yale case 09-023 may 1, 2009

DonorsChoose.org

An Innovative Internet Philanthropy Goes National

Anna Blanding1 Jennifer Stredler2 Kim Su3 Ivy Washington4. Sharon Oster5 Jaan Elias6 Andrea R. Nagy7

In 2000, Charles Best (Yale College ’98), a social studies teacher at an alternative public high school in the South Bronx, found himself frustrated because his school did not have access to many of the resources available in other New York City public schools. Best and his colleagues were able to secure basic materials, but they were unable to bring many creative classroom projects to fruition, because they lacked financial support.

Best believed that there were many people who would be willing to fund small projects that quickly improved classroom performance and educational opportunities; however, the challenge was to connect donors with appropriate projects.

In an attempt to solve this problem, Best founded DonorsChoose.org, a website that would match donors directly with New York City public school teachers who needed funding for classroom materials and activities. Simple in its conception, the DonorsChoose.org model actually required a number of systems to insure that teachers posted good projects, that donors could easily choose among projects, and that a link was forged between the donors and students. Best believed that this direct link between donors and classrooms would address “the scarcity and inequitable distribution of learning materials and experiences in our public schools.”

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After an auspicious start, Best and DonorsChoose.org set their sights on growing beyond New York City. The organization received national publicity and won a prestigious non-profit strategy award. Then in 2005, a group of Silicon Valley executives agreed to provide a $14 million grant to fund national expansion. DonorsChoose.org scaled up its organization and began a step-by-step expansion into various locales. It created an ambitious outreach program to encourage teachers to design projects and donors to visit the site and commit to funding projects.

At the beginning of 2009, as the grant money was coming to an end, the organization had made great strides toward completing its expansion. However, observers wondered whether DonorsChoose.org could reach its goal of providing $100 million per year in gifts to classrooms and whether it would have an impact on the fundamental inequities within the educational system.

2 DonorsChoose.org

Changes in Philanthropy in the Early 2000s

When Best began considering how to build a service to help classroom teachers, there were a number of trends in public education and philanthropy that he had to consider.

In school districts that served the underprivileged, teachers often spent their own money to buy basic learning tools, such as pencils, books, and other classroom materials. Although teachers could file for a $250 deduction for these materials on their annual income tax returns, many teachers reported spending significantly more than this amount to outfit their classrooms with basic supplies. On average, teachers spent $430 of their own money on school supplies each year.

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When Michael Bloomberg became mayor of New York City in 2002, he declared that improving the public school system was his number one priority. Bloomberg and the man he chose to be the head of New York School system, Joel Klein, created a new Fund for Public Schools, which raised $240 million from a variety of philanthropic sources. National foundations, such as the Bill & Melinda Gates, the Wallace, the Pumpkin, and the Michael & Susan Dell Foundations, as well as the local New York Community Trust, made major gifts. Corporate sponsors, such as Goldman Sachs, Morgan Stanley, and Citigroup, also made contributions. In addition, as a result of Klein and Bloomberg’s fundraising abilities, public education “became the darling cause of the corporate-philanthropy-society set.”10 Wealthy individuals, including James Tisch (founder of Lowe’s), Caroline Kennedy, Leonard Riggio (founder of Barnes and Noble), and Rupert Murdoch, began funding experimental programs, such as new schools, academies for principal training, and charter schools. Some philanthropists sponsored a new library or new classrooms at their public school alma maters. Despite this outpouring of charity, most of the funding was going to support major capital projects, and only a limited amount was being directed to everyday needs such as classroom supplies.

A related problem was that small donors had relatively few options: because of the complexity of the school system, a small-gift donor could give to the Community Trust or the United Way of New York City, who would in turn direct the gift to the classroom.

11 However, the mechanism for such gifts was

cumbersome and not well publicized.

At the same time, new philanthropic models shaped by the internet were changing the experience of giving for small donors. Under the traditional model of philanthropy, a large organization such as the Red Cross solicited donations and then directed them to worthy causes of their own choosing. For the most part, only individuals and foundations that made major gifts had control over how the money was spent. But under the new internet-based model, philanthropy was becoming more “democratized.” Elaborate computer programs could easily enable any donor to direct any amount of money to a precisely targeted recipient or cause. Internet giving also increased competition and accountability. Donors could easily compare organizations and choose the one that best fit their interests and priorities. They could also monitor the progress of their contributions, ensuring that they were spent as advertised. As a result, non- profit organizations found themselves needing to provide donors with more control over their giving and with more information about the impact of their gifts.

The development of online giving resulted in the development of “two-sided marketplace platforms,” in which both donors and recipients could enter preferences and be matched with each other. For example, Heifer International, a charitable organization founded in 1944, became a popular online giving site by allowing individuals to select and fund livestock assets for farmers in developing countries. Another organization, Kiva.org, allowed donors to fund microfinance projects in the developing world by selecting entrepreneurs profiled on its website.

By the early 2000s, online giving was becoming an effective way to raise money. According to a survey by the Chronicle of Philanthropy, from 2003 to 2004, online giving to the nation’s largest charities increased

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by 63 percent to $122 million.12 Best was attracted to the idea of using the internet to solicit funds and to allow donors to direct the use of their funds. He created an organization whose name celebrated the new empowerment of the small donor, and in its first mission statement, DonorsChoose.org made the democratization of philanthropy one of its primary goals.

The DonorsChoose.org Model

Building on trends in philanthropy, Best came up with a simple idea: DonorsChoose.org would be an online marketplace where classroom teachers could post requests for funds to carry out academic projects, and donors could search for projects of interest and support them. “It’s a philanthropic eBay, in which teachers are the sellers, and donors, or what we call ‘citizen philanthropists,’ are the buyers,” said Best. “It seemed like a common sense solution: we classroom teachers knew our students’ needs better than anybody else in the system, and a lot of people out there wanted to participate more in their giving and really be philanthropists, even if they only had 10 dollars to give.”13

The simplicity of the idea belied the complexity of getting the model working. In order to insure a superior experience for online donors and recipients, Best had to set up an effective structure.

Posting Projects

DonorsChoose.org first had to determine guidelines for the type of projects teachers could post to the website. Full-time teachers from all public schools, including charter and magnet schools, would be eligible for participation as long as they submitted projects that would directly benefit students. But the organization ruled that projects would not be permitted to “foster discrimination or proselytize a religious or political viewpoint.”14 Projects also could not be used to pay for labor, capital improvements, vehicles, rentals, royalties, or reimbursements.15 Most teachers requested physical materials, such as paints for a kindergarten class, but some wanted funding for special trips or speakers.

In order to encourage teachers to plan their projects carefully, DonorsChoose.org implemented a point system. Upon registering, a teacher received three points, which were traded for permission to post a project. Projects requesting materials costing $400 or less required one point to post. More expensive projects required more points. Teachers accumulated additional points for each project that was funded and implemented, and for which donors had been thanked. Teachers who had successfully completed a number of smaller projects could apply for a Special Project, which cost six points and which requested unusual materials (typically for field trips or speakers). No matter how many points a teacher accumulated, the organization limited each teacher to eight projects at a time. (See Exhibit 1 for data about the number of posted projects for a year by teacher and by school.)

In order to increase the possibility that the project would be funded quickly, DonorsChoose.org encouraged teachers to submit proposals for projects that cost less than $400, and it suggested that those costing more than $400 be broken up into smaller projects. If a teacher’s project was not funded within five months, it was removed from the site and the points were forfeited. While not part of the initial model, the five-month cut-off was implemented in 2008, after DonorsChoose.org discovered that projects not fully funded after five months were often problematic. Materials would no longer be available or teachers would have moved to other schools. Moreover, donors seemed to ignore these “stale” projects. (See Exhibit 2 for data about the average cost of funded projects and the time it takes to fund each one.16)

To insure that projects met guidelines and to help teachers frame their projects. DonorsChoose.org recruited volunteers to review all projects before posting. The organization required that volunteers be teachers who had had at least 15 of their posted projects funded and who had a record of being punctual with feedback. With help from these volunteers, nearly all of the projects proposed by teachers were eventually included on the website. Of those projects, about 60 percent received full funding.

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Choosing Projects to Support

DonorsChoose.org allowed visitors to their site to view the posted projects by various categories. Donors could sort projects based on location, subject (such as mathematics, literacy, special needs, visual arts), grade level, funding amount, or student poverty level. (Exhibit 3 shows the categorization of a year’s worth of projects based on type of project, poverty of school, and subject matter.)

Since DonorsChoose.org was founded to help teachers in poor urban districts, the website nudged visitors toward considering projects at high poverty schools by listing projects for students at high poverty schools at the top. Poverty levels were determined by the percentage of students at a given school who qualified for free or reduced lunches (children in families reporting incomes lower than 130 percent of the poverty line). Schools with more than 40 percent of students receiving free or reduced lunches were categorized as “high poverty”; schools with 10 percent to 39 percent of students receiving free or reduced lunches were classified “moderate poverty.” Schools with less than 10 percent of students receiving free or reduced lunches were denoted as “minimal poverty.”

After searching for projects that were of interest, donors could read longer descriptions of the project from the proposals written by the classroom teachers. In addition, they could read information about the teacher’s other projects with DonorsChoose.org, about the school, and about the other donors who had already given to the project. (An example of one of these pages appears in Exhibit 4.)

DonorsChoose.org’s donor experience mimicked online shopping. In order to make a gift, a donor had to create a profile that included an email address. Registered donors would then enter a donation amount for a project they liked and click to have the donation registered in a “giving cart.” The website generated a page that acknowledged the addition, and the donor could then “shop” for additional projects to support. Once a donor was satisfied with their choices, they would “check out,” providing details about how they would like to pay for the donations. The website then generated a thank-you page that allowed donors to easily forward information about their donation and the project to friends who might also be interested in giving. (Examples of both of these pages appear in Exhibit 4.) Immediately following the donation, the site sent a confirmation email that could be used as a receipt for tax purposes.

DonorsChoose.org kept in touch with donors. Using profiles that contained a donor’s record of giving and preferences, the site proactively emailed donors, encouraging them to donate to additional projects that would soon expire or that were close to being fully funded. A donor could also log into their profile at any time and look at reports about the cost and the status of projects that they had funded. (Examples of these reports are shown in Exhibit 5.) As of 2008, DonorsChoose.org was working on a system to better target donors based on their donation history.

If a project for which a donor had contributed was not fully funded within five months, the donor received credits that could be used to fund another project. DonorsChoose.org contacted these donors and allowed them 30 days to reallocate their funds. If the credits were not reallocated after 30 days, the DonorsChoose.org staff determined which projects would receive the funding. When possible, they chose projects with a similar focus in subject area, or from the same teacher or same geographic region. Donors also received credits for their contribution if a teacher decided that she was unable to implement the project described on the website.

Procuring Material for Projects

When it came to implementing projects, DonorsChoose.org engaged a partner, eSchoolMall, to manage the electronic procurement and shipping of materials. eSchoolMall had created an online catalog with offerings from 36 vendors. Teachers used the catalog to choose what they needed for their projects. DonorsChoose.org believed that this centralized vendor management allowed for more efficient purchasing and shipment of materials. eSchoolMall vendors offered a wide variety of products, including

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books, classroom materials, art supplies, technology (such as cameras and computers), and furniture (such as shelves and chairs).

DonorsChoose.org processed all other transactions, from making payments to sending purchase orders to vendors, through Ariba, a software and technology management company that provided streamlined “Spend Management” services.

Thanking Donors

In order to keep donors involved, DonorsChoose.org carefully managed the process of thanking donors for their contributions. Immediately after a project was fully funded, teachers received an email notification and had six days to confirm that they would carry out the project. The teacher would then send a thank-you email introducing the teacher and her classroom to the donor. (Exhibit 6 shows a sample thank-you email.)

Donors who contributed more than $100 or who were the final donor on a project received letters and photographs from the teacher and students once the project had been carried out. To insure that all the steps of the thank-you process were carried out, DonorsChoose.org tied teacher project points to timely sending of thank-you letters.

The organization also mobilized a team of volunteers who worked in “Feedback Land,” a section of the DonorsChoose.org national office, to help teachers communicate with the donors. First, the volunteers assembled thank-you packages that included guidelines for writing letters, as well as a disposable camera for the teacher to photograph her students participating in the project for which funding had been provided. A postage-paid return envelope was also included.

After taking pictures, the teacher returned the camera, along with a teacher-impact letter and student thank-you letters, to DonorsChoose.org. Then in “Feedback Land,” volunteers sorted the letters and photographs and screened them for appropriateness. Communications to the donors could not include students’ or teachers’ last names or classroom numbers in order to protect the privacy of the beneficiaries. Similarly, photos sent in the thank-you packages could not include information that would allow individual students to be identified. Once the letters and photos were screened, a thank-you package was mailed to each qualifying donor. (Exhibit 7 shows the estimated timeline of a project from posting through the end of the thank you process.)

DonorsChoose.org’s Growth

Getting Initial Commitments

As he was creating the model for DonorsChoose.org, Best realized that the website’s success required overcoming a chicken-and-egg problem. Donors would come to the website only if there were a number of exciting projects posted, while teachers would only take the time to post projects if there were numerous donors looking at the website.

To solve this problem, Best acted personally to fortify both sides of the market during the project’s preliminary phase. First, he asked his colleagues to post their own funding requests for classroom projects and materials. In order to persuade other teachers of the site’s efficacy, Best and his aunt anonymously financed many of the initial projects. Best also had his students write personalized letters to potential donors all over the country who were chosen from his copy of Yale’s Alumni Directory. Within four months, this strategy attracted $30,000 in donations.

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Expansion into Other Sectors

At first Best hoped to expand the organization beyond education into other social sectors of New York City, such as law enforcement and foster care. However, after a test run he discovered that police- sponsored projects raised questions about potential conflicts of interests. As a result, DonorsChoose.org confined its mission to teachers and public schools.

National Expansion

After the initial success of DonorsChoose.org in New York City, Best began to consider national expansion. In June 2003, Best appeared on “The Oprah Winfrey Show,” and the website received so many hits that the system became overloaded. Soon afterward, a philanthropist offered to help DonorsChoose.org expand to North Carolina.

By the end of 2003, public schools in North Carolina had posted over 1,000 projects. However, there were not enough donors to fund all of those projects: only 35 percent of the projects initially posted in North Carolina were funded. Nonetheless, the organization continued to work with teachers and donors in the area to bring the teacher-donor mix into balance.

The experience in North Carolina led DonorsChoose.org to consider a more deliberate strategy for national expansion. First, the organization realized that much of the infrastructure could be maintained through a centralized operation in New York. However, some on-the-ground presence was required in each new locale, because cultivating relationships with school district leaders was a key success factor in recruiting new teachers. In working with teachers, the organization had observed a snowball effect: when there were more than three participating teachers at a given school and support from school district administrators, the number of projects posted increased dramatically.

The expansion received a boost when DonorsChoose.org won the 2005 Nonprofit Innovation Award, created by Stanford Business School and Amazon.com. In the course of creating its strategic plan, the organization determined that it would require $14 million to build out its infrastructure. Soon a group of Silicon Valley donors agreed to fund the expansion into all 50 states.

As part of its expansion plans, DonorsChoose.org had designs to create 13 regional teams. The organization later decided to reduce the number of regional teams to six and then to three. Each team concentrated on building partnerships with regional corporations, foundations, and school districts. In deciding which communities to target, DonorsChoose.org selected locations based on corporate or community support. In 2007, DonorsChoose.org opened its website to schools in other metropolitan areas, including Chicago, San Francisco, Los Angeles, and Washington D.C., and statewide in New York, Texas, Indiana, Louisiana, Mississippi, Alabama, and South Carolina.

As with North Carolina, matching the number of donors with the number of projects remained a challenge. For example in the San Francisco Bay area, the number of potential donors overwhelmed the number of projects proposed, an imbalance opposite to the one faced in North Carolina.

To supplement the efforts of regional representatives to recruit teachers, DonorsChoose.org also targeted leaders who participated in alternative teaching programs, such as Teach for America. The organization also began publishing a monthly newsletter that updated teachers on the latest DonorsChoose.org news and advised them on how to maximize the success of their projects.

DonorsChoose.org also focused on the technological improvements needed to run a national organization. In response to the server problems following the “Oprah” appearance in 2003 and similar problems following an appearance on Stephen Colbert’s program in 2007 DonorsChoose.org began an ambitious

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website overhaul with pro bono assistance from engineers at Yahoo! By the time Stephen Colbert encouraged his viewers to donate to Pennsylvania public schools in 2008, DonorsChoose.org handled the increased site visits without problems.

Financing

DonorsChoose.org distinguished between funds received from individual donors (referred to as “marketplace giving”) and large gifts from institutional donors (referred to as “managed giving”). Staff in charge of marketplace giving had responsibilities for managing the call center and customer support activities, marketing to individual donors, and analyzing and designing the website. Staff in charge of managed giving worked with the large donors on various programs.

Funding from both marketplace and managed giving expanded rapidly. In the fiscal year ending June 30, 2008, DonorsChoose.org received $10 million in donations to fund student projects, representing an increase of 70 percent from fiscal year 2007. At the same time, fundraising expenses only increased from $550,000 to $700,000. (See Exhibit 8 for DonorsChoose.org financial data and Exhibit 16 for a map of funded projects.)

Marketplace Giving

Approximately 60 percent of donations to student projects came from marketplace giving. Individual donors were most likely to be women in middle and upper-middle income brackets, and 37 percent preferred to give to classrooms in the communities where they lived.

The marketplace giving staff focused on the acquisition of new donors and the retention of existing donors. The website itself was a key part of the strategy for gaining new donors. (Exhibit 9 shows an analysis of the conversion rate of people visiting the site to people adding a project to their online cart.) As part of this strategy, marketplace staff created gift cards that donors could give to their friends or employees to use on the website. These gift cards brought new individuals, who might, in time, return on their own.

In another recruitment effort, DonorsChoose.org targeted young male internet users (an underrepresented constituency) by issuing a “Mustache Challenge.” Men recruited on the internet agreed to grow mustaches to draw attention and bring sponsors to projects they designated. As of October 2008, more than 2,000 new donors, of whom 90 percent were first time donors, had given in support of this challenge.

To draw new donors, DonorsChoose.org also used new media forms such as blogs. For example, after the 2004 presidential election, Tomato Nation, a left-leaning blog, encouraged its readers to fund a DonorsChoose.org project that would purchase a set of George Orwell’s 1984 for the classroom. The project was funded in minutes, prompting Tomato Nation to link to 40 additional DonorsChoose.org projects. In just three weeks, 577 Tomato Nation readers in 24 states had funded $22,000 worth of projects. Tomato Nation continued its support of DonorsChoose.org with several additional blogger challenges.

DonorsChoose.org also continued to leverage its influence with television celebrities. In 2007, comedian Stephen Colbert used his fantasy run for the presidency in the South Carolina primary to introduce his audience to DonorsChoose.org. As a result, approximately 800 viewers donated $68,000 to support classroom projects. Then during the 2008 Pennsylvania primary, Colbert encouraged viewers to donate to Pennsylvania classrooms in support of either Barack Obama or Hillary Clinton, again bringing donors to the website. In 2009 Stephen Colbert joined the DonorsChoose.org national board of directors. (See Exhibit 13.)

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Retaining donors required different strategies. Marketplace staff concentrated on refining the website and the email strategy. One way was to contact donors through the use of their profiles when teachers posted projects that could appeal them. Most importantly, DonorsChoose.org found that donor identification with a particular teacher was a key driver of repeat donations; indeed, six out of 10 donors had a friend or family member who was a public school teacher. When a donor contributed to a teacher’s project, DonorsChoose.org sent emails to the donor when the same teacher posted additional projects. Repeat donors were an important source of growth; data showed that, on average, repeat donors gave larger gifts than first-time donors. DonorsChoose.org also relied on this relational marketing to attract new donors, encouraging posting teachers to use their networks to bring in new contributors.

Managed Giving

Managed giving often was used to encourage individual giving. For example, the Bill & Melinda Gates Foundation made a $4 million “Double Your Impact” grant that covered 50 percent of the cost of any proposal that met its criteria of furthering equality in America through high quality secondary education. When teachers posted a qualifying project, the description would show that it had already been 50 percent funded by Gates, dependent upon the remaining balance being funded by individual donors. (See Exhibit 10 to see how this Double Your Impact grant shows up for donors viewing the website.)

Another example of managed giving being used to encourage individual participation was the American Express Members Project. In 2007 and 2008, American Express invited its users to create an online community and propose projects from social cause organizations around the world in sectors as varied as community development, education, arts, and the environment.

17 Members then voted on the

organization that should receive $2.5 million from the card company. In both 2007 and 2008, DonorsChoose.org received over 20,000 top five votes and received $500,000 in funding from the financial services company.

Fulfillment Fee

To pay for expansion, the organization had relied on a $14 million grant from Silicon Valley executives. But once the grant ran out, the organization hoped to fund its continuing operations entirely from a fulfillment fee tacked onto project donations.

When donors visited the DonorsChoose.org site, each project’s cost included a fulfillment charge. Donors were allowed to opt out of paying this charge if they desired. (Exhibit 11 shows what a donor would see when making a donation and if they clicked on “fulfillment” to find out more.) Few donors, however, went through the trouble of turning down the fee; for example, 85 percent of donations for projects funded between Nov. 5, 2007 and Nov. 4, 2008 included the fulfillment charge.

Although the cost to fulfill a project was the same regardless of the school that was receiving the materials, DonorsChoose.org offered a “scholarship” to those schools with the highest need in order to promote funding of those projects. Donors to schools with the greatest need were charged 15 percent of a project’s cost for fulfillment while donors to other schools were charged up to 25 percent.

DonorsChoose.org was banking that fulfillment fees would cover its operational costs once the grant money ran out. Asking for donations to cover operational expenses was a difficult proposition. Funding for classroom activities was easier to solicit, because donors, whether individual or corporate, preferred to fund programs with direct impact rather than covering infrastructure or operating costs. Indeed, the Silicon Valley executives who had made the $14 million grant had tasked DonorsChoose.org with using the money to become sustainable through collecting this fee. As of December 2008, the organization believed it was on track to accomplish this goal.

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Organizational Structure

In 2000, Charles Best considered his role at DonorsChoose.org to be his “second job.” But by 2008, he was a full-time CEO of the organization with a total staff of 60. (See Exhibit 12 for an organizational chart.)

The majority of the organization’s senior management and staff had corporate work experience, and many had also worked in the non-profit sector. Many of the senior managers possessed graduate degrees from top-tier universities, including MBAs and Masters in Public Policy. Best noted that the organization looked for entrepreneurial people who were excited about technology. He believed that DonorsChoose.org often attracted people looking to move into a second phase of their careers who wanted to work at a place that was “agile and data driven, where their business skills would be appreciated, and where they could achieve social impact.”

The DonorsChoose.org staff was divided into departments: Engagement, Finance, Marketing & Donor Relations, Operations & Teacher Customer Service, and Technology. In addition, each of DonorsChoose.org’s regions was staffed by two or three people, including an Executive Director. The primary role of the Executive Directors was to cultivate a strong base of regional donors, while Associate/Deputy Directors focused on teacher outreach. Many of the regional staff had education degrees, in-classroom experience, or experience working for Teach for America.

While staffing levels had risen since the organization’s inception, DonorsChoose.org had committed to continuing its growth after 2008 without increasing its staff, thereby increasing the ratio of projects funded to staff members. The organization wanted to limit any increase in operating expenses, particularly given the impending end of the Silicon Valley grant.

The organization’s National Board of Directors (see in Exhibit 13) included 15 members. Most board members came from the corporate sector and represented a variety of industries including banking, media/publishing, and entertainment. Initially, the board was comprised of Best and some of his close associates. Then in 2004, when he felt that he could attract high-caliber leaders who could make a significant impact, Best formed a traditional board. Although board members were not required to contribute money to the organization, all had, with many board members donating more than $100,000. Board members varied in terms of their involvement with the organization; a few were very active in fundraising and other activities.

In addition to a board, DonorsChoose.org recruited a National Advisory Council (see Exhibit 14) composed of 24 members, representing the corporate, public, and non-profit sectors. The Council replaced a variety of regional advisory boards the organization had utilized in the earlier stages of its expansion.

Measuring Impact

In creating and expanding DonorsChoose.org, Charles Best sought to impact the lives of children across the country, while also reshaping donor behavior, thereby changing the landscape of philanthropy. The organization, therefore, believed it had three critical groups of stakeholders: donors, teachers and students. To assess its impact, the organization believed that it had to measure its effectiveness with each of these constituencies.

Donor Impact

Many non-profit organizations did not consider how the organization influenced its donors’ civic engagement. Unlike many traditional non-profit organizations, however, DonorsChoose.org considered

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this aspect of donor impact to be a critical component of its success. The organization wanted to raise donor involvement with the public schools.

To measure its success, DonorsChoose.org conducted a survey of more than 1,000 of its donors. The results of the survey showed that DonorsChoose.org seemed to be providing a new opportunity for individuals to contribute to public school systems, which historically had been difficult to manage given that school systems are not independent non-profit organizations. In the survey, 70 percent of donors reported that their donation to DonorsChoose.org was their first donation to a public school.

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DonorsChoose.org also seemed to be meeting its goals of increasing awareness of needs in public schools. According to the survey, 60 percent of donors stated that their experience increased their interest in the state of public schools. Additionally, 21 percent reported that their DonorsChoose.org experience increased their commitment to voting in an election or referendum.

19 The connection forged between

donors and real classrooms was creating advocates for public education.

From its operations, DonorsChoose.org also seemed to be connecting with a new generation of donors. Recruiting donors through hip television programs such as “The Colbert Report” and from bloggers showed the promise of exploiting the internet as a vehicle for securing funds. It also appeared that the organization had piqued the interest of individuals who otherwise might not give money to traditional causes, furthering the goals of increasing philanthropic participation across society.

Teacher Impact

In addition to surveying donors, DonorsChoose.org also surveyed teachers about the impact of the program in their classrooms. Conducted in March 2005 with a sample of 1,350 teachers, the survey produced the following results:

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Student Impact

Given the way in which projects were integrated into the daily life of the classroom, the organization believed that it was nearly impossible to measure the impact on students. For some measures of success, DonorsChoose.org depended on teachers for an estimation of the number of students its projects had helped. According to teachers’ accounts, by 2005 the funded projects served 2,278,001 students – an average of 103 students per project.21

In addition, the survey of teachers suggested that the program had fostered a sense of community among students. In the survey, almost 90 percent reported that their classrooms’ involvement with DonorsChoose.org had sparked a “sense of caring by other people” among their students, which reflected an increase of more than 2.5 times the number who felt this prior to their DonorsChoose.org experience.

The difficulty in measuring the impact on students had created challenges for the organization. The organization could not claim broad results such as improving test scores or school attendance. This inability to quantify results prevented DonorsChoose.org from accessing financial resources from some foundations that required proof of impact. Best understood that this “impact problem” was relatively intractable, and he and his team were always brainstorming ideas for methods of measuring student impact. One possibility the staff had considered was conducting a study that used a control group of classrooms that had posted projects on DonorsChoose.org, but whose projects did not receive funding within the five-month timeframe. These classrooms would be compared with classrooms whose teachers

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had received funding for their posted projects. Using this type of control group eliminated many selection concerns, as all teachers in the study would possess the awareness and initiative required to participate in DonorsChoose.org. Student impact would be assessed by analyzing the performance of students in classrooms that received funded projects versus student performance in classrooms with unfunded projects.

Social Return on Investment

In order to quantify the impact of national expansion on its program, DonorsChoose.org used a social return on investment (SROI) calculation. (See Exhibit 15.) By investing $14 million in national expansion, the organization would facilitate the delivery of $63 million of materials and experiences to students across the country. More than four million students would benefit from these resources over the course of 160,000 projects posted by 200,000 teachers. By the organization’s calculations, this represented a social return on investment of 350 percent.

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Moving Ahead

As the organization entered 2009, DonorsChoose.org faced numerous operational challenges posed by its innovative model of philanthropy. Could the organization attract enough new projects to reach its ambitious goal of $100 million? How could the organization handle regional imbalances between the number of projects posted by teachers and the number of donors? Would the technological infrastructure support a dramatic increase in website traffic? Would the website remain a favored site for its donor constituency recruited from blogs and television programs? Could the organization quantify its impact on its stakeholder groups?

All of these questions, however, were part of a bigger dilemma the organization faced as part of its national expansion. DonorsChoose.org had used its $14 million grant to staff a sizeable national organization. Could the organization deliver on its promise? Would it be able to attain its goal of $100 million in project funding from donors with the expanded model of its organization?

This case has been developed for pedagogical purposes from published sources. The case is not intended to furnish primary data,

serve as an endorsement of the organization in question, or illustrate either effective or ineffective management techniques or

strategies.

Copyright© 2009 Yale University. All rights reserved. Reprinted with permission of Yale University School of Management. To

order copies of this material or to receive permission to reprint any or all of this document, please contact the Yale School of

Management Department of Case Study Research and Development, 135 Prospect Street, New Haven, CT 06520.

Endnotes

1

Class of 2009, Yale School of Management. 2

Class of 2009, Yale School of Management. 3

Class of 2009, Yale School of Management.

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4

Class of 2009, Yale School of Management. 5

Frederic D. Wolfe Professor of Management & Entrepreneurship, Yale School of Management. 6

Director of Case Study Research, Yale School of Management. 7

Case Writer, Yale School of Management. 8

DonorsChoose.org mission statement, http://www.donorschoose.org/about/history.html?zone=101. 9

As reported in DonorsChoose.org’s 2005 teacher survey. 10

David M. Herszenhorn, “New York City’s Big Donors Find New Cause: Public Schools,” “The New York Times (Dec. 30, 2005), http://www.nytimes.com/2005/12/30/nyregion/30charity.html?pagewanted=1&_r=1. 11

Herszenhorn, “New York City’s Big Donors.” 12

Chronicle of Philanthropy Survey of Charitable Organizations. 2005. 13

Adapted from NPR.org, “Web Site Helps Teachers Boost Classroom Resources,” Tell Me More (audio recording), December 4, 2007. Accessed April 21, 2009, http://www.npr.org/templates/story/story.php?storyId=16871678. 14

DonorsChoose.org Teacher FAQs, http://www.donorschoose.org/help/teacher_faq.html?q=115&zone=0. 15

DonorsChoose.org Teacher FAQs. 16

Initially, DonorsChoose.org projects did not expire, then an eight month allowance was instituted, and after two years with that policy, the organization decided to decrease the time allowed to five months. Data about funded projects in the exhibits spans the eight to five month transition. 17

American Express Members Project. http://www.membersproject.com/about/index.html. 18

DonorsChoose.org National Expansion Plan. 19

DonorsChoose.org National Expansion Plan. 20

DonorsChoose.org National Expansion Plan. 21

DonorsChoose.org National Expansion Plan. 22

DonorsChoose.org National Expansion Plan.

13 DonorsChoose.org

Exhibit 1: Number of Funded Projects by Teacher and School

Funded Projects Posted between November 5, 2007 and November 4, 2008 Funded Pro-

jects per School

Number of

Schools

Number of

Teachers

1 4,031 10,955

2 1,390 2,189

3 717 748

4 385 338

5 270 165

6 172 94

7 140 59

8 108 56

9 79 27

10 75 21

11 57 8

12 50 10

13 30 10

14 26 4

15 30 1

16 20 0

17 20 1

18 18 0

19 6 1

20 10 1

21 13 0

Funded Pro-

jects per School

Number of

Schools

Number of

Teachers

22 10 0

23 5 0

24 12 0

25 4 0

26 4 0

27 5 0

28 5 0

29 2 0

30 4 0

31 1 0

33 3 0

34 3 0

35 1 0

37 2 0

40 2 0

41 1 0

48 1 0

55 1 0

61 1 0

Total 7,714 14,688

Note: “Schools” and “Teachers” refer to the number of schools or teachers for which X number of projects were

funded. For example 10,955 teachers each had 1 project funded that was posted between 11/5/07 and 11/4/08.

14 DonorsChoose.org

Exhibit 2: Funded Project Cost and Donation Data

Funded Projects Posted between November 5, 2007 and November 4, 2008   Average Cost for a Funded Project’s Materials: $337.15

Median Cost for a Funded Project’s Materials: $283.00

Average Number of Donations Required to Fund a Project: 3.29

Median Number of Donations Required to Fund a Project: 2

Maximum Number of Donations for a Funded Project: 68

Average Days to Fund a Project: 58

Median Days to Fund a Project: 38

Note: There is a long tail at the right end of the graph because during this period DonorsChoose.org instituted a

time limit of five months for funding a project. The projects that exceed the five-month limit were grandfathered

in.

15 DonorsChoose.org

Exhibit 3: Funded Projects by Category

Funded Projects Posted between November 5, 2007 and November 4, 2008

Resource

Usage

Resource

Type

Number of

Projects

Percentage of

all projects

Basic

Supplies 5,062 22.91%

Books 3,574 16.17%

Technology 2,109 9.54%

Trips 13 0.06%

Visitors 2 0.01%

Other 864 3.91%

Subtotal 11,624 52.60%

Enrichment

Supplies 4,192 18.97%

Books 2,780 12.58%

Technology 2,318 10.49%

Trips 102 0.46%

Visitors 28 0.13%

Other 1,053 4.77%

Subtotal 10,473 47.40%

Total: 22,097 100.00%

16 DonorsChoose.org

EXHIBIT 3 (CONTINUED)

School Poverty

Rating

Number of Schools

Applying for Funding

Percentage of

All Schools

Applying for

Funding

High 18,027 81.57%

Moderate 2,761 12.49%

Minimal 552 2.50%

Unknown 760 3.44%

Subject Area of Projects Number of

Projects

Literacy 7,093

Mathematics 2,431

Literature/Creative Writing 2,196

Special Needs 1,305

Visual Arts 1,069

Applied Science 1,018

Health & Life Science 935

Environmental Science 927

History/Geography 709

Music 639

Social Sciences 530

Other 459

English as a Second Lan-

guage

430

Early Development 406

Subject Area of Projects Number of

Projects

Gym & Fitness 260

Performing Arts 238

Health & Wellness 227

Foreign Languages 218

Sports 190

Character Education 170

Extracurricular/After School 127

College/Career Prep 124

Civics/Government 98

Student Rewards 84

Parent/Community

Involvement

78

Community Service 64

Nutrition 43

Economics 29

17 DonorsChoose.org

Exhibit 4: Screenshots of Donor Experience on DonorsChoose.org

“Visualizing Math” Project, Nov. 27, 2008, Project Proposal

18 DonorsChoose.org

EXHIBIT 4 (CONTINUED)

“Visualizing Math” Project, Nov. 27, 2008, Project Added to Cart

19 DonorsChoose.org

EXHIBIT 4 (CONTINUED)

“Visualizing Math” Project, Nov. 27, 2008, Donation Confirmation

20 DonorsChoose.org

Exhibit 5: Project Cost Report and Project Fulfillment Report

DonorsChoose.org Project Cost Report

Project: Visualizing Math: Batteries for Calculators (#216307)

Teacher Receiving Resources: Mr. L (abbreviated since this document is publicly available)

DonorsChoose.org Staffer Procuring Resources: Jenni D

This report is based on the price of materials when the teacher submitted his/her proposal. Actual expendi-

tures may differ slightly from the above estimate due to items going on sale at time of purchase; the need to

use alternate suppliers when the original items are out of stock; and/or the absence of payment processing

charges for donations by check. If actual expenditures turn out to be more than the above estimate, Donor-

sChoose.org pays for the difference. If actual expenditures turn out to be less than the above estimate, Do-

norsChoose.org places the savings in a restricted account that is solely used to fund additional classroom pro-

ject materials. In short, any savings go to students.

Materials Resources:

Item Vendor Unit Price Quantity Total Price

RECHARGEABLE AAA BATTERIES4PK — Duracell Rechargeable

“AAA” Batteries 4-Pack Quill $10.79 13 $140.27

Resources Subtotal $140.27

Vendor Shipping Charges *

(10% of Materials Subtotal)

14.03

Vendor Sales Tax Charges **

(0.00% of Materials Subtotal)

0.00

3rd Party Payment Processing Fee

(2.5% of Resources Subtotal)

3.51

Camera, Photo Development, and Postage for Donor Thank-You Package 17.00

Project Subtotal 174.80

Optional Donation to Cover Project Fulfillment Labor

(15% of Total Project Cost – See Next Page)

30.88

Total Project Cost 205.69

* The shipping fee represents a net average of vendor shipping rates based on an annual evaluation con-

ducted by DonorsChoose.org. Any savings are restricted to funding additional classroom project materials.

** The sales tax fee represents the state sales tax charged with one exception: a 15 percent charge is added by

DonorsChoose.org to projects taking place in Hawaii and Alaska to cover the higher cost of shipping re-

sources to these two states.

21 DonorsChoose.org

DonorsChoose.org Project Fulfillment Report Project: Visualizing Math: Batteries for Calculators (#216307)

Teacher Receiving Resources: Mr. L (Abbreviated since this document is publicly available)

Students Benefited: 60

Instructional and Homework Hours Supplied: 120.00

This report details the labor performed by DonorsChoose.org to turn your donation into a live project. The

project fulfillment fee supports this work and ensures “end to end” integrity on every student project. While

the cost of fulfilling a student project remains the same, DonorsChoose.org offers a “scholarship” to the

highest-need schools. Depending on a school’s poverty level, the fulfillment fee is 25 percent, 20 percent, or

15 percent of the total project cost. The vast majority of schools using DonorsChoose.org have high rates of

poverty, so most proposals carry the 15 percent fulfillment fee.

Sep 27, 2008 Mr. L completed the registration process at DonorsChoose.org and identified the school

where any project would take place. DonorsChoose.org only lists schools which have been verified by the

government, and staff members update school information (such as address and percent of students from

low income families) every four months.

Sep 27, 2008 Mr. L submitted “Visualizing Math: Batteries for Calculators” at DonorsChoose.org.

Sep 28, 2008 Donorschoose.org volunteer Karen R reviewed the proposal essay to ensure that Mr. L fully

explained the student learning that would take place, and emailed follow-up questions if anything was un-

clear.

Oct 2, 2008 DonorsChoose.org staff member John C verified the project resources and calculated the pro-

posal price tag.

Nov 27, 2008 “Visualizing Math: Batteries for Calculators” was fully funded. Thank you!

Nov 28, 2008 DonorsChoose.org staff member Brandon C confirmed with Mr. L that the requested re-

sources were still needed, forwarded Mr. L’s initial thank-you email, and established a thank-you package

due date based on the project lifecycle.

Nov 30, 2008 Operations team staff with ordering privileges Jenni D purchased the project resources for

Mr. L and had them sent.

Dec 29, 2008 When Mr. L returned the completed thank-you package to the DonorsChoose.org office,

DonorsChoose.org staff member Cheyenne J checked it in.

Dec 30, 2008 DonorsChoose.org staff member Di Z packaged the thank you letters, and sent this thank-

you package to you. We hope it demonstrates the impact you’ve had on Mr. L’s students and illustrates what

a difference you’ve made for this classroom.

22 DonorsChoose.org

Exhibit 6: Email Thank-You “Visualizing Math” Project, Nov. 28, 2008

Dear Ivy,

“Visualizing Math: Batteries for Calculators” (at

http://www.donorschoose.org/donors/proposal.html?id=) is now

becoming a reality for the students of Mr. L, with the help of a Double

Your Impact grant from Bill and Melinda Gates Foundation. You can

expect feedback on this proposal by 04/07/2009. In the meantime,

Mr. L wrote you this note:

Dear Ivy,

Thanks so much for helping us get more use out of the

graphing calculators! Since I posted the request for the

rechargeable batteries, I took a seminar on applications

for the Ti calculator platform, so I have a few uses in

mind for these. First up: the Algebra 2 class can graph

linear inequalities in two dimensions! Thanks again for

your generosity.

Contact Us

Sincerely,

The DonorsChoose.org Team

P.S. Make another teacher’s day! Find more projects that need fund-

ing based on your favorite criteria.

23 DonorsChoose.org

Exhibit 7: DonorsChoose.org Project Timeline

Activity Time to Complete

Classroom teacher posts project & materials list. Process begins

DonorsChoose.org volunteers screen project using eligibility criteria (re-

sources to be used by students; project not discriminatory or political).

Project posted for public viewing/donations.

2 weeks

(1 -15 business days)

Project fully funded.

Donors immediately sent initial thank-you email, which also serves as a

receipt for tax-deduction purposes.

4 months

(Maximum time allotted for

funding is 5 months)

Teacher contacted to confirm student need; teacher must respond in order

for project to proceed. Once confirmation is received:

Email sent to school principal (and sometimes other administrators) to

inform them of the project/donation.

Materials order sent to eSchoolMall for fulfillment.

1 week

Thank-you email sent from teacher to donors; includes teacher-selected

date to expect thank-you package.

1 week

DonorsChoose.org sends thank-you kit to teacher. 2 weeks

Materials arrive at school. 1 month*

Teacher returns thank-you package with teacher letter, student letters, and

used disposable camera to DonorsChoose.org.

DonorsChoose.org develops/prints pictures and forwards them, along

with teacher and student letters, to donors.

3-6 months after project is

funded

*Does not include delay if materials are held during the DonorsChoose.org winter/summer breaks, during

which times no project materials or thank-you kits are mailed.

24 DonorsChoose.org

Exhibit 8: DonorsChoose.org Financials

DonorsChoose.org

STATEMENTS OF FINANCIAL POSITION

June 30, 2008 AND 2007

Assets 2008 2007* Cash and cash equivalents (Notes 1b and 3) $7,163,959 $7,387,919 Certificates of deposit and accrued interest (Notes 1d and 5) 5,292,614 Unconditional promises to give (Notes 1c and 4) Unrestricted 10,400 75,000 Board designated to national expansion activities 2,387,500 4,250,000 Temporarily restricted, net of allowance for uncollectible amounts of $500,000 (2008) 798,455 857,205 Prepaid expenses and other current assets 35,504 2,308 Property and equipment, at cost, net of accumulated depreciation (Notes 1e and 6) 1318193 1,201,316 Security deposits 44782 29,653

Total Assets $17,051,407 $13,803,401

Liabilities and Net Assets Liabilities Accounts payable and accrued expenses $307,974 $178,450 Salaries and payroll taxes payable 200,552 119,131 Accrued vacation liability 84,539 35,130 Total Liabilities 593,065 332,711 Commitments (Note 8) Net Assets Unrestricted (Note 2a) Operating 1,839,105 1,972,228 Designated for national expansion activities 8,568,086 6,414,803 Designated for classroom projects 338,990 413,766 Total Unrestricted 10,746,181 8,800,797 Temporarily restricted (Note 2b) 5,712,161 4,669,893

Total Net Assets 16,458,342 13,470,690

Total Liabilities and Net Assets $17,051,407 $13,803,401

* Certain amounts have been reclassified for comparative purposes.

See notes to financial statements.

25 DonorsChoose.org

DonorsChoose.org

STATEMENTS OF ACTIVITES

YEARS ENDED June 30, 2008 AND 2007

2008 2007

Unrestricted Temporarily Restricted Total Unrestricted

Temporarily Restricted Total

Changes in Net Assets

Revenue

Contributions for classroom projects – $9,996,644 $9,996,644 $28,215 $5,774,936 $5,803,151 Contributions for program services and supporting services 1,343,824 1,307,716 2,651,540 1,001,736 1,004,423 2,006,159 Contributions for national expansion (Note 2a) 5,800,000 – 5,800,000 7,950,000 – 7,650,000 Provision for uncollectable unconditional promises to give – (500,000) (500,000) – – – Donated services and facilities (Note 7) 262,842 – 262,842 498,275 – 498,275 Investment income (Note 5) 351,263 – 351,263 239,465 – 239,465 Net assets released from restriction 9,762,092 (9,762,092) – 6,196,386 (6,196,386) –

Total Revenue 17,520,021 1,042,268 18,562,289 15,914,077 582,973 16,497,050 Expenses Program Services Classroom projects 10,731,667 – 10,731,667 6,303,729 – 6,303,729 Classroom projects advocacy 3,166,531 – 3,166,531 1,597,959 – 1,597,959

Total Program Services 13,898,198 – 13,898,198 7,901,688 – 7,901,688 Supporting Services General and administrative 963,516 963,516 951,905 951,905 Fundraising 712,923 – 712,923 552,320 – 552,320

Total Supporting Services 1,676,439 – 1,676,439 1,504,225 – 1,504,225 Total Expenses 15,574,637 – 1,574,637 9,405,913 – 9,405,913

Increase in net assets 1,945,384 1,042,268 2,987,652 6,508,164 582,973 7,091,137 Net assets, beginning of year 8,800,797 4,669,893 13,470,690 2,292,633 4,086,920 6,379,553

Net Assets, End of Year $10,746,181 $5,712,161 $16,458,342 $8,800,797 $4,669,893 $13,470,690

26 DonorsChoose.org

Exhibit 9: Conversion from Site Visit to “Add to Cart” Action

Notes

Date Note on Data

November 1-14 Site release corrupted Google Analytics tracking, causing a two-week absence in

data.

November-December Typical increase for holiday season peaking in December and then again at end of

year for tax redemptions.

February 26-March 2 Major site change broke Google Analytics code again.

March 25 Twitter campaign by Tim Ferris:

http://www.fourhourworkweek.com/blog/2009/03/09/tweet-to-beat/

April 8-10 Major GivingCard campaign drop supported by Crate & Barrel (approx. 100K Giv-

ingCards distributed via email)

27 DonorsChoose.org

Exhibit 10: Screenshot Showing Bill & Melinda Gates Foundation “Double Your Impact” Donation

28 DonorsChoose.org

Exhibit 11: Sample Screenshots Showing Fulfillment Fees

David Crane

Sr Software Engineer

Susan Chow

Sr Web Developer

Ken Kim

Sr Software Engineer

Tom Ferri

Controller

Frankie Cheung

Sr Marketing Analyst

Laura Libby

Special Projects Manager

Alisa Frazzini

Screening Manager

Jonathan Evans

Vendor Relations Director

Missy Sherburne

EVP, Engagement

Northeast

Thalia Theodore, ED

Yaritza Olmeda-Cedeno, PC

Southwest

Tee Hubbard, ED

Julie Lacouture, DD

Arianne Miller, AD

Northwest

Carolina Martin, ED

Candice Chesson, AD

Kris Murray, DD

South

Jeff Wood, ED

Jonathann Rice, PC

Natalie French, AD

Atlantic

Katie Bisbee, ED

Kate Hays, DD

Alex Cerkovnik, PC

Cesar Bocanegra

EVP, Operations

Faran Nadir

Finance Staff Accountant

Andy Kaplan

CFO

Oliver Hurst-Hiller

CTO

Linda Erlinger

VP, Nat’l Teacher Engagement

Charlotte Weiskittel

Dir. Of Teacher Mktg and Comm.

Brita Lombardi

EVP, Strategic Development

Dave Puketza

Principal Designer

Zach Walker

Donor Relations Manager

Tatiana Josephy

Marketing Associate

Charles Best

CEO

Central States

Keecia Broy, ED

Kirk Smiley, AD-Indiana

Juliette DeCarlo, DD

Elaine Perez

Feedback Manager

Roger Carrion

Accounts Payable

Binna Lieh

Jeana Takahashi

Operations Associates

Abby Feuer

Operations Associate

Neeta Nadkarny

Cust Svc Mgr

Rama Louis

Staff Accountant

Soo Na Hoover

Karina Liu

Andrew Protain

Operations Associates

David Snelling

Sr Software Engineer

Boris Kerzner

Software Engineer

Frances Lee

Sr Software Engineer

Alan McGee

Sr Marketing Analyst

Steven Zaluk

Software Engineer

Allyson Gavaletz

Office Manager

Brandon Cavanagh

Operations Associate

Daphra Holder

Executive Assistant

and Project ManagerMelanie Duppins

Mgr of Teacher

Engagement Partnerships

Jenni Davies

Fulfillment Mgr

Erica Goldman

VP, Consumer Marketing

Kari Hayden

Director, Corp. Partnerships

Jeff Howard

Sr. Vendor Relations

& Fulfillment

30 DonorsChoose.org

Exhibit 13: National Board of Directors

Jonathan Alter

Senior Editor and Columnist, Newsweek

Charles Best

Chief Executive Officer and Founder, DonorsChoose.org

Jonathan Beyman

Former Global Head of Operations and Technology, Lehman Brothers

Peter Bloom, Board Chair

Managing Director, General Atlantic, LLC

Michael Brader-Araje

Managing Partner and Founder, SunPocket

Bill Bradley

Former U.S. Senator and Presidential Candidate

Stephen Colbert

Satirist, Actor, Writer, and Host of Comedy Central’s The Colbert Report

Cheryl Dorsey

President, Echoing Green

Edwin A. Goodman

General Partner, Milestone Venture Partners

Dena Jones Trujillo

Investment Manager, Omidyar Network

Joshua Levine

Managing Director, Kita Capital Management

Michael Lynton

Chairman and CEO, Sony Pictures International

Trabian Shorters

Vice President of Community Programs, Knight Foundation

Jeff Weiner

Executive in Residence, Accel Partners & Greylock Partners

Anthony Yoseloff

Partner, Davidson Kempner Partners

Dewey & LeBoeuf LLP

Pro Bono Legal Counsel

31 DonorsChoose.org

Exhibit 14: National Advisory Council

Kevin K. Albert

Managing Director, Elevation Partners

Chuck Beck

Former Chairman and CEO of Fiduciary Trust

International of California

J.B. Buxton

Deputy State Superintendent, North Carolina De-

partment of Public Instruction

Bob Daly, Los Angeles Founding Partner

Former Head of Warner Brothers and CEO, Rule-

maker, Inc.

Ruthanne Feinberg

Managing Director, Glocap Search

Donna Golkin

Perry & Donna Golkin Foundation

Steve Jones

Market President, Eastern NC / VA, RBC

Centura

John Keller

CEO, Keller Group, Inc.

Neeru Khosla

Amar Foundation

Sherry Lansing

Former Head of Paramount Pictures

Dagny Maidman

Managing Director, Lehman Brothers

Lenny Mendonca

Director, McKinsey & Company

Tom Miglis

CIO, Citadel Investment Group

Craig Newmark

Founder, Craigslist

Jeffrey Patchen

President & CEO, Children’s Museum of Indian-

apolis

Dr. John J. Ramos

Superintendent of Schools, Bridgeport Board of

Education (Connecticut)

Dan Rosensweig

Operating Principal, Quadrangle

Carole Bayer Sager, Los Angeles Founding Part-

ner

Singer and Songwriter

Anne K. Shane

Vice President, BioCrossroads

James Slavet

Partner, Greylock Partners

David Snelling

Principal Architect, Walt Disney Interactive Media

Group

Dana Stalder

Senior Vice President, eBay

John E. Thompson, Jr.

Author

Tom Uhlman

Managing Partner, New Venture Partner

32 DonorsChoose.org

Exhibit 15: Social Return on Investment

(Source: DonorsChoose.org National Expansion Plan)

Over the expansion period, DonorsChoose anticipates delivering well over $60 million worth of materials

and experiences to 4,000,000 students in need. Excluding the value added by DonorsChoose and strictly

measuring the pass-through, $14 million in national expansion funding will generate a 350 percent social

return on investment. Details on the ROI are as follows:

FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 Total # of Funded Projects 9,000 17,000 25,000 30,000 36,000 43,000 160,000 # of Teachers Benefiting 11,000 22,000 31,000 37,000 44,000 53,000 198,000 Student Resources Delivered (1) $3,567,000 $6,941,000 $9,875,000 $11,850,000 $14,220,000 $17,064,000 $63,517,000 # of Students Benefiting (2) 221,000 431,000 613,000 735,000 883,000 1,059,000 3,942,000N

at io na l

Ex pa ns io n

75% of These Students Will Be Attending High Poverty Schools (3) 90% of These Students Will be Attending High Need Schools (4)

Student Resources Delivered reflects actual purchases, after discounts that DonorsChoose negotiates with ven-

dors. To arrive at the true market value of the student resources delivered, one should increase the number above

by 15 percent, the average discount.

# of Students Benefiting studiously avoids double counting. For example, and elementary school teacher who has

funded 15 projects (each listed as benefiting 25 students) only contributes 25 students to the number above—not

15 times 25—because it is assumed that elementary school teachers do not teach more than one group of kids.

The number above also does not account for the fact that 80 percent of resources funded through DonorsChoose

are re-used by future students. Assuming an average shelf-life of 3 years, one would calculate that the education

of 10,000,000 students will ultimately be enriched through DonorsChoose.

High Poverty Schools are those where 65 percent or more of students receive free lunch, for which a student’s

family must live near or below the poverty line to qualify.

The federal government classifies a school as “high need” if the free lunch rate is 40 percent+.

33 DonorsChoose.org

Exhibit 16: Map of Funded Projects

Funded Projects Posted between Nov. 5, 2007 and Nov. 4, 2008

34 DonorsChoose.org

Exhibit 17: Funded Projects and Project Giving, 2002-2008