Helen Brown Group

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Crypto, DAFs and Fundraising – Oh My!

We’ve talked a bit in recent months about both cryptocurrency and DAFs here on The Intelligent Edge, and this week my colleague, Kenny Tavares, pulls the two together in a thought-provoking piece. What do these two vehicles have in common, and how do they impact fundraising and prospect research? Read on…

Kenneth Tavares

                      Kenny Tavares

Let me start with a disclosure: I’m a skeptic. When the media starts to buzz about new investment approaches and how it might benefit nonprofits, I see red flags. So, you can imagine how I must feel these days with a drumbeat of favorable stories about cryptocurrency (crypto) and donor-advised funds (DAFs). It’s not that I don’t support new ideas. However, I do worry about the consequences of not being more thoughtful about these changes.

In July 2021, Paul Sullivan of The New York Times, in a story about nonprofits handling gifts of cryptocurrency, noted that Fidelity Charitable Gift Fund, the largest donor-advised fund (DAF) in the United States, had already received $150 million in crypto this year, an increase of more than 435% so far. A number of other donor-advised funds, including those run at colleges and international institutions, have announced that they also accept crypto.

Blockchain technology, which cryptocurrencies run on, have made some transactions easier to track and more cost effective, providing more money for the nonprofit organization. But the skeptic in me wants to know why crypto gifts to donor-advised funds are surging. How will the growth of these two vehicles affect fundraisers and researchers? First, I think we should look at why each of these might be attractive to investors. [Read more…]

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Interview with a prospect development crypto miner

This week we have a real treat of an article: HBG’s Associate Director for Consulting, Tara McMullen-King, interviewed Amy Begg, former NEDRA board president and an Ann Castle Award recipient. Amy is also an active cryptocurrency miner (with a heart of gold!). Tara and Amy had a fascinating discussion about crypto mining, and Amy generously shared her knowledge and experience about what it means to mine cryptocurrencies. Huge thanks to Amy for taking the time to explain it all for us! ~Helen

tara

Tara McMullen-King

It is clear that the demand for cryptocurrency and crypto mining is not subsiding any time soon – as of August 2021, the combined value of the world’s cryptocurrencies stood at about $2 trillion. Not only are more people investing in crypto, but an increasing number of donors are using cryptocurrencies like Bitcoin to fund their charitable contributions. According to a recent article in the New York Times, there has been a significant increase in cryptocurrency donations to donor-advised funds – for example, Fidelity Charitable received $150 million in cryptocurrency in 2021, up from $28 million in 2020 and only $13 million in 2019. And in May 2021, it was reported that a $5 million anonymous gift in the form of Bitcoin had been made to the Wharton School at the University of Pennsylvania – the largest cryptocurrency gift ever made to the University.

Amy Begg

While many nonprofits are still not set up to accept gifts of cryptocurrency, more and more are beginning to put the internal infrastructure in place to do so, or signing up to accept crypto gifts through donation platforms like The Giving Block – in part because of some of the benefits. Donors can benefit from tax write-offs since cryptocurrency is classified as property (which means no capital gains tax and a fair market value deduction). They are also cost-efficient for organizations involved in international transactions since they eliminate the usual costly associated international banking fees. And with close to half of Millennial and Gen-Z investors owning cryptocurrencies, making the choice to accept crypto donations will also potentially provide an opportunity for nonprofits to engage with a new generation of younger donors in the future.

But how does cryptomining work? How do people get started in the field? And what even IS cryptocurrency? To try to get some answers to these questions, I sat down for a conversation with Amy Begg, Managing Director of Prospect Management at Harvard University, who is a miner with a wealth of knowledge and insight about all things crypto! [Read more…]

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Is your nonprofit missing out on a huge crypto-tunity?

Want to know who’s cooler at using technology to raise money than your average well-funded university or nonprofit?

Malala, that’s who.

Also, the United Way.

The Count Basie Center for the Arts, Wake Forest University, Cushing Academy, and 200+ other nonprofits that have signed up with The Giving Block to accept cryptocurrencies.

“Oh, cryptocurrency. Pfft!” you might be thinking. “That’s not going to be a thing.”

If you were working in fundraising in the late 1990s, you might remember that the same thing was said about taking donations online. Using credit cards! Over the internet! Like it was space age tech from Mars. Online giving? No way.

Way

Accepting cryptocurrencies is the same thing, and it’s already old news for some (especially considering the length of the news cycles these days).

Back in December 2017 an anonymous philanthropist called “Pine” set up the Pineapple Fund to give away their 5104 bitcoin that had exploded in value to $55 million. Although cryptocurrency donations weren’t unheard of then, Pine’s announcement that nonprofits could apply to be grantees was a turning point moment. Applying for funding from a foundation-y sort of entity was familiar. Some nonprofits started to see the opportunities in being ready to receive cryptocurrencies.

Like UNICEF. Since the UNICEF Crypto Currency Fund was launched in October of 2019 it has received over $5.5 million. That’s during a pandemic yet.

Accepting crypto is an already large and yet still rapidly growing opportunity for nonprofits. According to Alex Wilson, co-founder at The Giving Block,

Cryptocurrency donations really took off in 2017 after bitcoin hit $20,000 for the first time. In 2017, we estimate that over $100M in crypto was donated to the few organizations who were ready to accept bitcoin. Since then, we’ve continued to see cryptocurrency donations increase and estimate that $200M-$300M per year is being donated in crypto. This year is on track to break those records.”

Wow.

The donor advised funds at Fidelity Charitable is one of the places where all of those bitcoin, bitcoin cash, Ethereum and Litecoins are being warehoused. Paul D’Allesandro, author of The Future of Fundraising: How Philanthropy’s Future is Here with Donors Dictating the Terms, said in a recent podcast with Andrew Olsen that Fidelity’s stack of coins is $100 million tall.

One hundred million is just…a lot.

But it’s not as much as a billion. Which is the amount reported yesterday that Ethereum crypto founder / billionaire / philanthropist Vitalik Buterin donated in one fell swoop in coins to help with Covid relief in India. Depending on if the coin retains its value, of course.

Starting the conversation

If you’re a nonprofit fundraiser, you might be wondering: how do we open up this conversation with donors who have cryptocurrency? (or who we don’t know have crypto?)

In a CASE podcast featuring Jay Goulart, former VP for Institutional Advancement at Gulliver Schools, now founder of the consultancy Big Philanthropy, Goulart describes what happened when his school approached a donor – a commodities trader – who had mentioned owning cryptocurrencies.

 We realized with this guy that we had to speak in terms of coins and not in money. So in other words, he didn’t see things in the same way as, you know, would you do a million, would you do five million, or whatever the number is.

We asked him for what was the equivalent of five million dollars in coins, which was about 500 coins. That’s not what he wanted to end up doing, he did about half of that. But he said I’ll do it over a period of time. Now when we first met him, bitcoin here in the States was just under $10,000 a coin…so…we’re just shy now of what’s left of 8 figures in terms of a gift from this person.

Now, it’s really not the way that most people would venture into this because, you know schools want to liquidate and they don’t want to hold and they don’t want to speculate. [It’s] all very logical and it all makes a ton of practical sense. But sometimes there’s moments when you meet someone and they’ve never really played in our arena, and you’ve got to find a different avenue. And sometimes we have to take a little bit of risk ourselves.”

So part of the answer is being open to trying a new way of receiving donations.

A first step could simply be getting a wallet set up to accept cryptocurrencies and publicizing it on your website’s giving pages so that donors can see that it’s even an option.

Another way is being more purposeful about it.

Marketing your Mission

United Way Vice President of Innovation Edwin Goutier recently published an engaging article on the nonprofit’s blog highlighting how easy it is to donate a variety of cryptocurrencies to the organization. For each currency he directly tied a donation level to its very specific mission impact at United Way. It’s a brilliant, effective piece of marketing.

What does the average cryptocurrency holder look like? Maybe not what you’d think. According to a study by London-based crypto custodian Copper.co, 56 percent of bitcoin holders are investors and 80% of those are long-term holders. So that means, for them, cryptocurrencies aren’t a fluke – they’re a part of their investment portfolio and they take it seriously.

It also means that when a long-term holder divests of some their cryptocurrency, they will likely incur capital gains.

Unless, of course, they donate them.

We know that tax incentives aren’t the main reason why people give to nonprofits, but they’re certainly a consideration. If people donate cryptocurrency under their real names (as opposed to anonymously), they can claim a tax deduction. If they can avoid capital gains tax as well it’s a double win. Being able to help a mission they care about? Win-win-win.

Finding prospects

The question for us in prospect research is, how do we identify cryptocurrency holders? Especially when they go by names like Cryptochristoff, Madgreek, Twobadour, and MetaKovan.

Well, you can start with The Crypto Giving Pledge members – people who have pledged to give 1% of their cryptocurrency annually – and see if you have a match in your database. There aren’t a lot of them yet, but the list is sure to grow.

You can also use a search engine, search in social media, and check out forums to see what you can find. A quick Google search found that MetaKovan is actually Vignesh Sundaresan, CEO of Singapore consulting firm Portkey Technologies. Twobadour is Anand Venkateswaran. On Twitter I found two crypto-enthusiasts who go by the handles Madgreek and Cryptochristoff. Could it be that simple? Maybe.

See if you can match names to social media handles you already have on constituents in your database. And, of course, as you’re researching someone generally it’s a good idea to see if they follow or knowledgeably discuss cryptocurrency on their social channels. This could be a clue that they hold crypto.

Primary source prospect research is key here also. This is a great topic for frontline fundraisers to bring up in face-to-face meetings with donors and board members. “What do you think about our nonprofit accepting cryptocurrencies?” could be a good opener for a discussion.

It’s certainly not a bad thing to ask for advice about. And you know the old fundraising adage about asking for advice, right?

Further resources:

 

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What the heck are NFTs (and why should you care)?

Reflections. Photo by Julie Kahn (c) 2021

Research Pride is a celebration of all aspects of our wonderful profession, and the thing I probably love most about prospect research is that we’re constantly learning. Lots of times it’s about odd things that you never knew existed but discover quickly that they are an up-and-coming thing. Take for example today’s topic, NFTs – non-fungible tokens.

I started seeing the acronym NFT flying through my social media feeds about a month ago. The articles were relating to wealth and art, and just like with SPACs a few months ago, when I start seeing a mystery acronym that pertains to wealth, naturally I have to know more.

What I found was that there is an increasing amount of digital artwork being traded via blockchain for astonishingly high amounts of money.

Okay, let me back up and start at the beginning.

I first saw the term “non-fungible token” or NFT in relation to an auction that Christie’s is doing of a work of digital art, The First 5000 Days, by Mike Winkelmann, an artist who goes by the name Beeple. Christie’s website touts that it is the first time they are offering at auction a piece of digital artwork, and it’s also the first time they’ll be accepting cryptocurrency – Ethereum, specifically – as well as more standard forms of currency from the eventual buyer.

Now, you might be thinking, “Wait. If it’s a piece of digital artwork, what’s to prevent it from being copied a billion times or displayed on the internet for free?” and in fact that’s a very good question because The First 5000 Days currently is being displayed on the internet and you can go see it for free. Go ahead and check it out. I’ll wait here ‘til you get back.

Here’s how it works: this specific piece of digital artwork is being sold as a token, a small piece of digital real estate on a blockchain, which forever authenticates it as being a unique thing, an intangible, tangible thing, in the same way that Bitcoins (and Ethereum, and Dogecoin, and all cryptocurrency) are also things – tokens on a blockchain with a value that’s determined by the market.

Because they’re tracked on a blockchain, these specific things can’t be forged or hacked. But while there are more than 18 million interchangeable (aka “fungible”) Bitcoins, there is only one original of any single piece of artwork, which is why they’re non-fungible: one piece of artwork can’t replace another one on a 1-to-1 basis. It’s apples to oranges – they’re both fruit/both art – but not the same thing.

So why do we care about NFTs?

Well, for one thing, within one hour of going up for auction on the Christie’s website, bidding on The First 5000 Days went from $100 to $1 million. As of March 5th bidding was up to $3.5 million but the auction closes today, March 11, so we’ll know the final price as soon as Christie’s publishes it.

UPDATE: It sold today for $69 million. SIXTY. NINE. MILLION. DOLLARS.

It’s clearly a hot new market for art lovers who are also tech savvy, like Elon Musk of SpaceX and Tesla, and Chamath Palihapitiya, the chief executive of the technology holding company Social Capital and former Facebook executive. Both are NFT collectors, and it’s clearly a fast-growing market, too.

In fact, the market for NFT art was $342 million. Last. Month. That’s more than all of the NFT sales in 2020 combined and up from $12 million just in December. NFT art sales are hot and moving like a high-speed train on a 700 mile-long prairie. People are even burning extant art to make NFT art!

But back on the ground, and perhaps more importantly for our purposes: nonprofits are benefiting. A Banksy-style artist (is it actually Banksy? He says not but the works are verrrrrry Banksy-like) created NFTs that recently sold for $900,000 and a portion of the proceeds went to Save the Children.

Also, part of the sale of a lightly-animated Wonder Woman NFT created by veteran comic book artist José Delbo recently sold at auction and netted a $23,196 donation to the nonprofit Girls Who Code. So philanthropic tech art-philes are finding creative ways to fund their favorite charities!

So check out NFTs and do some mining to discover if you have any prospects that love them. This might be a good time for your nonprofit to look into accepting cryptocurrency, too, if you haven’t already.

FURTHER READING

Post-sale explainer from The Washington Post: https://www.washingtonpost.com/technology/2021/03/12/nft-beeple-christies-blockchain/

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Demystifying Digital Assets

This week we welcome to the Intelligent Edge HBG Senior Researcher and HBG Book Club organizer extraordinaire, Angie Stapleton. Angie brought up the idea for this article way back in January because she was so intrigued by cryptocurrencies and their impact on philanthropy, and she has been reading up (and generously sharing her knowledge with the team) since then. It’s fascinating stuff, and if you’re interested in learning more, don’t miss Angie’s webinar – details below. ~Helen

If you’ve been reading the Intelligent Edge blog for a while, you may have heard the HBG Book Club has been on a roll! We’ve recently read The Givers by David Callahan, Capital Without Borders by Brooke Harrington, and Secrecy World by Jake Bernstein. At their core, each of these books is about the inherent relationship between wealth and power, the structures UHNWIs use to conceal wealth, and the ability of these structures to quietly shape the world we all live in. [Read more…]

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