printers and open- source underwater robots. This enabled teachers to secure the equipment they needed, while providing companies like MakerBot and OpenROV the ability to leverage DonorsChoose.org’s donor base to fund discounted purchases of their equipment and get them into classrooms. “Those companies would never have attempted to break into the education marketplace,” said Best. “We think we can inject some meritocracy into K-12 education procurement.”

In another major initiative, DonorsChoose.org developed what the team called “a third way” on teacher merit pay. In the 2013-2014 school year, working with philanthropists and funders, DonorsChoose.org started to give classroom funding credits to teachers who achieved certain educational outcomes, such as helping students to pass a math or science Advanced Placement course or encouraging female students to learn to code.

Teachers could spend the credits—which were taken from a pool of funds created by philanthropists, foundations, and corporate sponsors—on their own projects. And students could feel a sense of pride in having helped their teachers to gain the credits that helped pay for a new classroom library, for example, or a scientific field trip. “Think of it as a performance bonus, but instead of being paid in cash, it’s in classroom funding credits,” explained Best. “It’s a performance bonus paid in an altruistic currency.”

33 Interview with Vlad Dubovskiy, a data scientist at DonorsChoose.org, April 2014. Subsequent unattributed quotes of Vlad Dubovskiy in this case are from this interview.

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Best even argued that the credits could help break the gridlock of opposing views in national debates about performance pay and the measures on which it should be based. “It’s potentially going to be common ground for the teachers’ unions and education reform warriors, who are right now at loggerheads on the issue of performance pay,” he said.

THE POWER OF DATA

When Best launched DonorsChoose.org, he was using technology to pioneer philanthropic crowdfunding. However, by 2010, it was becoming apparent that technology could do more than find funds for projects. The organization could also use the information generated by the millions of teacher requests posted regularly to produce insights that could potentially influence education policy and help educational budgeting become more responsive and targeted. The question for DonorsChoose.org was how to turn this mass of data into insights that could be easily accessed by individuals, educators, policymakers, and others.

First, however, data helped DonorsChoose.org develop its donor base. Taking an approach frequently used in the business world, the organization used data to analyze its customers, which were, in this case, donors. It found that about half its donors gave to projects in schools within a 25-mile radius of their zip code, with this rising to a higher proportion in some donor segments. By sending out targeted e-mails with geo-location as the primary criteria, DonorsChoose.org hoped to increase donation rates.

The assumption proved correct and, having built an algorithm based on geo-location, the team expanded to target other criteria that would allow DonorsChoose.org to send personalized project recommendation emails to its donor base. For example, donors could “favorite” schools, projects, and teachers and then receive project recommendations based on these preferences. In addition, by analyzing the search/filter history of previous actions on the site, the team was able to pick projects that best matched donors’ interests.

Technology also helped DonorsChoose.org gain insights into other factors that would drive donor engagement. In July 2013, for example, Fred Wilson, founder of the blog AVC.com and a DonorsChoose.org board member, ran a campaign to fund a chess club on the DonorsChoose.org site. DonorsChoose.org tested the effect of a customized welcome banner for his readers (i.e., individuals who arrived to the chess project page on DonorsChoose.org via his blog) saying, “Welcome, AVC community.” By posting the banner on the chess project page of the DonorsChoose.org site to only a portion of AVC visitors, its impact could be assessed. In this case, the placement was effective. Visitors seeing the AVC banner had a 266 percent higher conversion rate than others (15.7 percent donated versus 4.3 percent among those who did not see the banner).34

As well as helping attract donors, the technology-based model of philanthropy DonorsChoose.org had developed was also generating a vast amount of data on education. Working with Looker, a California-based software company, DonorsChoose.org tracked the

34 DonorsChoose.org blog, http://www.donorschoose.org/blog/2014/01/31/welcome-to-insights-donorschoose-org/ (June 13, 2013).

DonorsChoose.org: How Technology Facilitated a New Funding Model SI-128 p. 11 relative numbers of funding requests for different kinds of equipment and materials. The numbers produced insights into what teachers needed most, which topics were deemed most important, and which tools were proving most successful in the classroom when it came to engaging students and making lessons stick.

An analysis of the projects requested revealed, for example, that teachers considered basic topics such as literacy and language, math, and science more important than subjects such as the arts (Exhibit 1). DonorsChoose.org and Looker also found greater demand for certain types of equipment for upper-grade classrooms. This suggested that efforts to teach STEM topics increased with the age of the students. Most project requests for pre-K through fifth grade classrooms fell under literacy, with math and science a far second. This was reversed in grades 6-12, with STEM projects forming the majority of requests from teachers in these classrooms (Exhibit 2).35

DonorsChoose.org could also use its data to compare request patterns in different parts of the country. In Chicago, for example, the data revealed trends that were different from the rest of the country. When it came to requests for technology equipment, the number being posted by teachers in Chicago schools was substantially lower than it was for the rest of the United States, while requests for books were higher in number. From this kind of data, it was possible to come up with certain hypotheses. In the case of Chicago, the fact that the city had made a push to technologically equip its classrooms might have made it less pressing for teachers to seek educational technology via DonorsChoose.org.

Chicago teachers also posted fewer math and science project requests compared to other teachers nationally, which meant that, as a proportion of their requests, more projects were posted for other subjects, particularly literacy and language. Here, the hypothesis was that, because Chicago had been focusing on promoting STEM education, it lessened the need for teachers to focus on this through their project requests.36

These hypotheses were based on observed trends, and DonorsChoose.org acknowledged that more academic research would be needed before being able to draw any scientifically sound conclusions. Nevertheless, it was becoming clear that the organization’s crowdfunding model was generating new forms of data that could potentially produce unique insights into education trends.

Types of requests also generated insights. For example, by classifying project requests as either “Essential” or “Enrichment,” it became possible to analyze regions or communities where education needs were greatest. “We discovered that the 2008 recession had a disproportionate impact on higher poverty schools,” said Dubovskiy. “The highest poverty schools had five times the amount of growth in demand for ‘Essential’ resources compared with the lower poverty schools.”

35 Looker website, http://www.looker.com/company/press/Looker-and-DonorsChoose-Launch-Giving-Index-to- Uncover-Charitable-Giving-Trends-in-US-Schools (February 8, 2015). 36 DonorsChoose.org, “City Facts: Chicago from DonorsChoose.org,” p. 5.

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And by looking at the different project materials requested—whether paint brushes or IT equipment such as tablets—it could identify teachers that were being most innovative in the classroom.

This kind of data was starting to tell many stories, said Dubovskiy. “It might be that governments were purchasing iPads for schools’ interactive learning initiatives, but forgetting the iPad covers,” he said. “These are the missing pieces that we can see.”

In 2010, to encourage others to use its data to build new apps or to develop analytical insights, DonorsChoose.org held its first hackathon in New York, a 10-hour event that was to be the first of many.37 And in 2013, in partnership with Looker, it launched an interactive open-data, business intelligence site presenting these insights in a visual way that did not require high-level expertise in data analytics to understand.38

“Our data scientists and engineering team spent a lot of time making the data super accessible,” said Best. “So you do not need to be a programmer to run a regression analysis39 to find out what kindergarten teachers have in common in terms of the resources they’re requesting on our site and the topics uppermost on their minds.”

To promote access to its data, in 2013, DonorsChoose.org launched a data blog as a resource for researchers. It published some of its insights on the site and allowed users to interact with the data visually in order to build graphs and charts and to share the resulting insights more broadly. By 2014, more than 200 researchers had signed up to use the site.

Although by 2014 DonorsChoose.org was gaining rich insights into classroom needs, it recognized that the next step was to find ways of getting legislators, governors, mayors, and superintendents to pay attention to and act on the analysis it was generating.

“It’s super early days,” said Best. “We’ve only just opened up our data. Step one is generating insights that could inform policy making—we’ll see what work we have cut out for ourselves in getting policy makers to pay attention.”

37 DonorsChoose.org, http://www.donorschoose.org/blog/2011/06/ (June 13, 2014). 38 DonorsChoose.org, http://data.donorschoose.org/open-data-unleashed/ (June 13, 2013). 39 Regression analysis is a statistical tool for the investigation of relationships between variables. Usually, the investigator seeks to ascertain the causal effect of one variable upon another—the effect of a price increase upon demand, for example, or the effect of changes in the money supply upon the inflation rate. To explore such issues, the investigator assembles data on the underlying variables of interest and employs regression to estimate the quantitative effect of the causal variables upon the variable that they influence. Alan O. Sykes, “Chicago Working Paper in Law & Economics,” The Inaugural Coase Lecture, http://www.law.uchicago.edu/files/files/20.Sykes_.Regression.pdf (October 28, 2014).

DonorsChoose.org: How Technology Facilitated a New Funding Model SI-128 p. 13

CASE QUESTIONS FOR STUDENTS

• What specific gaps in the philanthropic market did DonorsChoose.org’s innovations address? How did each of these innovations disrupt the social capital marketplace and what challenges will they possibly present in the future? • What does DonorsChoose.org do to ensure transparency and accountability? How could DonorsChoose.org evaluate its work beyond its existing methods? • How might DonorsChoose.org use its existing platforms and data to create a new set of sector-level objectives?

DonorsChoose.org: How Technology Facilitated a New Funding Model SI-128 p. 14

Exhibit 1 Back to Basics: Fundamentals and STEM Trump the Arts

Source: Looker and DonorsChoose.org 2013 Giving Index, http://try.looker.com/sites/default/files/giving-index- infographic.pdf (February 10, 2015).

DonorsChoose.org: How Technology Facilitated a New Funding Model SI-128 p. 15

Exhibit 2 STEM Efforts Increase with Age

Source: Looker and DonorsChoose.org 2013 Giving Index, http://try.looker.com/sites/default/files/giving-index- infographic.pdf (February 10, 2015).