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Jumo: Get Grant, Do Good, Sell

August 17, 2011

(Bradford K. Smith is the president of the Foundation Center. In his previous post, he wrote about foundations and unsolicited proposals.)

Jumo_Sold ChrisHughes.org has just gone back to being ChrisHughes.com. According to a story in Fast Company, Hughes' Jumo -- a nonprofit portal built with grant funds from some of America's largest philanthropic foundations -- is being acquired by GOOD, which despite its altruistic-sounding name and mission is a for-profit company. Is this what grants are for?

Hughes, described on the Jumo site as "co-founder of Facebook and director of online organizing for Barack Obama's 2008 presidential campaign," became something of a darling in philanthropy circles after he announced his intention to create a "social network that helps people find high-quality nonprofits and take meaningful action." Some foundation professionals jumped in with early funding and were prone to statements like: "If anyone can make the online giving space work, Chris can!"

Did Chris make it work? In a field where metrics are not difficult to come by, the Fast Company article is frustratingly vague with its numbers. Reference is made to "good results" in a recent Jumo campaign to raise money for Somalia. If this is the same campaign for which I received an e-mail, the approach was surprisingly old school and the goal a mere $3,000. Meanwhile, the folks at GlobalGiving have managed to raise $49.6 million for causes around the world. At the end of the day, Hughes' big takeaway from his experience is that the "do-gooder space" (as he calls it) is tough and that "people need carefully curated content if you are going to sustain their interest." Along the way, some offered that advice to Jumo and its supporters but no one seemed to be listening.

From the scant information available, Hughes fell far short of making Jumo the Facebook of online giving. Of course, this wouldn't be the first time that foundations made a bet on an individual with brains, charisma, and an impressive track record that didn't pan out. Nor should it be the last. Foundations have the freedom to take risks, and that implies the possibility of failure as well as success.

We don't know the terms of the deal, and undoubtedly everyone involved is sufficiently lawyered up to make sure everything is on the level. Still, the Jumo sale raises questions. Most foundation grant letters I have seen have language restricting the use of the funds to charitable, scientific, or educational purposes. Does selling your nonprofit and its intellectual property comply with these conditions? Have the foundations that supported Jumo unwittingly been transformed into angel investors with far less-than-fabulous rates of return (no re-payment of interest or principal)? Maybe as Betabeat has ventured, the acquisition involved no money at all. Apparently Jumo's code will remain open-source, hence a public good, but as anyone who markets anything online knows, content, e-mail addresses, user profiles, and click-through data have future commercial value, which presumably GOOD will put to use.

As we march off into a brave new world where the lines between nonprofit and for-profit activity increasingly are blurred, moments like this should make us pause and reflect. Are foundation grant agreements keeping up with the times? How much do we understand intellectual property in a digital world? I'm still sorting out the role of philanthropy in this one and need some help. If you've got any answers or questions of your own, please comment.

-- Brad Smith

Comments

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Brad
Great questions of great importance about "Whether foundation grant agreements are keeping up with the times." Speaks to a key question for all of us - what is a public good and how are we financing, creating them? In the age of Open Source and Creative Commons Licensing, digital content, user produced content - we need to think hard about how intellectual "stuff" and "relationships" are valued, funded, shared, and (gulp?) owned?

One question of clarification that I have - was it all grant funded or were there other kinds of investments made?

Lucy

I am definitely piqued by the relationship between online giving platforms and their investor/supporters who are also variably referred to as "partners" and "supporters."

There are so many of these sites that they've created an entirely new form of competition for donors and funding from individuals, foundations and corporations.

I love the fund sourcing sites' ability to bring excellent nonprofits together with new donors. But, I'm not sure I love the over-abundance of such sites, which I fear may come to be associated with the innumerable letters of solicitation that comprise so much of what many donors consider "junk mail."

Does too many sites dilute each one's power to inspire action? Does their corporate/foundation support divert direct support to nonprofits? What about the sites' for-profit status while receiving grants?

These are issues I will be following closely as online giving grows and new social partnerships are created to harness that giving.

Wendy Smith
author, "Give a Little: How Your Small Donations Can Transform Our World"
www.givealittlenow.com

Stephanie Strom has added her perspective to this story in the New York Times http://www.nytimes.com/2011/08/18/business/for-profit-business-acquires-nonprofit-charity-site.html and raises some of these same issues. I don't know whether Jumo's startup funding came entirely from foundations or there were private investors involved. Traditionally foundations have seen their grant funds as producing public goods rather than commercial assets. This is not a question of whether those goods are provided on a free or fee basis per se, but rather whether the mission, purpose (and acccounting) of the organization is non-profit. Once Jumo decided to be acquired by a for-profit enterprise, maybe the foundation dollars should have been paid back so they could be granted directly to one or more of the worthy non-profits JUMO was created to champion. The fact is, there isn't a whole lot of transparency surrounding this story, so we are all just guessing. But the issues involved are fascinating and worth reflection. About the proliferation of online giving platforms, a brave foundation Program Officer once put this to Chris Hughes in a public forum and his answer was essentialy was that Jumo was different. There is something of a non-profit capital marketplace emerging out of all this and further down the road competition will reduce the field to those that can survive. Could some of those may be for-profit, rather than non-profit?

In addition to all the great questions that have already been asked here ...

This situation also begs questions about funding individuals and entities who know the nonprofit sector, and not just the technology that serves the sector. There are plenty of good reasons to blur the boundaries between the non-profit and for-profit sectors and all kinds of professionals have successfully been moving back and forth across these boundaries for the last 15+ years. But I do think it's worth pressing folks like Chris Hughes, before we hand them millions of dollars, to tell us what they know about nonprofits, about how nonprofits behave online, about what their priorities are, about what obstacles they face, and about what they really need. Despite the blurring of boundaries there are still some things that are unique to how this sector operates. Here's to hoping that GOOD can answer those questions better than Hughes did.

Brad, thanks for the kind words about GlobalGiving. And to be fair, we set out to be a marketplace for transactions so 1) it's fair to measure us by that standard, and 2) it's over the last 9 years. My understanding of Jumo is that it was always designed to be a dynamic content driven engagement site for nonprofits and their supporters--so the match with GOOD, which has lots of great curated content, and Jumo's membership, is the mission sweet spot that this merger seems to be designed for.

Good points Mari and it is important to be fair about all this until more details are available. The comparison to Global Giving was sparked by the Fast Company statement that Jumo had been piloting some community fund raising campaigns "that have yielded good results." I made a mistake in my original blog post, the target for the Somalia campaign that I received a Jumo email on was not $3,000; it was $3,500.

Brad,

Thank you for raising this issue. It relates to another issue in the grant making lexicon.

One foundation that I know has been using the term "investing" rather than grant making, and has even retitled their program officers as "portfolio managers". When "investing" becomes "buying", I have problems with the outcomes. The grant becomes a different kind of contract. A foundation sees the grantee as a vendor to achieve a desired set of results. The donor is not a "builder"--of less concern is the overall well-being and sustainability of the grantee. It's akin to a school that decides to change its cafeteria machine vendors. Such a transactional approach is highly problemmatic in today's economic environment.

You raise important questions for sure Brad. But the law is quite clear. As Strom quotes a lawyer in her article, "The money paid to Jumo for its assets will have to continue to be dedicated to charitable purposes". Assuming GOOD is law abiding and paid fair value for Jumo, I don't think we should question the transaction based simply on the fact that it is between a for-profit and nonprofit.

Quick follow up, according to Hughes, "Every single one of our foundation supporters has been supportive of this deal."

The deal might be a terribly one. But I think it should be critiqued on the basis of its impact potential, not what might or might not be wrong with tax treatment.

I've added a blog post of my own on the topic.

As you say Michael, some foundations are using the "investment" label more often and there are some countries like Brazil, in which the paradigm is one of "social investment" rather than "grantmaking." Nice job, Sean, of analyzing the impact of Jumo to date, speculating on the future potential of the merger and of convincingly impersonating a millennial!

I am curious about whether Jumo followed appropriate laws regarding the desolution of a non profit, presuming they were a 501C3 when they received grant funding. My understanding is that assets of a non profit must be turned over to another non profit.

Jumo was well on its way to dying a slow, ignominious death. Good, which boasts of three million unique visitors, clearly wants the technology underlying Jumo. Unless Good wants an annual tax write off, I would wager they let Jumo continue to go under. The open source technology is only as good as its up keep. Good will continue to develop it, in-house and for-profit only, while the quickly outdated open source technologies fade by way of gopher. I might be a pessimist - only seeing how the deal was organized would tell.

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