Lehua closed down her fundraising startup after reading our blog: plan change story

Learning about ‘counterfactual analysis’ threw some puts on sunglasses cold water on Lehua’s startup idea.

Lehua Gray’s story is an interesting ‘significant plan change’ because she increased her social impact simply by realising what she was doing was not accomplishing anything when the true counterfactual was taken into account.

Lehua is an entrepreneur in Texas who studied environmental sciences but afterwards taught herself coding. In late 2014, along with two co-founders she had just met at the eBay Hackathon, she founded a company that offered charities an innovative fundraising platform and took a cut of the money raised. Her role in the startup was a combination of coding, UX and sales.

The team’s hope was to make the viral nature of the ‘ice-bucket challenge’ replicable. In their platform, someone would donate money to a charity, but it would only actually be delivered if, say, 3 friends who they nominated matched their donation. They might also be offered the option to do a public challenge on social media that would spread the fundraiser instead of donating the full amount, as in the ‘ice-bucket challenge’.

Over a period of 9 months they had built this platform and were improving it while some charities tested it out.

However, in the first half of 2015 Lehua started following me on Facebook and so started regularly encountering and reading new 80,000 Hours’ blog posts about how to have more social impact.

As a result, Lehua started to have more doubts that her project was actually useful. On a Skype call she told me “my concern was that we were syphoning money away from good nonprofits by giving bad nonprofits an effective tool to raise money.”

80,000 Hours reinforced the importance of choosing the right cause, and using an intervention that is likely to work. Her platform would be raising for all kinds of charities, many of which she did not believe were doing much good, either because they weren’t working on the right problem, or weren’t doing anything useful to solve it.

While the company could in theory approach and give preferential deals to organisations that they believed were more effective, her two co-founders did not share Lehua’s view of social impact, and preferred to support groups she regarded as neutral or even harmful. As they had a majority equity stake and similar views, Lehua was never going to be able to set the priorities of the company such that it would do more good.

She continued, “the straw that broke the camel’s back was to read your article The Ten Most Harmful Jobs and what I was doing was in there – raising money for bad nonprofits.”

Here’s the quote from ‘The Ten Most Harmful Jobs’ which included at number eight:

Fundraising for a charity that achieves nothing, or does harm
The share of national income that a country gives to charity changes little over time, though it varies widely between countries.
As a result, if you’re fundraising for a charity that is much worse than average, you’re at least in part taking money out of the hands of other organisations that would produce much more social impact with it.
If on average charities do a lot of good, then that kind of job is indirectly very harmful.
This is one of the few jobs you could end up taking without realising the damage you’re doing because it’s a hidden effect.

Reading this caused Lehua to decide that raising money for mediocre charities wasn’t merely a mediocre option, but was more likely neutral or destructive. Because most people have a target level of charitable donations each year, when they give to one organisation, they are less likely to give to another later on. She figured a platform that gave all charities an extra opportunity to fundraise small amounts would simply redistribute money between them in a random way, not increasing the value they collectively provided.

I should clarify, as I do in the ‘harmful jobs’ post, this is partly speculative – we don’t have very high quality evidence to say exactly how much donations to one charity are offset by lower donations to another. The two key pieces of evidence are that donations to nonprofits as a share of GDP are remarkably stable over time in each country despite changing fundraising methods. Furthermore, psychology research shows that doing one good thing makes you less likely to do another good thing later on, so-called ‘moral licensing‘.

Regardless, this information combined with the fact that she did not feel aligned with her co-founders, meant she did not see much value in continuing with the startup. As a result in September she decided to leave the project, and her co-founders, who were not interested in doing sales work, decided to throw in the towel. Fortunately, they had other options they found similarly as appealing, so “fortunately it was a very calm break.”

Is she sad to have learned the project she started out on wasn’t likely to improve the world much?

“No, I am definitely glad to have found this out early – it’s better to work on something, well, better right? I guess the thing that I’m sad about is that the people I worked with didn’t have the same values as me.”

Having recently had all her time freed up, Lehua is starting work on an app for getting through breakups with your mental health intact. Having learned from co-founding with people she barely knew, she is now working with people she has known for much longer.

Right now she is focusing on for-profit entrepreneurship because she is not confident that her current skills would be enough to start a nonprofit that would be more effective than those which already exist. She is open to working on both a startup product that does good by being directly valuable to its customers, and one that simply makes money she could donate to valuable causes.

She is currently interested in giving to family-planning charities in the developing world, but would look through the research on charity effectiveness much more thoroughly before giving any significant amount.

We look forward to tracking her progress and hopefully giving her useful advice in the years to come!