Everyone Wins with Stock Donations

Everyone Wins with Stock Donations

October 21, 2022
46 minutes
EPISODE SUMMERY

Steve Latham · DonateStock, CEO and Co-founder | When you think about making a donation to your favorite nonprofit, you might not realize that you could be donating (and saving!) more than you thought possible. Steve Latham is changing how we think about nonprofit stock donations through DonateStock, a platform that makes donating stock easier for everyday investors. Tune in to learn about stock donations and how you can get in on the action by donating stock!

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EPISODE NOTES

If you’ve been involved in the nonprofit world for the last decade, you know that the landscape of nonprofit fundraising has significantly shifted to increase charitable giving as digital innovation drives donor engagement. But in order for innovation to truly change the fundraising game, it’s critical for innovators in technology and finance to direct their attention and their talents toward increasing social good.

Steve Latham is doing just that.

In 2020, while many of us were locked in our homes and navigating the uncertain terrain of a global pandemic, Steve recognized an opportunity to increase donations to nonprofits doing critical and life-saving work. As a fintech innovator, Steve leveraged his background in finance, technology, and digital marketing to found DonateStock, a tech platform addressing the historical inaccessibility of nonprofit stock donations by streamlining the stock donation process.

In the last two years, DonateStock has innovated the stock donation pipeline so that everyday investors can donate stock to nonprofits with ease, allowing donors to give more charitably and save their tax dollars in the process.

By making stock donations a mainstream source of nonprofit revenue, DonateStock allows nonprofits to tap into a new pool of resources to elevate the financial infrastructure of their social good initiatives. Creating more opportunities for nonprofit fundraising? We love to see it.

Listen in as Steve introduces us to the world of nonprofit stock donations, and learn why stock is the “biggest pool to fish in” for nonprofit fundraising. You’ll want to listen until the end to hear about the exciting partnership between DonateStock and Funraise!

Make sure you listen to the entire episode to hear a bonus interview with Arup Banerjee, CEO and Co-founder of Windfall Data, recorded at The Nonprofit Innovation & Optimization Summit. Watch and listen to the full interview!

And if this episode gets you as excited about nonprofit stock donations as we are, be sure to create your free Funraise account to get started unlocking all the potential that stock donations has to offer.

TRANSCRIPT

Hello, I'm Justin Wheeler, and welcome to this episode of Nonstop Nonprofit!

If you’ve been an active listener to the pod, or if you’re following along with me on LinkedIn, you know that I believe that the best companies (like Funraise!) are born from leaders whose products address issues that the founders themselves have faced.

Innovation is often driven by a frustration with inaccessibility, a desire to dismantle the status quo, and a passion to shake up the system. Nonprofit fundraising is no different–innovating the marketplace to drive user experience and increase donor engagement is key to increasing nonprofit revenue.

That’s where Steve Latham comes in.

As CEO and Founder, Steve founded DonateStock after he personally experienced the pain-in-the-ass process of making nonprofit stock donations, and realized that streamlining the process would increase stock donations and overall revenue for nonprofits.

Steve saw untapped fundraising potential and made it his mission to bridge the gap.

With a background in technology, finance, and social good, Steve started DonateStock to create ease in the nonprofit donor experience and facilitate the transfer of stock donations to create a world where everyday investors of diverse economic backgrounds and income levels can become nonprofit donors. That's something we can all get behind.

In this episode, you’ll hear us discuss how everyone wins with stock donations—and how we’re teaming up with DonateStock so that you can win, too.

Let’s dive in!

Justin Wheeler Steve, thank you so much for joining Nonstop Nonprofit podcast. How are you doing today?

Steve Latham I'm doing great. Thank you.

Justin Wheeler Awesome. Well, I'm really excited to have you on the show and to talk about stock donations and to talk about our partnership as well. But before we jump into that, I'd love just if you could share with our listeners just a little about yourself, your background, and how you got into stock gifting.

Steve Latham Sure. So I'm pretty new to the nonprofit industry; a couple of years now. I started my career actually in finance as an analyst, and then after business school went and did some private equity for a while. You know, I got the startup bug about 20-plus years ago and joined the early-stage software company and I've kind of been in that world ever since then, mostly in the marketing and advertising technology side of it. And so, I've always loved finance, loved technology. And just, side note, my mom was as a fundraiser, Executive Director for American Cancer Society, where I grew up. So I grew up doing a lot of fundraisers, setting up signs at golf courses and tearing them down and doing all that. So I kind of watched her for years really wearing lots of hats in small nonprofits, small office of a big organization. And so I think that's kind of always been, you know, fundraising and giving back has always been kind of part of my ethos since really since I was younger. DonateStock really happened and started, if you go back over a decade ago, a friend of mine who's a financial advisor is telling me about the benefits of donating appreciated stocks to their cash. In fact, their entire practice was about going out to these wealthy individuals and presenting to them more tax advantage ways to give as a way that to show them how they could actually get more and save more at the same time. And he told me about it and I thought, "Wow, that sounds amazing." In short, you can avoid the capital gains tax on the stock that you donate, and then you also get to itemize the full deduction of the market value. So if you've been sitting on the stock for ten years, it's at five or ten X, you can really save a ton of taxes while giving the nonprofits a larger pretax gift. I thought, "Wow, that sounds too good to be true".  I talked to my accountant, talked to my broker, like, yeah, you can do that. And then I learned why very few people do it because it was just such a pain. My own experience--

Justin Wheeler Very hard.

Steve Latham Yeah, my own experience as a donor was, I had to research, make calls, I had to literally send a fax, I had to fill out forms. It was several hours of work, but also just trying to research, understand the process and all just to make a more pretax, a more managed gift. And it was just more hassle than it was worth. And so for I didn't do it again, that was over a decade ago. And then about two years ago I was thinking about that and I assumed somebody had made it easy by now that someone had digitalized it, made it a slick, easy process. And when I realized that no one had, that was really inspiration. I was like, "Okay, this is what I'm going to do next." Because I was really wanting to get out of the marketing, advertising, technology industry, do something that was actually more fulfilling for my soul, something where I could kind of give back while also doing something exciting in that as a commercial venture. So this is really kind of, that was how we started down this path, like let's just solve this for donors and, and see where that takes us. That's kind of kind of how we got started.

Justin Wheeler Yeah, I found, you know, being an entrepreneur myself, and the sort of like best companies are really born from problems that, you know, plagued us at one point in time.  And, you know, typically, like, you just see much better traction with product that way. And so I want to kind of double click on sort of like the pain that you experienced when giving stock just because I think, I think this pain is still very much the reality for so many nonprofits. I think this is why so many organizations just aren't accepting stock donations because of the perceived effort it takes, both on the organization side and also the donor side. So, maybe like help us, help us understand. Just like, you know, of course not through your company, but like how most nonprofits today are going about accepting stocks of nations and just the challenge it is.

Steve Latham Yeah, well, it's been a we call it a biased and broken process. So one for donors, it's generally been the top 1% who get good financial advice, who then have advisors who could do this legwork for them. But it's a pain. As a donor, you have to get information from the nonprofit. You've got to fill out forms for your broker, you have to deliver that to them somehow. And that's if you know what to do, if you know what to do, you've got to figure this all out from scratch. So it's it's painstaking. But what we didn't realize till we got into this and started working with nonprofits was the pain points for them and why very few nonprofits actually have been aggressive in marketing or soliciting to promoting stock gifting. Historically, there is I'd say there's two major problems that nonprofits face. One is access. Because of these what are called "know your customer" and anti-money laundering compliance requirements. The brokerages have a really difficult time opening accounts for small nonprofits, which, unfortunately, you know, there's now over a million and a half, I heard 1.9 million earlier today in terms of new nonprofits or total nonprofits and they and unfortunately, they have a high risk propensity for either malfeasance or fraud or just unfortunately, just bad management, financial management. So brokerages have a cost to actually get compliance--a waiver to actually create a brokerage account for nonprofits. The other problem is nonprofits generally don't build assets, they don't build balances. They use that brokerage account to receive the stocks, sell the stock, and move them the cash out to their operating account or their endowment fund. So the brokers have had a hard time because there's not really any money in it for us, but there is a cost. So when we started DonateStock and put a kind of a beta out and early or very end of 2020, and a few nonprofits were like "this is great but we don't have a brokerage account and we can't get a brokerage account." We knew that was a big problem. And then, those that do have a brokerage account have a different set of challenges in that there's two big problems with stock. One is the painful process. And then the donors come to you, so you have to kind of walk them through that process; educate them. And most nonprofits really aren't that comfortable at telling anybody how to do a stock gift; it's just kind of something they're just not very well versed in. Secondly, the way that stock transfers through this archaic financial system, we have what's called the DTC or depository trust companies. That is like the transfer mechanism. It takes days for this to happen. There's no transparency. And then when stock actually does hit the nonprofit's brokerage account, they have no idea whose stock it is. So if you donated stock to a nonprofit and did not tell them, "I'm donating 50 shares of Apple" and they just see the stock come in their account, your identity does not travel with it. And that's the big, I think, the big disappointment for a lot of donors is "I just made this really nice gift to you and I'm waiting for you to thank me, send me a note, maybe give me a call, that's a really big gift I just gave you." And instead, it's just crickets because the nonprofits don't know who stock it is. So they routinely get stock transfers and they have no idea whose it is until the donor reaches out months later asking for a tax receipt. And that's when they actually have to go and research and say, "Oh, I'm sorry, what did you give us and when? And we'll go research it and try to find it. Oh, yeah, we do have your stock. We'll send you an acknowledgment." But by the end, it's just been a bad experience for the donor, so they're not very inclined to go do that again. Then the other issue is that everybody is donating the same stock--

Justin Wheeler It's amazing. It's amazing that anyone would even donate stock given those hoops you have to jump through!

Steve Latham And the next piece: if you're an organization that receives a lot of stock gifts, what we see is a lot of people donate the same stocks. We see a lot of Apple, a lot of Microsoft--stocks that people have owned for decades. They've been around a long time, really large market caps, widely held. So if a bunch of people are all donating Apple stock to a nonprofit, they see Apple coming in ten shares here, five shares there, ten shares there. They don't know whose stock is whose and they literally have no way of knowing whose stock it is. So they have to kind of go back to the donor, say, "can you confirm that, you know, we got a bunch of Apple stock, we're not sure which is yours. Can you tell us if the shares actually left your account?" So it's just a really manually intensive, archaic, painstaking process for the donors and nonprofits. Most nonprofits historically, I'd say majority of them, when the "Yes we do receive stock gifts" like, "yeah, a couple cause we have a board member that likes to give us a big gift every year; we have to receive stock. So we know that one stock gift is from him or her and then that's that's the extent of it." So that's that's really why stock is despite being, frankly, the biggest pool to fish in if you're a nonprofit. I mean, people households generally have ten X more in their investment account than they do in their checking accounts, at least that, maybe more especially in larger network households. It's a bigger pool, it's more tax advantaged for the donor. But it's just been really hard to get at, or it's just been kind of locked up for for decades. So that's really, those are the problems that we set out to solve.

Justin Wheeler Okay. So whenever there is a problem, and specifically with stocks, like how big of a problem this is, you know, for again, for both sort of like parties, the organization and the end user? Like, the donor who's trying to give, like there there has to be a big--and you just you just you kind of shared some initial data there--but like, if the problem is is painful, usually that means like if you can solve it, there's a big opportunity to build a business and a big opportunity for organizations to tap into a whole nother, you know, resource pool where they're just currently not fishing. And so how did a DonateStock solve this problem and make it easier for nonprofits to accept stocks?

Steve Latham Sure. Well, I'll start with like answering what you... It is a huge prize. If you think it's about 60 million investors out there. Roughly over half of U.S. households actually own stock. If you think of 60 million investors, if every investor donated $1,600 a year in stock to all the nonprofits, right, across all the nonprofits they support, that would be $100 billion in funding for nonprofits. Individual giving last year was close to $300 billion. You take away, you take away Elon and Bezos, Mackenzie Scott, that never gets smaller really fast, right? So, stock has a potential to be just a really a huge windfall for that for the giving industry if they could unlock it. So the way we do it is a few things. One is we just make it easy for the donor. Making it the easy donor experience where in just a matter of a few minutes, a donor can click on a DonateStock button on the nonprofit's site, enter their information, provide their brokerage details. We don't ask for a username or log in. We're not asking for their credentials, but just the information needed, and then the securities they want to donate to that charity. And that's it. We'll take that data, send it to their broker and facilitate the transfer the stock to that nonprofit. That's if their nonprofit has a brokerage account. But then we also let the nonprofit know. We send them an email. You're going to get this gift that Justin is sending you 50 shares of Apple worth $7,500 and it's in their dashboard, too, so they can see that. So they now know "Justin Wheeler just made a stock gift to me. It's enroute." Because it takes days to go through the financial system. It's not instantaneous like we're kind of accustomed to. So one, they have transparency and visibility in the process and then it makes it much easier for them to reconcile the gifts. Now if they don't have a brokerage account or frankly, don't have the team to process all of these, we created our own 501c3, DonateStock Charitable, so we can actually convert that stock to cash for the nonprofit and just send them the proceeds through ACH. And that's overwhelmingly what they what they prefer. Because they don't like, it's a pain. It's still manual process to to go. You got to check your brokerage account. You got to initiate a sell order. You gotta wait a few days for the stock to clear. You got to then transfer the funds. Then you got to acknowledge gift. We do all that for them. So it's, it's like, we can turnkey this entire process for you and that's, for those that are either resource constrained or just so busy pursuing the mission, they don't have the time and effort or hassle to go hassle with this. Then we can make that really easy for them. So it's, it's access to all the nonprofits, so every nonprofit can receive stock. And it's ease and efficiency, removing the friction, both for the donor as well as for the nonprofit. And high level, that's what we do.

Justin Wheeler Amazing. So you've really solved two problems. One is you made it accessible for all nonprofits to accept stock donations. So you removed sort of like the, you know, potential security risk, the KYC process that a lot of nonprofits just can't go through or maybe wouldn't pass because of the requirements. And so you're making it possible for, making it more accessible. And then you're also making it extremely, a lot easier for the donor to actually initiate a transfer of stock to gift to a nonprofit, which I actually double click on in a little bit, talk a little bit more about the benefits of stock donations. But what I want to come back to is this market size. So you mentioned, you know, $100 billion potential total through stock donations. And so I would assume we're still very much in the infancy of stock gifting. So how is, what are you guys doing to really try to move the needle? What's going to be the catalyst, do you think that will just make this a more mainstream giving method for for donors?

Steve Latham Sure. So a few things. So one is awareness. So very few investors are aware of the benefits of charitable stock gifting. It's amazing. When I was starting this, the first probably 25 people I asked, of means, only one can tell me about the benefit of avoiding Capital Gains tax. Everyone's like, "Well, I know there's some benefits. I'm not sure what they are." And when you explain it to them, the response is like, "Why do I not know this?" It's kind of like one of the best kept secrets in personal finance and it has been for decades. That's why we call it kind of a 1% solution historically. So one is awareness building. We are actually going to be, we view the financial advisor channel is really the best way to educate their donors because ultimately, as a fiduciary, you should be telling your clients, hey, there's more tax advantaged ways to give. So when you're doing a charitable giving and donate stock, you avoid capital gains tax, you get the full write off. And so they've been kind of loathe to do that because invariably what happens, a client says, "Oh, that's a great idea. I want you to go donate stock to these five charities for me." And then it's a lot of work for the for the advisors. So like, no good deed goes unpunished. So we're actually going to be relying on new product for advisors in October, late October, that makes it easy for them to initiate stock gifts on behalf of their clients and then not only do it for them, save them a ton of time, because what an advisor would have to go chase down the charity, get their information, you know, get someone to call them back, get that information and submit the order. And then they'd have to go back and tell them what they gave and when. For them, it's just a lot of work. So we're trying to make it really easy for the advisor to, in a couple of minutes, initiate a gift on behalf of the client, and then have a dashboard of all gifts they've initiated for all of their clients. And then when the when the stock gets received and the donor gets acknowledgment letter, the donor has to click into their dashboard to get their acknowledgment letter. So now the donor has the ability to go do that themselves. So their client, they're like, "Hey, I'm going to" think of fishing, "I'm going to get you a rod and reel, I'm going to put the bait on and I'm going to throw it out there. You're going to then I'm going to hand this rod and real to you, so in the future you can do this yourself." So try to help them become more self-sufficient that way advisors can be better fiduciaries. Be more outspoken in advising their clients without it burdening them with a ton of work to do that they don't get paid for. So that's how we're going to solve the, or tackle the awareness problems, and then it's just a matter of enabling and making it accessible and available to all nonprofits. So, once people start seeing a stock gifting button in the menus of ways to give, they're going to, if they investigate, like "What is the stock getting all about?" And then once they understand the benefits they're going to, generally people say, "Why do I not know this? And why would I give cash? If I have appreciated stock, it's financially irresponsible to give cash, so why don't I just start giving more stock and that's easier. I've got stock I've owned for years. It's just sitting there in an account growing. I can throw a little bit here and there and share my share my winnings with the causes that I love." So it's awareness and then distribution and access, but for the nonprofits and the donors. And over time, the network effect will happen when they start seeing stock everywhere and then once they do it and then they can go to the dashboard and repeat that transaction really easily. There's like 60 seconds to do it the second time. Then it just becomes a new way people to give. We think that over time that's how we go from roughly 1% or 2% people donating stock of investors today to 5%, 10%, 15% over the next five years. So that's that's really where there's just there's so much opportunity to to generate so much funding for nonprofits, for good causes. And it's easy. It's just a matter of getting the button out there and making the clients, or the donors aware.

Justin Wheeler Aware, yeah.  

Don't go away! When our episode returns, Steve Latham reveals more about how awareness influences stock gifting. He also shares the dramatic impact of stock gifting vs a (valued!) average donation. Stay tuned!

And now, enjoy this segment sponsored by Funraise, the world's most innovative and friendly nonprofit fundraising platform. Nonstop Nonprofit recently took our podcast on the road to NextAfter’s 2022 NIO Summit in Kansas City, MO. At the conference, I had a chance to catch up with Windfall’s CEO, Arup Banerjee. Listen in as Arup gives us the scoop on data-driven wins that nonprofits can expect from the type of insights Windfall delivers.

Justin Wheeler Sounds like you're providing a great product to nonprofits, which we obviously both care about. And so maybe just before we jump into that, tell us a little about yourself, your background, and what your company does.

Arup Banerjee Sure. Absolutely. So my background specifically is in computer science, finance. I actually worked in venture capital growth equity after I went to business school. It was all about data, though. And so any time I looked at the investment landscape or I looked at organizations that were trying to understand either their own data sets or being able to augment their own data sets with external data, most organizations were just simply not data-driven. And so my goal and my mission post-MBA world was to really try and solve that, whether that was through business intelligence, mapping out different data sets. But really the key aspect behind any organization is putting that data within workflows. So Windfall, what we do is we are a data and people intelligence platform. And in fact, effectively what we do is we provide wealth screening, propensity modeling, and audiences for net new acquisition. So really capturing the fundraising environment for the nonprofit and empowering them to be much more data-driven within the constructs of their existing IT ecosystem or their tech stack. Nonprofits is the core of our business. We have been doing that since our inception in June of 2016. We do have some other customers in similar industries as well, like financial services, who effectively are targeting exactly similar folks to those in our nonprofit community as well. But nonprofits represent about 95% of our customers.

Justin Wheeler Okay. So tell me, like I always like to know, like the founders, like why behind especially starting a business that's selling to nonprofits, like what's what's your why? Like, what was the inspiration? And you kind of shared it with your background, but like what was your inspiration to like build something specifically for nonprofits?

Arup Banerjee Yeah. So I think there's, there's a couple of different things. One, I was always pretty active in volunteering when I was growing up, and so there was a lot of different challenges that I saw when I was volunteering and effectively helping put on events, fundraise, reach out to folks. That actually helped me understand a little bit more about the work process that folks actually go into. I got actually my MBA at Berkeley, so we have Social Impact as one of our key tenants as an institution and really resonated with me when I decided to go to that school. And it really left a huge element of, you know, appreciation for, I think, this community. And what I saw was that a lot of folks kind of similar to old B2B software, where most software that was new and shiny was built for consumers, but not for businesses. Well, that wasn't what I really saw in the nonprofit organizations, like everybody was using 30 or 40 year old technologies. And it was pretty crazy. But now I think over the last six years there's been a lot of new companies that have actually come out and said, no, this is one of the largest sectors in the country and there's a lot of professionals here. And it's pretty much overlooked for a lot of a lot of folks.

Justin Wheeler Yeah, absolutely. I remember I started Funraise in 2014 and when we went to raise our seed rounds, investors were saying, "Wait, like nonprofit industry, like, is it, you know, is it a market?" And then fast forward to today, how many transactions have happened, how much like capital has gone into the nonprofit initially. It's it's really quite amazing. And it's an exciting time, I think, to be operating a business in this vertical.

Arup Banerjee For sure, 100%. Yeah, I think that's spot on. I think a lot of the folks out there will probably say you can share this part of your business because like there's other opportunities. But I, I do believe that just to kind of, you know, add on to that, I there's a lot more excitement about how we can help and how there is a lot more sophistication that's going into the overall ecosystem.

Justin Wheeler Absolutely. So talk to us a little bit about like some of the like core kind of wins a nonprofit would get from a product like Windfall. What's like the core kind of use case? What are, or even that maybe it's like a case study that you can like share about a specific customer where they know implemented you guys' technology and and saw X as a result?

Arup Banerjee Sure. Yeah. So I'll probably talk about the three different product offerings that like we had talked about. So the first is our wealth screening product. When we got started, net worth was a it was a bad word. So nobody wanted to use net worth. They didn't believe it. It was all about give capacity. And we came out and said, "Nope, we're going to actually give you a precise figure." We'll say John Smith's worth $2.3 million versus Jane Doe worth $49.9 million. And then we refresh our data every week and we also don't charge on credit. So we want you to use us as frequently as you like. And so that was very, very different for a lot of organizations who might have done wealth screening every three years, or only to the top 10% of their population. So they're missing tons of hidden gems. So some of our use cases that we've recently seen associated with wealth screening is that we're finding anywhere between 40 to 50% net new prospects that they had never looked at within their database. And we even have some situations where you utilize in our data for somebody that was a donor who gave $100, $500 as soon as they started to cultivate stewarded through it. That's a $50,000 donor. And so some of we do have some case studies on this with Make-A-Wish, Arizona in particular, who actually use our secondary product, which is propensity to give modeling. So we layer on artificial intelligence, machine learning to not only say, hey, is this person wealthy, but will they give? And what is the use case for giving? Is it major gifts playing, giving, annual fundraising? And we really customize that model for your organization. In that scenario, not only are you looking at wealth, but you're also looking at prioritizing a major gift officer's portfolio. This reduces the amount of time by about 75% that these major gift officers have to go through data and just will ultimately start doing the real job, which is cultivating those relationships instead. The final one is around net new audiences. So we also are the data layer associated with direct mail, social, digital advertising, the efficacy associated with those fundraising. We've seen a ten X return within nine months of folks utilizing us when they historically have been using Facebook lookalikes, for example, instead of really targeting the donors or the net new donors that they should be going after instead.

Justin Wheeler Yeah, super interesting. On the net worth, I used to be a fundraiser, so before I started Funraise, I spent 12 years in the nonprofit space and we started implementing some, some like net worth sort of technology or wealth technology. And where we started first was with a recurring donors. We had like a pretty large recurring donor program, about 1000 donors, and we found that donor was giving them ten bucks a month and had like just an outrageous net worth and lived in the middle of the country, never met them, never had any conversations. So we started to build a relationship and that individual went on to give in our six figures yearly after that after you know that conversation as a stewardship. All that to say, you know like I really believe in just like how wealth data can really help, especially an organization with lots of constituents, lots of records. It's hard to prioritize like, who do you talk to? Right. So the wealth indicators is a strong one. On the custom audience, so is it basically you're taking like the organization's like data, existing data, and finding donors that look like the database? Is that like an oversimplified version?

Arup Banerjee Yeah, so, that same propensity model of who's going to respond and who's going to whatever your target is, right? You want to get donors that can give up to $10,000 a year. I'll make it up here, right? Well, you only have 50,000 records in your database, and, yeah, we can certainly mine your existing 50,000. But what about the next 50? What about the next 100,000 people that you want to add on? Well, what we have is our household database is over 90 million households across the United States. So we're tapping that same model. Instead of applying it to your 50,000 records, we apply it to our 90 million records. And now we're going to select the right 2 million, 3 million people for you to actually serve your marketing to instead. And so the cool part about that is that it's omnichannel. So it can be the same 3 million folks can go on to Facebook, Google, LinkedIn, direct mail, whatever you want to do. You can apply that data set for various campaigns.

Justin Wheeler Okay. Very interesting. Very interesting. What's a trend as we kind of round out 22 and going into 23, what's a trend or something you really excited about in this industry, whether it's something you guys are working on building or something that you're just seeing more in in the nonprofit vertical?

Arup Banerjee So I've notice this trend over the last like three or four years of nonprofits are getting more data driven. So like the thesis from six years ago, I think the industry has started to shift quite a bit and the thing that everybody's probably has on their mind, especially in the nonprofit ecosystem today, is the economic uncertainty. Yeah, what's really interesting is that nonprofits will see a decline in giving in recessionary years. But the difference here is that Americans have more cash than ever on hand. Now, the savings rate did go down the last two months in terms of people tapping in those savings. But unlike any other economic environment that we've ever seen before, consumers have a lot of cash lying around, which is really great for nonprofits from a support perspective. Yeah. And so I think it's really important that folks are going to start working a lot more intelligently then pray and spray. And it's something that even with in-person events, we're here, we are in an in-person event starting to come back, really still keeping those processes, measurements, iterations are going to be much more important moving forward. And I think this trend has really accelerated last two years. My hope is that it continues over the next 5-10.

Justin Wheeler Absolutely. Yeah, that's awesome. That's exciting, yeah. All right. Last few questions, the rapidfire questions. There's no wrong or right answer. Some may be more right than others, but that's okay. All right. So digital reading or actual book?

Arup Banerjee Digital reading.

Justin Wheeler Do you have a favorite book at the moment?

Arup Banerjee I just read well, it's a completely different book. It's called Amp It Up by Frank Slootman, who's the CEO of Snowflake. So another data oriented company. And just really interesting to read his story.

Justin Wheeler Awesome, cool. Pizza or salad?

Arup Banerjee Pizza.

Justin Wheeler If you had to live somewhere for the rest of your life: beach or mountains?

Arup Banerjee Beach.

Justin Wheeler Beach. Me too. Football or futbol?

Arup Banerjee Football.

Justin Wheeler Yeah. Dogs or cats?

Arup Banerjee Dogs.

Justin Wheeler Dogs. I'm not a big cat fan. Funnel cake or cheesecake?

Arup Banerjee Cheesecake.

Justin Wheeler And the last one, The Goonies or The Sandlot?

Arup Banerjee Sandlot, for sure.

Justin Wheeler Sandlot for sure. We have a lot of the same responses. Appreciate it. Well, hey, thanks so much for coming on podcast. Appreciate your time.

Arup Banerjee Yeah, thank you so much.

Justin Wheeler Appreciate it. Absolutely.

Hey! Welcome back to Nonstop Nonprofit. Before our Funraise-sponsored break, Steve was about to give us the inside scoop on the importance of donor awareness on stock gifting. Nonprofit friends, having DonateStock in your corner unlocks potential for amazing gifts Listen in to hear how accepting stock donations can dramatically change gift size—and impact—for your organization.

Justin Wheeler Yeah, awareness is crucial. I think that, you know, like there's very few like fundraising programs where if you just put it out there, it like we'll have initial kind of like, traction. But like if you have a website and you have web traffic, putting an option for people to give stock is going, you're going to see something happen.

Steve Latham We've seen, anecdotally, so many situations where all they do is announce it and all of a sudden here goes a $50K, $100K donation come in. Because people aren't going to come to you and ask, "Hey, do you take stock gifts?" But if you inform them this is the way to do it, they're like "Yeah, I have a lot of stock if, if I can give to you through that, that's a no brainer."

Justin Wheeler Totally. Totally.

Steve Latham Yeah. I have a great a great story on that. Just real recently, just two weeks ago, there's one of our nonprofit clients was having their big annual galas. It was two weeks ago today. And they put out in their response card like, "You can use stock to bid on the auction items" and and their their grand prize for the auction, the live auction was, I don't know if you're a Yellowstone fan, but it was basically like a weekend in Montana with Cole Hauser, who plays Rip on Yellowstone. So one of their benefactors informed the people who run this nonprofit, she said, "I'm just letting you know, I'm going to outbid anybody for this prize. I'm going to win this auction as long as I can use stock. You know how much that went for?

Justin Wheeler How much was it?

Steve Latham $220,000 for this event. Right? And, honestly stock enabled it. She couldn't have done that. One of the ways she did that was with stock she's had forever. So it's such a great story, and that's what's really fun about--I'm sure you feel the same way. That's what so much fun about this industry is you can play an active role in helping great things happen. And that's that's just one example. I can, there's another organization in Miami. I was speaking at a thing there earlier this summer. She went back, they signed up. They put an email out to their to the board and their donors. And literally within a week, they got a $50,000, $50,000 gift as a group called "Putting Stock in Children" I think or "Taking Stock in Children", one of the two. It was real similar to DonateStock, which was kind of funny. Another one called "Channeling Partnership", they announced it and had got $100,000 gift within a week. It's just, there's so many great stories out there. It's just, you've got to just communicate. If you communicate it, somebody is going to give you stock.

Justin Wheeler Yeah, I do. I host an annual gala for an organization that I sit on the board of, and last year we were doing a cash auction and I run the cash auction component of it. And we always start with like the highest gift amount, and, you know, go way down to like 100 bucks, whatever it might be. And we were at the largest sort of amount was the night, which was like 100 grand. And we asked, you know, "Anyone tonight can donate hundred thousand dollars?" And, you know, to your point, like most people, especially like savvy investors, have much more in their investment accounts than in their checking accounts. Like no one's like raising their hand. You know, there's people at capacity. And I just like flippantly, you know, it was like "We accept stock donations if that changes the game" and a couple of hands go up and, you know, donated 100,000 plus in stock. Most of it was like Apple stock, is what it was. But it's just crazy how like, there's very, like going back to my original point, like there's very few sort of like revenue programs that a nonprofit can adopt with almost like, where awareness is just making it aware that you do this thing, actually increases the revenue. Yeah. So it's, it's, it's pretty amazing. Another question I wanted to come to was, I think and I think this like well was the whole kind of like "meme stock" like phenomenon that's happened over the last couple years. It has created a lot more consumer investors or investors who are like more casually sort of investing and allocations in technology, making it easier to even to invest. Do you see like that sort of energy and also helping fuel sort of this like new kind of air of giving through stock because you have, you know, younger people like investing and are already used to like, you know. So I'm just curious if if you see this kind of sort of like consumer sort of investors playing a role and helping this more mainstream?

Steve Latham We see potential. The main thing that I'll put out there about about stock to get that benefit of avoiding Capital Gains tax, you have to have held the stock a year, right? So if you buy it, if you buy GameStop and then a month later want to donate that, you wouldn't get the same but tax benefits, right? IRS says "No, you have to hold it a year." So it's really for a longer term holdings, but what we are seeing is the studies show that the younger generations are just much more generous in their mindset. They claim to be charitable like 67% of, I think millennials, identify themselves as charitable people. Where, it's like one fourth of that if you go to the boomers. So, you know, it's a very different generational mindset about social awareness and social responsibility. And there are more people because of the ease of getting into investing, because of all that happened during the pandemic, all the stimulus money, and people will stay at home and started started investing, you know, if you want to call it investing, some might call it speculating. But whatever, they're getting in the game, right? They're learning and they're getting the taste for it. So I think there's definitely a groundswell of younger investors that are very charitable and benevolent just in their way of being that as they acquire assets and start having some meaningful assets are going to be really a huge force for stock gifting over the next decade or two. But today, I would say, you know, just some data. We've surveyed our donors and we're about about 500 transactions in now, so we have a pretty good database, and it skews over 55. It's households that have assets that, you know, some data points, like our average give today, if you like, straight up the average is about 22 grand. If you remove the outliers and normalize that, it's about $5000 as a as an average, but it's about $2000 as a median. And I think over time we'll see that probably go down. But an average gift of, let's say $2-5000, compared to like average. I don't know if you guys if you guys publish-

Justin Wheeler $120 is like average online credit card donation.

Steve Latham Yeah, I just heard earlier today one of the top five fundraisers in the country, their average gift is 35 bucks. Like, that's a lot of people. If you think about just, you don't need a ton of big stock donors to do well, but now anybody can donate stock. They don't have to just be a wealthy household. They can be somebody with, "Hey, I can give you $100 in credit card or $500 in stock. I've got eight shares of Tesla."

Justin Wheeler So that's what's super interesting is, you know, like these like, you know, thousand dollar, $5000, $8,000 gifts are coming through stock, are likely individuals who couldn't just do that with cash. Right? So I think that's that's what's so, so key about making this so feasible and easy for for donors to understand. With the headwinds in the economy, and, you know, we know that like the biggest incentive of stock donating is donating appreciated stock that's past the year mark. Do you see any sort of like headwinds with like stock gifting as it relates to like the broader markets?

Steve Latham I'm sure it's depressed activity. I mean, I know I'm sure it has to have, right? But what's interesting is that most of the stock that people are donating, it's not somebody that owned one short term. Like we see Apple came in and the costs that the holding period comes in with it with the data, these are five, ten year holding periods. So ten years ago, for reference, Apple on split adjusted basis was about 10-12 bucks. Today it's down, right? It's at like under $150, but it's still up 12 x the last ten years. And they have a concentration issue, so they're like, "Hey, my Apple stock now is a really big share in my portfolio, I need to harvest some gains. I need to reduce some of my exposure." Gifting is a great way to do that. I think obviously, you know, it'll be better when it's a healthier stock market, it's going to be better for stock gifting. But we're still seeing donations come in every day. People just again, people have been sitting on, you know, we had a 12 year bull market, right, where even if a lot of those big high fliers have really gotten crushed. Not a lot of Roku being donated right now, but we still see a lot of energy stocks and long term Microsoft. Even they're down a little bit, but if you look at them over over the last five, ten years, they're up just dramatically. So we still see stock giving taking place. The other thing, seasonally, like, we're really kind of just hold our breath that hopefully November, December is better now than it is because that's that's when most stock gifting takes place. More so than other types of gifting, people who are doing their year-end, looking at like taking their tax loss, harvesting on their stocks, like selling their their losers to offset gains. That's a time when a lot of them also figure out to do their like terrible stock gifting or DAF contribution that all takes place. I've heard like from one of the big DAF managers said half their donations, half the contributions come in the last month, last two weeks of the year really, that's from a lot of people do that. So or last three four weeks. Yeah, it's December right? So more so with securities than with cash. So I think the number is around something like 30% of donations come in in November, December, all donations. But for stock, it's going to skew much higher just because of that year end planning takes place.

Justin Wheeler From a strategic perspective, my assumption is it's much more advantageous to donate appreciated stock than to sell losing stock. Right? Because there's like there's a max, isn't there? There's like a max, I think $3000 a year that you can write off for harvesting tax, and so which there's no max on appreciated stock in what you donate, correct?

Steve Latham Well there's an AGI limit so you can donate up to 30% of your adjusted gross income in non-cash donations. You can do about 60% cash. So if you made if you're--and this really applies people who are kind of at that have large incomes and are at the stage of life where they're starting to really give away more--they're going to be looking at, you know, they're in their 30% AGI limits. They might do that, but most people generally don't. So practically speaking, you can give away as much as you want unless you just don't have much income. It's hard to get to 30% if you think about what you make. And, "Wow, would I really give away that much in a year? That's a lot." So but, depending on what your AGI is, you could give away a lot. I don't know if you remember Elon Musk, they reported earlier this year, and they kind of got buried in all the Twitter controversy. But he donated $5.7 billion to Tesla stock, to an unnamed nonprofit. I'm guessing it's probably a private foundation he put it in to be doled out over time. But I did the math on that and wrote an article published in Bloomberg just a couple of weeks ago because it was stock he was gifted and granted like it was basically zero-cost stock. But if you add up the tax benefits, his tax benefits were $4.6 billion in tax avoided or saved with that $5.7 billion gift. And that just speaks to the power. And that was the 5.7 was literally 30% of what he made selling Tesla stock that he had to sell a bunch of Tesla stock like $20 billion worth or $19 billion. So like he donated exactly 30% of that to a charitable organization and saved almost 5 billion in taxes. So we look at it as like, just, that's a great example of what's possible and you don't have to be a billionaire to get the benefits of the same tax benefits just a more, you know, not the same scale, but certainly on a relative basis.

Justin Wheeler Yeah, interesting. Super interesting. So one of the things you guys talk about, I think it's on your blog is one of the key insights you pull out is that like the more an organization diversifies, you start to see sort of like growth by like in the magnitude of like five X. So can you unpack that a little bit? How did you get to that sort of five X growth?

Steve Latham Yeah, that's Russell James, from his reports. He's one of the probably foremost researchers on charitable giving and asset mix. What he found is I think, I forget the exact percentages, I'm sorry you caught me off guard on this, but I think it's something that if your non-cash assets are growing at a rate...Are more than X percent of your total composition of what you receive every year, you actually have like a 5x higher growth rate in your overall fundraising, whereas if you're below that, then you actually generally lag the market in terms of growth in your fundraising. So, and it's kind of makes sense, like if you're getting more larger non-cash gifts, you're going to grow that. And the more you get, the more you tell people, the more you're going to get, it becomes that virtuous cycle. So it kind of makes sense, but the numbers are pretty surprising at literally five X higher growth rate if you have a larger mix of non-cash assets. And so, you know, with stock, crypto, it could be those are the most common ones. And obviously crypto  is a much newer and it's I think you will find is probably fairly cyclical. I mean, when cryptos up, you'll see a lot of when it's down probably not. But stock people have held so long and have established cost basis so on to such an established mechanism there we feel like it's a lot less volatile as an instrument for donating.

Justin Wheeler It makes sense. Makes sense. All right. So kind of wrap up the conversation. Really excited to talk a little bit about our new partnership that we're launching here pretty soon. And so for those of you listening, Funraise and DonateStock, have decided to partner. And we're going to make stock gifting available through the Funraise Giving Form. As, for those who don't know, we work with thousands of nonprofits, millions of donors have given, you know, through the Funraise platform. And we're just absolutely thrilled to be partnering, to bring sort of this service to our customer base and to the donors that are giving to nonprofits. And so, yeah, we will be announcing the official partnership here and I think in the next couple of weeks. But Steve, really excited to be working shoulder-to-shoulder with you and the team on making this more accessible to another audience that hopefully will take stock gifting seriously.

Steve Latham It's going to be a game-changer. Because right now if you go to most websites, you have to really work hard to figure out how to donate stock to them. Like it's a lot of clicks, a lot of research. If it's right there on the menu as an option to give, it's going to be a game-changer. I think it's going to be transformational for a lot of nonprofits that never told their donors you can do that. When the donor sees that, like, wow, I can give stock. And it just takes a couple of minutes right here without leaving a site like that's, I think it's going to be really exciting. I can't wait to see the results for this giving season, but we're so excited about the partnership with you guys. We appreciate your leadership and your you know, we've been talking a lot of platforms and there's interest. Everyone says, yeah, this is kind of a no-brainer. But you guys have really emerged as just like really focused and agile, I think, is what's the word that comes to mind. So kudos to you guys for being leaders in this space.

Justin Wheeler Absolutely. Yeah,  we're excited about it. And for those listening and are interested in more information, we'll definitely be linking in the show notes but also will be producing more content with the DonateStock team around further education on how you can start accepting donations via stock. Steve, thank you so much for this great conversation. I found it to be super insightful and appreciate the time you invested in the podcast today.

Steve Latham Oh, thanks for having me. I really appreciate it and look forward to more.

Justin Wheeler Absolutely, have a good day.

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