The following is a conversation between , Host of The Business of Giving on AM 970 The Answer WNYM in New York City.
Denver: It’s still early in 2019, but we already know that one of the most significant developments in the world of philanthropy for this year will be the merger of the two largest data and information nonprofit organizations, the Foundation Center and GuideStar. Here to discuss this with us is Brad Smith, the former head of the Foundation Center, and now the CEO of this new entity which is called Candid. Good evening, Brad.
Brad Smith
Brad: Good to talk to you, Denver.
Denver: This is exciting news. How long has this been in the works? And what was the impetus behind this merger?
Brad: The first conversations actually date all the way back to early 2009 when I had recently become the president of the Foundation Center and reached out to Bob Ottenhoff, who was then the GuideStar president. We began to talk about the fact that there really hadn’t been much collaboration between the two organizations, that maybe we should start to explore that.
Those talks continued to mature. In early 2012, we actually hired an external consulting firm to make the case for merging the two organizations. At the time they came back with an answer that would surprise them and us. Wait a minute! Not so fast! You’re actually quite different; the way you handle information and data is really quite distinct. Actually, the audiences you serve don’t overlap that much. But here’s what you could do to work together, save costs.
So we started down that path. We negotiated things like joint outsourcing agreements. We worked on some joint projects. Jacob Harold came into GuideStar at the end of 2012. We continued those explorations. And in 2017, we brought back the same consultants early in the year. This time around, they said, “We think it makes perfect sense. Both organizations have evolved. The field has really changed, and technology has changed.” One of the most important things, as of the 1990 tax returns filed by nonprofits and foundations, now, are… at least the bulk of them are made available as machine-readable, open data. So, that changes your cost structure. It changes the whole nature of producing information on the field, and we think that both organizations have really evolved to the point where this makes great sense.”
When they hit upon the word “candid,” we all scratched our heads and said, “Huh?” Then the more we began to think about it, it does a lot of work for one word. It captures the historical approach to both organizations’ information about the sector. Both of us have built reputations for being fair and objective and producing information that people can trust, which is an incredibly valued asset in today’s information-wary world. The other thing it does is: it works really well as an adjective. It’s a real word. It’s not one of those pseudo-Latin words that people come up with.
Denver: It’s such an interesting name, Candid.; how did you land on that?
Brad: It’s a fascinating process. I’ve been through branding exercises that were really frustrating, where you felt like you were paying a consulting firm to basically learn about your organization and then recycle your ideas to you. We did an RFP, which is the way you’re supposed to do these things, and we picked a really great firm called Open. They took a lot of time looking at the brands in the field, the taglines in the field, the mission statements in the field. They read a lot of our own historical information. Remember Foundation Center goes back to 1956, and GuideStar goes back to the birth of the internet in the mid-’90s. They started to come up with this idea of one-word names. We had already decided that we weren’t going to call it the Foundation Center. We did want to consider GuideStar; it’s a strong brand among all the potential names. But overall, the staff and the leadership felt if we could come up with a new name, it would really help create this new organization.
When they hit upon the word “candid,” we all scratched our heads and said, “Huh?” Then the more we began to think about it, it does a lot of work for one word. It captures the historical approach to both organizations’ information about the sector. Both of us have built up reputations for being fair and objective and producing information that people can trust, which is an incredibly valued asset in today’s information-wary world. The other thing it does is it works really well as an adjective. It’s a real word. It’s not one of those pseudo-Latin words that people come up with.
Just begin to imagine. GuideStar has a really good report they do every year… GuideStar Report on Nonprofit Compensation. Think of that as the Candid. report on nonprofit compensation, and you begin to get ideas on how this can be used. Together with the style guides and the visual look we want to give the new organization, we felt, really, it conveyed both the historical ethos of the organization, but also something fresh and modern.
Denver: I agree, and I like it.
Is there an estimated cost of what it’s going to take to put the two organizations together? And do you have plans to try and go out and raise some of that money?
Brad: We do. We have put together a campaign, a capital campaign. The heart of the campaign is really about the actual integration of both organizations, which is… the overall campaign is around $50 million. Within that, about $18 or $19 million dollars over three years is actually the physical and cultural integration of the two organizations. Those costs – some people asked: Why does it cost that much? We’re quite different than a lot of nonprofits. We’re not service organizations out of a website. We have huge stores of data, content, video. We do a lot of machine learning. Between the two of us, we have 30 different business systems because we have budgeting, accounting, time allocation, order processing, credit card transactions – all that kind of stuff. We have earned income for subscription products.
Integrating, bringing all those systems together, making the right decisions, requires a lot of professional services, software expenses, and even things like cloud expenses.
We’re consolidating most of our data and web properties and software applications in the Amazon Cloud for lots of reasons. All that costs quite a bit of money and takes time. So, that’s a big chunk of it. The rest of it is for ongoing general support from likely funders because we also… we’re quite unique in that we have over 16 million people that use our information 24/7. We have to keep running the whole time we’re building this new airplane. So we have to keep flying it. The general support is really important, especially for the 99% or more of people that use our service absolutely free. Then there’s another piece of it, which is strength in the reserves that the Foundation Center is bringing in because reserves are important for the long-term viability of the organization.
Then something experimental, which is an internal venture fund, where we can actually loan ourselves money as if it was internal venture capital, to develop new products and services that we can then pay back to this fund. So, that all adds up to a lot of money. We are doing well with the fundraising. We definitely have not reached that goal, but the response of foundations has been very encouraging.
We’re going to be using machine learning to autocode all of the GuideStar data. What that will mean for the user is: it will be a much better search experience. You don’t have to be tied as much to knowing broadly what an organization does or what the exact name of the organization is…
Denver: That’s great. It’s great you have a little bit of money for innovation and opportunities that come along, and that you’re not completely pinned down.
Finally, Brad. For the consumer who uses this data, what will be the benefit to them of this combined entity?
Brad: The immediate benefits that people are going to see; one of the methods we have is: if you’re already using Foundation Center and GuideStar products like Charity Check or GuideStar Professional or Foundation Directory Online, you will continue to get the same kind of quality and service that you’ve been getting. In the relatively short term, you begin to see richer information in those products as we begin to cross-pollinate those products and services with the GuideStar information about nonprofits and the Foundation Center information about foundations and grants, and particularly a lot of the international information that the Foundation Center brings.
Also, we’re going to be doing something which is a little geeky. We’re going to be using machine learning to autocode all of the GuideStar data. What that will mean for the users is: it will be a much better search experience. You don’t have to be tied as much to knowing broadly what an organization does or what the exact name of the organization is, and that information is really important because that information not only flows through GuideStar’s products, but if you use AmazonSmile, for example, if you picked a nonprofit to have– I think it’s 0.05% of your purchases you make on Amazon, be donated to that nonprofit… The information you’re getting about that nonprofit is coming from GuideStar.
Similarly in Facebook, there’s a data pipe from GuideStar into Facebook that allows you to create a campaign for your favorite nonprofit. With this information now being autocoded and enriched, you’re going to be able to search, for example, by a cause. Let’s say you want to fund toxic waste treatment, or environmental consequences of toxic waste in a given state or something, you’ll be able to start typing in a natural language phrase and get a whole list of organizations that are working on that issue, rather than picking… knowing the organization in advance. Further down the road, we do have ideas for new products and services that will be possible.
I think one of the biggest wins is that the two organizations together will be able to bring much more standardization of information to the field and a lot less duplication of effort. Right now, a nonprofit has to fill out the same organization or information about themselves on a zillion different platforms, for a zillion different purposes. We feel the weight of the new organization will make it possible to make the profile that people fill out– that are now part of Candid.– flow through grant application systems, even perhaps government contracting, and we will be able to reduce the waste so that nonprofits can really get to doing the work they want to do to make the world better.
Denver: This is all very exciting. I want to thank you so much, Brad, and I also hope that this serves as a model and an inspiration of sorts for some other organizations in the sector, who would really do well to combine their efforts with another entity. The best of luck to you and Jacob in this new venture.
Brad: Thanks so much, and thanks for everything you do for the field as well.
Denver: Thank you, Brad.
Brad Smith and Denver Frederick
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