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Love Drop: Making Money By Giving It Away

By: Guest | February 7, 2011 | 
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Nate St Pierre of Love DropNate St. Pierre is the founder of ItStartsWith.Us, a global group of people committed to changing the world in just 15 minutes a week.

I probably read only about 10 blogs regularly (oh, the horror!), and Spin Sucks is one of them. The main reason I come here is for all the straight talk from smart people. Gini Dietrich leads the charge, and the rest of the community joins in with experience, insight, critiques, and always a bit of fun. It’s my kinda place.

So today I’d like to throw out a topic that has turned out to be somewhat polarizing: The launch of my latest project, Love Drop. I’d love to hear your feedback on it.

Here’s the pitch: Love Drop is a micro-giving network of people who unite as a community to help one person or family a month. By subscribing to the team for as little as $1, we make it easy for our members to change lives in a fun and easy way. Each month Love Drop delivers a unique combination of unexpected financial gifts, personal encouragement and the support of local and online communities.

We launched on January 1st, and for our first Drop we brought our community together to help out a single mom whose family lost everything in a fire. For our second one this month, we’re trying to help a family with two autistic boys obtain a service dog that will literally change their lives. You can see how we told the first story in its entirety here. The final video at the bottom shows us actually making the Drop. It was such a cool event, and it meant so much to the family – we were happy to be a part of it.

But here’s where it gets polarizing: Love Drop is not a charity. It is a for-profit social enterprise. Basically, we make money by giving it away. Of course, we just make the bare minimum we need to be sustainable, but it’s still a profitable business. And we take a fair amount of criticism for that. Many people think that if you’re doing something good for someone, you shouldn’t get paid for it.

We’re very clear about the breakdown of where the money goes: Fifty percent to the recipient family each month, 20 percent to taxes (yes, we owe tax), and 30 percent to the operating budget of Love Drop. It takes a lot of money to do something of this magnitude every month, but the difference we can make for one family is enormous.

We’ve proven the micro-giving principle sound over the last two years with the ItStartsWith.Us and Love Bomb projects, both of which I’ve done for free. Now that we’re starting to give back financially, it gets a bit more complicated. We tried to go the non-profit route for months, but ultimately decided we could be more effective this way.

Here are my questions for the group:

1) Does this project “feel” right to you? Why or why not?
2) If you were running this, how would you choose to partner with other organizations?

Let’s chat.

Nate St. Pierre is the founder of ItStartsWith.Us, a global group of people committed to changing the world in just 15 minutes a week. He helps large organizations mobilize their members to make a difference in the lives of those around them using the concept of microgiving.

28 comments
Friend_adder_elite
Friend_adder_elite

Good luck on your venture. You seem so in tune and excited which I think is the ingredient for a sucessful venture. I would really like to learn more of this. Thank you for sharing yur insights on so many aspects.

Elizabeth
Elizabeth

Your new venture a) sounds wonderful and b) reminds me a lot of another for-profit social good company, TOMS Shoes. Their entire for-profit business model is built around donating one pair of shoes to a child in need for every one pair bought. The founder of TOMS, Blake Mycoskie, found a need which he could meet and figured out a way to make helping others a profitable business in the process-- which I think is really cool. As long as there is complete transparency in raising funds and donations, I see no problem with your model and in fact commend you for looking out for both people in need AND yourself.

4thGear
4thGear

Nate,

The question to ask those who think you should be organized differently is... "Would it seem more acceptable if we make money and DON'T help people?" Plenty of organizations already have that market cornered.

The bottom line is that you are doing what you love and something that you believe makes a difference for others and the only way you get to do that again tomorrow is if you are able to also earn a living at the same time.

Randy

Howie Goldfarb
Howie Goldfarb

Hi Nate

I see no problem with for profit here. If you are 1] changing people's lives 2] being transparent 3] and being reasonable with your own draw, it will attract people vs make them skeptical. Often people are cautious with Non-Profits because plenty waste money and have graft. We see Government Agencies and NGO's fail at their missions everyday, even with plenty of money.

If you show impact people will fund you. Sounds like a great endeavour!

JonHearty
JonHearty

Aside from the project specifically, I think there is ABSOLUTELY NOTHING WRONG WITH PROFITING BY HELPING PEOPLE. There are all kinds of ways to make money - inheriting, stealing, winning, earning, etc. - and each carries with it a certain ethical characteristic; obviously earning money is far more ethical than stealing it. Earning, however, can be further broken down. For example, in my opinion, it's better to make money by selling, say, computer software, the way Microsoft does, than tobacco products, the way Philip Morris does.

All of this being said, I not only think that there's nothing wrong with making money by helping people, but I also think that this is a far superior way to make money than many other ways out there.

Cheers to your endeavor and thanks for sharing it with us. There is a lot more to it than what lays on the surface and I hope it spreads like fyre (misspell fully intended).

SarahInMI
SarahInMI

Y'know, I'm married to a CPA, and I could go into the blah blah blah of the tax side of things (really. I could. You absorb a lot living with a number nerd), but what strikes me about Love Drop - is really, just a sincere desire to help people.
I guess there's just so much to be cynical about in this world - that as long as you're being transparent and upfront about HOW funds are used - I'm cool with it. If you give participants that information before they opt to be involved - they are making an informed choice based on their facts. They're in or they're out based on circumstances they are or are not okay with.
Frankly, I don't want to make a donation to someone JUST for the tax break. I want the donation because my heart says it's right. Doing good is doing good. The end result is someone is getting help who might not have otherwise. I'm cool with that.

bdorman264
bdorman264

I think it is a very noble cause, but who gets included and who doesn't make the cut? There is so much 'need' out there it is overwhelming. Would it be better if you worked in collaboration with the churches and social service agencies, or from a pure 'feel good' aspect and knowing you touched at least one person's life makes it worthwhile?

I'm a volunteer Guardian ad Litem and I see firsthand a 'system' with a lot of money that 'feeds' a lot of people but seems to never be enough for the kids in need. It is so big and bureaucratic and not easy to change for efficiencies. May you have such success that this becomes an issue with your organization.........

On the surface I think a non-profit would allow more money to the families, but maybe you have weighed the pros and cons of both.

I think your heart is in the right place however and more power to you.

John Falchetto
John Falchetto

I think there is a confusion between non-profit and charity.
Non-profit doesn't mean you do not cover your taxes and expenses. If you look at large non-profit companies, they pay fees and need to cover the salaries of their employees, office rental, IT bills, etc.. It just means at the end of the year you have made..no-profit, NOT no income.

Now in my book, charity means you are doing it for free. You give up your time and resources for no income.

I am no CFO, but I don't really understand why you do not setup as an non-profit and at least save 20% in taxes which could go to the good causes you support? How can you be more effective by paying taxes?

Regarding the ethics of the whole project, I would not piggy back on a humanitarian cause to make a profit. That is my take and I can see you are trying to do good in your community but I often blasted friends who 'raised money for charity by climbing a peak in the Himalayas'. One has nothing to do with the other, either you go climbing or your raise funds. If you piggyback on handicapped children to get some cash for your climbing trip, it's wrong in my book.

I appreciate the fact that you are trying to change the world and looking for feedback on your model.

FranchiseKing
FranchiseKing

It's great what you're doing, for sure.

Personally, I would be more comfortable with the non-profit model in this case. It's probably a little cleaner, and it's definetely more traditional.

Now, are there non-profits in your space taking in 30% for overhead and other expenses? Is the CEO of that real "non-profit" that you're competing with making $25k a month in a salary? I hope not.

I'm giving your gig a thumbs down. I'd rather help get a service dog for the kids in a more traditional way. With a non-profit with low expenses that specializes in service dogs.

You're opening up a huge can of worms, (which I'm sure is part of your marketing plan) but, it doesn't lend itself to cred, in my book.

A+ for thinking out of the box, though. You'll get no money from me. I guess that I'm more of a traditionalist when it comes to doing good; doing good, just to do good.

JL

jasonarican
jasonarican

So I guess my question is: what happens when this scales? Right now, 20% may or may not cover your operating costs... but what happens when/if this blows up? Will the percentages change?

Also, if you're talking about lots and lots of money... do you plan on scaling the projects? Say you get 100k people, it seems like the scope of the projects would have to change, right?

Since you're being transparent about it, I don't think there is anything objectionable about what you're doing. But I do think that it would discourage me from donating since my money could probably be more effective elsewhere. Not a knock on your idea at all, just giving you my thoughts.

graciemitchell
graciemitchell

I recently became a member of Love Drop and I'm totally fine with how you're doing it. As long as you are transparent about where the money is going, which you seem to be, I think it's absolutely fine and I'm happy to be involved.

NateStPierre
NateStPierre

Oh, one more thing. For just this month, we've decided to defer all revenue on this project until we achieve our goal of providing a service dog for a little boy with autism. It costs $13,000, which is much more than we can provide, but we're going to go into fundraising mode for February and see if we can band together to help this family out. And we won't take a penny until we do.

Full details here: http://www.itstartswith.us/blog/2011/02/06/when-youre-in-over-your-head/

Let me know what you guys think about everything, and don't be afraid to be critical. I want to listen and learn, k?

NateStPierre
NateStPierre

@Elizabeth Hey thanks, Elizabeth! I LOVE what Blake has done with his project. In fact, he was one of the ones we considered when thinking about our own model. We really do believe that there's a place for profitable giving - you just have to strike the right balance, as you alluded to at the end. We're learning a little bit more every single week we do this, too. Hopefully we get better each and every month. :)

NateStPierre
NateStPierre

@4thGear Wow, I never thought about putting the question that way, haha . . . you're right. :)

I love your last paragraph. All of it. Thanks, man.

NateStPierre
NateStPierre

@HowieG Thanks, Howie - that's actually part of our plan . . . showing impact. We're just getting started, so we don't have a lot under our belt yet, but in a few months everyone will see just how much we were able to do with this project, and we think they'll be very happy with it. :)

Thanks for the support!

NateStPierre
NateStPierre

@JonHearty Thanks, Jon. In absolutely everything I do I make sure it's not only world-changing, but ethical and above-board as well. At the end of the day, I have to be proud of what I spend my time doing. And I'm proud of this.

NateStPierre
NateStPierre

@SarahInMI Love this, Sarah - J$ and I both talked about this same thing from the very beginning: we don't want people on the team who are doing this for a tax break - we want people on the team who are doing it because they want to make a difference in this way. We're totally cool with people not participating because they don't like the system - we always encourage everyone to simply get out there and touch lives in a way that makes sense for THEM. This is just how our crew is doing it.

SarahInMI
SarahInMI

Also, I love how I repeat myself. Maybe I should proofread my replies before submitting.

NateStPierre
NateStPierre

@bdorman264 Who gets included and who doesn't make the cut is always the tough part, isn't it? Not only for our organization, but for any that do good. I can tell you it's really tough to read 20 personal, heart-wrenching stories each month, and only be able to pick one to help. We wish we could help them all. But we all know that's not possible, so we choose the one where we can make the most impact on a personal level, and inspire the most people on a larger level. We honestly feel that's the best we can do.

And you're right, we've weighed the pros and cons of both systems - you can see my response to johnfalchetto below for more details on that. :)

Kudos to you for being a volunteer, and thank you for the thoughts.

NateStPierre
NateStPierre

@John Falchetto Hey John, thanks for the honest critique. I think you have a very black-and-white definition of giving back that excludes some of the nuances that may in fact work quite well. What's wrong with using an already-scheduled trip to the Himalayas to raise money for something that you care about? And if you use a small portion of it to fund the trip and actually go out there and get it done, and your contributers/donors are fine with that, then I don't think I see the problem. At the end of the day you've given x amount to handicapped children, whereas if you hadn't done it they would have gotten nothing. Your donors helped out both the kids AND you, which they're okay with. And you climbed a mountain, helped some kids, and allowed others to be a part of it. As long as everyone's on the same page, I don't think there's an issue here. If people don't like the fact that you're using a portion of their funds to finance the whole project, they won't give. Simple as that. At the end of the day people are free to give wherever and whatever they wish, in a way that makes sense for them.

That's my response simply based on principle. On a more concrete level, the non-profit designation is purely a tax designation. It says you pay a drastically reduced rate or nothing at all, which is great. However, it also adds a larger layer of complexity to your operation. I have friends who run non-profits both large and small, and some of them are dissolving their non-profit status to change over to a social enterprise system. Why? Because of the complexity. You no longer own your project. It's managed by a board, and you report to the board. There are very strict ways you can do things, say things, take in money, give out money, and everything has to be done to the letter of the law and the approval of the board. J$ and I are just a couple of guys who know how to build community both online and off. We're not a huge corporation. We're used to banding together with people for a short time, getting something done quickly, and moving onto the next thing. If we were to set up as a non-profit, we don't think we'd be able to be nimble enough to do the things we need to do with the Love Drop model. We are VERY reactionary with this project. We're basically running a charitable org, a business, a TV show, and an event setup all at the same time, in a different city every month. Stuff happens FAST with this project, and you have to be able to react quickly and have the freedom required to act on your gut instinct, without getting permission all the time. It's almost like an SNL/improv-type atmosphere, and we feel that being limited by all the 501(c)3 regulations would be stifling to the personality of the project.

Secondly, we're dealing with micro-payments for the vast majority of this model. $1 to $10 a month is the range almost everyone fits in when they contribute. At that level, it doesn't much matter if it's tax-deductible for our contributers. They just don't care. So it's not worth the operational imitations to save that little bit of money, for us or our subscribers.

But I'll tell you where it DOES hurt - and we've already experienced this. I got a call last week from a big national firm that loved what we're doing and wanted to partner with us for the year. They offered us $25,000 cash, right off the bat, just to be a part of what we're doing. I thanked them very much for the offer, but told them that we weren't a 501(c)3, and they should check with their marketing arm to see if that would be a problem. And it was. We knew going into this that we'd be losing out on some big deals because of our current tax status. And we're okay with that, at least for now. If things get really crazy around here, and we're losing out on possible partnerships left and right because of this, maybe we'll take another look at it. But right now we're happy with the decision. It lets us do what we want, when we want to, how we want to. Fast, fun and casual, baby - that's how we do business. :)

Hope that helps, thanks for the thoughts!

NateStPierre
NateStPierre

@FranchiseKing I didn't take offense to your first post; hope I didn't come across that way.

You're right about the "taking awhile to get to be known, liked and trusted." I was just saying that in my little area I do indeed have that, and am happy with it.

And sorry, but you're wrong about the calculated nature of writing a post on Spin Sucks. In fact, I'm pretty sure I've never asked to write a guest post on anyone's blog. I wrote here today because Gini (someone who knows, trusts and likes me) emailed and asked if I'd like to guest post here regarding my new project. Since I respect her, this blog, and readers like you, I agreed.

But you're right - it certainly doesn't hurt. :)

Thanks again, man.

FranchiseKing
FranchiseKing

@NateStPierre @FranchiseKing Hi,

In social media, it takes a while to get known, to be liked, and to be trusted.

I have no idea if you're heart's in the right place or not.

When some folks first vist The Franchise King Blog, and they read post after post giving free advice on the topic of franchise ownership, it takes them awhile to get to know me, and to trust me. (I'm sure that it takes a while for them to be comfy with my "straightforward" style. ) In time, they "get" me. Maybe it will take a while for me to get you, too.

Maybe it was a slam when I said that "opening up a can of worms " was part of your marketing plan." I'm sorry.

Is it fair to say that writing a post on a well-trafficked and pretty robust blog like Spin Sucks was done to get some pro-con comments going, so that you can get more active donors?

Marketing.

Smart, too.

JL

NateStPierre
NateStPierre

@FranchiseKing Thanks for the honest thoughts. There are a lot of people just like you that are more comfortable with the traditional non-profit model, and to them we say go ahead and invest your money there. We aren't out to compete with other charitable organizations for people's money. We just want people to make a difference that's meaningful to them, whether it's in money, time or other forms of support.

There are also a lot of people who are UNcomfortable with the traditional non-profit model, and want to do things a little differently. Those are the people who will join us, and we're happy to have them.

Opening up a huge can of worms is definitely not a part of our marketing plan. It just so happens that worms (and the cans in which they reside) come with this territory.

As for cred and doing good just to do good, I have plenty of that, and anyone who knows me know that. I've run my other two projects (ItStartsWith.Us and Love Bomb) for two years specifically on the platform of not spending a dime, but still making a big difference for people on an individual level. We've touched hundreds of thousands of lives, and saved more than a few. I'm quite happy with that record, and I continue to do it simply because I love it and it's work that truly matters. This initiative is simply a way to take some of those same basic principles and use them in the financial realm.

Love the comment, thanks for the thoughts!

NateStPierre
NateStPierre

@jasonarican Our goal is to always have a minimum of 50% go right to the person we're helping, and as we do more volume over time, the first goal is to be done with the monthly sponsors (unless we really want to work with one that's a great fit and has people with big hearts behind it, and they want to actually get down and dirty and WORK with us), and the second goal is to be able to raise that 50% number higher.

And yes, as we get bigger, the scope of what we do will need to change. But we'll be able to address that pretty easily as we grow, I think.

Good point in that the bigger we are, the more people will think that their money could be better spent elsewhere. Hmm.

Thanks for the thoughts!

NateStPierre
NateStPierre

@graciemitchell Cool, glad to have you on board! And yes, we're always going to be transparent about the financial breakdowns. Our goal is to make it easy, accessible, and fun to give back financially with very small amounts, in a way that you can actually see exactly where you're money's going, and get to be an integral part of it (by adding gifts or services or other fun stuff to the mix).

NateStPierre
NateStPierre

@FranchiseKing Nope, not backpedaling. Just doing it once, this month, because of an unusual combination of circumstances. March is already set in motion, and it does not look like this.

That being said, if we're gonna do it like this this month, we're gonna do it right.