October 2010
Liquidnet is the premier global marketplace for institutional investors. Since 2007, the company has devoted a percentage of revenues to social causes through an award-winning corporate social engagement program called Liquidnet For Good. 2
Beyond its employee engagement efforts, sustainability programs, and signature project (a comprehensive residential community and high school for orphans in Rwanda), Liquidnet is leveraging its core competency using technology and the power of collaboration to remove inefficiencies in a fragmented marketplace to maximize social impact. 3
Markets for Good is Liquidnet s effort focused on creating greater social impact throughout the social capital markets. 4
CHALLENGES IN THE PHILANTHROPIC ECOSYSTEM
CHALLENGE: How might we make it easier and cheaper for nonprofits to raise money?
CHALLENGE: How might we make it easier for donors to find effective nonprofits to donate to?
CHALLENGE: How might we ensure that higher-performing nonprofits are receiving enough donations so that they can effectively meet their mission?
THE SPECTRUM OF MARKETS FINANCIAL CAPITAL MARKETS IMPACT INVESTING MARKETS PHILANTHROPY (GIVING MARKETS) RETURN Financial Return Financial + Social Return Social Return MEASUREMENT Financial Performance Measurement Financial + Social Measurement Social Performance Measurement INVESTMENT TYPE Debt Equity Debt Equity Grants PLATFORMS Retail (mutual funds, online brokers) Institutional (Exchanges, Alternative Trading Systems) Retail (online micro finance) Institutional (Impact Funds, emerging platforms) Retail (offline channels, online giving, Donor Advised Funds) Institutional (Foundations) AVERAGE TRANSACTION COST About 5% About 10% About 30% MARKET SIZE FINANCIAL CAPITAL MARKETS $50 Trillion SOCIALLY RESPONSIBLE INVESTING Social Screening and Shareholder Advocacy $7 Trillion $5 Billion $300 Billion SOCIAL CAPITAL MARKETS / MARKETS FOR GOOD 9
THE SPECTRUM OF MARKETS How might we apply best practices, technologies, and metrics across all markets? FINANCIAL CAPITAL MARKETS IMPACT INVESTING MARKETS PHILANTHROPY (GIVING MARKETS) RETURN Financial Return Financial + Social Return Social Return MEASUREMENT Financial Performance Measurement Financial + Social Measurement Social Performance Measurement INVESTMENT TYPE Debt Equity Debt Equity Grants PLATFORMS Retail (mutual funds, online brokers) Institutional (Exchanges, Alternative Trading Systems) Retail (online micro finance) Institutional (Impact Funds, emerging platforms) Retail (offline channels, online giving, Donor Advised Funds) Institutional (Foundations) AVERAGE TRANSACTION COST MARKET SIZE About 5% FINANCIAL CAPITAL MARKETS $50 Trillion SOCIALLY RESPONSIBLE INVESTING Social Screening and Shareholder Advocacy $7 Trillion About 10% $5 Billion How might we reduce the transaction costs in the giving markets? About 30% $300 Billion How might we make better use of the dollars in the giving markets? SOCIAL CAPITAL MARKETS / MARKETS FOR GOOD 10
TODAY: PHILANTHROPY Today, we do not have enough readily available, reliable, and universal information to support the philanthropic ecosystem the giving markets. How might we make it easier for donors to find effective nonprofits to donate to? How might we make it easier and cheaper for nonprofits to raise money and demonstrate performance? How might we enable beneficiaries to provide feedback and have their voice heard? 11
FACTS ABOUT PHILANTHROPY In general, most giving comes from many donors, but goes to relatively few nonprofits. How might we provide tools for individuals to give more effectively? Source: 1. Figures come from the Foundation Center, the Urban Institute, the IRS, and other sources, via Disrupting Philanthropy: Technology and the Future of the Social Sector, by Lucy Bernholz with Edward Skloot and Barry Varela 12
FACTS ABOUT PHILANTHROPY In general, most giving comes from many donors, but goes to relatively few nonprofits. Source: Giving USA Foundation (2007) Sources: Foundation Center, Slate, via Disrupting Philanthropy: Technology and the Future of the Social Sector, by Lucy Bernholz with Edward Skloot and Barry Varela 13
FACTS ABOUT PHILANTHROPY In general, most giving comes from many donors, but goes to relatively few nonprofits. How might we provide sufficient information about all nonprofits? 14
FACTS ABOUT PHILANTHROPY In general, most giving comes from many donors, but goes to relatively few nonprofits. Source: Giving USA Foundation (2007) Sources: Foundation Center, Slate, via Disrupting Philanthropy: Technology and the Future of the Social Sector, by Lucy Bernholz with Edward Skloot and Barry Varela 15
UNDERSTANDING DONORS If we understand the various motivations driving donors, we can more fully engage them in social investing. How might we reach all donors, regardless of the reasons why they give? Source: Hope Consulting, Money for Good: The US Market for Impact Investments and Charitable Gifts from Individual Donors and Investors, May 2010 16
UNDERSTANDING DONORS While donors say they care about nonprofit performance, very few actively donate to the highest-performing nonprofits. How might we get people to act on their interest in nonprofit performance by doing some research? How might we get people to care about social impact and other measures of performance? How might we get people to give to the top nonprofits, not just those that are good enough? Source: Hope Consulting, Money for Good: The US Market for Impact Investments and Charitable Gifts from Individual Donors and Investors, May 2010 17
TOMORROW: GIVING MARKETS How might traditional donors become social investors who demand a high social return on their investment? To ensure that funding goes to the highest-performing nonprofits, traditional donors will need to become social investors. 18
TOMORROW: GIVING MARKETS With enough demand from donors and sufficient supply of information about nonprofits, we might transform the philanthropic ecosystem into giving markets. TRANSACTION PLATFORM FOR INFORMATION & INVESTING RETURN: My needs are being met and I have a voice. RETURN: I demand a high social return on my investment and I know that I am making an impact. RETURN: We can demonstrate that we are making a difference and are able to attract more funding to continue to do so. 19
TOMORROW: GIVING MARKETS With enough demand from donors and sufficient supply of information about nonprofits, we might transform the philanthropic ecosystem into giving markets. 20
TOMORROW: GIVING MARKETS A vision of how some components of a giving markets platform might correspond to the best practices of a successful retail market, providing a range of information to connect buyers and sellers. 21
TOMORROW: GIVING MARKETS A vision of how some components of a giving markets platform might correspond to the best practices of a successful retail market, providing a range of information to connect buyers and sellers. Ability to search, browse, or select organizations in a variety of ways, to make it easier for donors to find effective nonprofits to donate to. Easy-to-use financial transaction functionality provides a safe, reliable and efficient way to take action and donate. Objective information about the nonprofit, their theory of change, and why they need funding. EXISTING EXAMPLES: Seamless integration with social media, which builds on existing relationships and networks EXISTING EXAMPLES: Additional multimedia helps tell the nonprofit s story and connect with their donors. 22
TOMORROW: GIVING MARKETS A vision of how some components of a giving markets platform might correspond to the best practices of a successful retail market, providing a range of information to connect buyers and sellers. Information about how others behaved, based on powerful sales analytics, offers insight into important market dynamics. Expert reviews, seals of approval, and deep analysis of performance inform donation decisions. Standardized data about the nonprofit allows comparison across organizations. EXISTING EXAMPLES: EXISTING EXAMPLES: 23
TOMORROW: GIVING MARKETS A vision of how some components of a giving markets platform might correspond to the best practices of a successful retail market, providing a range of information to connect buyers and sellers. Clear and simple visual rating system to quickly indicate nonprofit performance. EXISTING EXAMPLES: Reviews from beneficiaries, volunteers, and other donors allow for transparent feedback. EXISTING EXAMPLES: 24
TOMORROW: GIVING MARKETS A vision of how some components of a giving markets platform might correspond to the best practices of a successful retail market, providing a range of information to connect buyers and sellers. Organizations are intuitively categorized, making them easier to search. EXISTING EXAMPLES: 25