If fundraising is broken, fix it! How Watsi became the first Y Combinator non-profit

Profile picture for user jreed By Jon Reed August 26, 2015
Is fundraising broken? What if you could change health care by getting funds directly to those in need? Grace Garey shares the story of Watsi, the first Y Combinator non-profit.

Watsi patient in Guatemala

The simplest of ideas can lead you to a monster adventure. That's how it was for Watsi's Grace Garey and her founding cohorts. This simple idea? What if you could make a dent in a serious issue - in Watsi's case, health care - by passing 100 percent of the proceeds directly to those in need? And what if you used the cloudy tools that many startups bootstrap with? Oh, and while you're at it, why not take a page from open source and make the entire process, including the money trail, completely transparent?

So far, so good. But if your idea takes off, you suddenly have a different set of problems. That's the predicament Garey and friends found themselves in after Watsi gained surprising traction on Hacker News. When they were still in launch mode, Watsi rose to the top of Hacker News, got a surge of 16,000 unique visitors, and crashed their web site.

From a disruptive idea to a Y Combinator invite

When Watsi's web site came back up, Hacker News visitors had fully funded health care for every single patient Watsi had posted, along with every single patient in the Watsi pipeline for the next six months. Soon Tech Crunch picked the story up; Huffington post and NBC piled on.

For most non-profits, that would be amazing news. But when your non-profit directs all proceeds to the recipients in need, growth ain't simple. How do you fund the operational staff? Garey and co-founders were forced to juggle their upstart venture with their day jobs; Garey would slip into the bathroom of her New York City employer to post patient profiles when her bosses weren't paying attention. Not exactly a sustainable strategy.

But that changed when Paul Graham of Y Combinator saw their post on Hacker News. Long story short, the Watsi team moved to the Bay Area and, in January 2013, officially became Y Combinator's first non-profit.

Watsi team in Guatemala

The numbers are piling up: Watsi has now raised $4.5 million for patients, with almost 5,000 patients treated. 13,000 donors fund Watsi recipients in 21 countries. The core team is about to get a boost in new hires as growth mode continues.

Watsi's approach to serving patients in need remains the constant. Through partnerships with local health care providers, Watsi gives donors the opportunity to fund the treatment of individual patients. Watsi works with providers to surface individuals who are slipping through the cracks of viable treatments for lack of funds. For this article, I clicked on Mech, a twenty year old woman from Cambodia.

On Mech's page, you can learn about her story (she works in a garment factory to send money back to her family, but is now battling chronic - but treatable - ear infections). Mech is 77 percent to her funding goal as of this writing - donors will receive updates on her progress. A year ago, Watsi launched their Universal Fund, which is a neat way to make a recurring monthly donation of an amount of your choice, with the money supporting a new Watsi patient each month.

It's a good story, but I wanted to learn more. Why health care? How does the ideal of transparency translate into the day-to-day operations? And what can other businesses learn from Watsi's Uber-esque disruption of fundraising? During a recent talk with Garey, we dug into these issues.

Jon Reed
: Why health care?

Garey in Guatemala

Grace Garey: We started by asking ourselves, “What are the unmet needs, and how can we be most helpful?” When my co-founder Chase first had the idea for Watsi, he was serving as a Peace Corps volunteer in Costa Rica. This woman got on the bus and asked all of the local passengers for donations to pay for her son’s health care. She had her son’s medical record with her.

That triggered Chase. He asked me, “We have web sites like CrowdFund. We have Kickstarter for creative projects, and DonorsChoose for education. Why is there no web site that can connect people like this woman and her son with a global community of supporters?"

Reed: I assume you sense-tested this idea with your health care partners?

Garey: Yes. At the outset of a partnership in Guatemala, I remember having a conversation and saying, “What are the first types of cases you’d like to submit to Watsi if we were to move forward?” Our partner told me that his traditional institutional funding was restricted to certain types of diseases. In the process of finding patients with those diseases so he could use the grant money, he’d diagnosed all kinds of other patients. He had the capacity to treat them, but he just didn’t have the money to fund their treatment.

Despite patients in the waiting rooms with other conditions, he had all this money that he couldn’t spend because it had all these strings attached to it. He told me about three siblings who had all been diagnosed with the same life-threatening heart condition. They’d been waiting for treatment for years, and had no path towards treatment, despite the fact that he had all this money that was tied up in other resources. He was like, “Those are the first 3 patients that I would submit to Watsi,” and they were. We start from the bottom up instead of the top down, and think about how to make an impact that way.

Can startup tech fix fundraising?

Reed: So does that mean traditional fundraising is broken? Yesterday, I ran into a fundraiser on the streets of Northampton. The cause is one I support. She's out there with a clipboard, but she's working for a third party agency doing the fundraising. She wanted to get me on a regular payment plan, but I would have had to stand out there for thirty minutes filling out a clipboard. I end up giving her cash, but I have no idea how much of that cash is actually going to people I'm trying to help. In an unflattering, selfish way, do I have the time to spend a half hour on the street setting that up?

Garey: I think that reaction is really normal. Compared to how quick and efficient and delightful of an experience almost everything else is in our lives now, from laundry services, to ordering food, to staying in someone else’s home instead of a hotel. It makes the traditional fundraising process seem pretty clunky.

I think that expectation has spilled over to other areas of our lives. Often, technology is last applied in some of the places that could benefit from it most. For non-profits, we can use that technology to attract donors and communicate where money is going, and get our message out there. Be we can also deploy that money in a really efficient way.

Reed: If there's one thing technology is good for, it's stripping out the middle person.

Garey: Like you were saying, she’s this woman standing on the street collecting money. Who knows how many people are between her and the actual cause? That’s something that exists in almost every area of non-profits in the humanitarian space. It used to be necessary to divide and conquer. One non-profit would do the fundraising, they would accept the donation and pass it off to a subcontractor, who would pass it off to another subcontractor. Eventually, it would reach where it was supposed to go. The Internet is just making it a lot easier to send money and information directly.

Reed: Is it fair to say that traditional fundraising broken?

Garey: Yeah, I think so. Traditional fundraising doesn’t serve either funders or beneficiaries as well as is possible today. We were sort of lucky in that we’re a very young organization. We have this clean slate to work off of.

Taking the leap into organizational transparency

Reed: Which leads us to organizational transparency.

Garey: Right. One our founding principles is that you should see where your money goes. We should be transparent about everything from our operations to our finances. That’s the best way to build trust: show, not tell. Like you were saying, we've all had this experience of donating to non-profits and feeling like our money has gone into a black hole.

Reed: But even if you knew this was the right move, there must have been some trepidation about exposing so much data so openly...

watsi patient care
Garey: We were kind of nervous about it at first. We were like, “Oh God, are people just going to tear us apart? What if we make a mistake?” But we took the plunge. We manually published twenty fields of information about every single patient posted on Watsi. We shared the name of the doctor who diagnosed them, the cost of their care, their expected treatment date, and a link to the screen shot of the fund transfer from our bank account to the hospital’s bank account.

Reed: And the results?

Garey: It's really paid off for us. Transparency is a great tool for engagement, too. What we found is that people are curious. Especially with so much of our core audience being in the tech community, sharing our numbers is a way for us to get people involved in a creative way. They have e-mailed us and said, “I noticed that the average cost of treatment in this area is this, and in this area it’s this, and I did some research. Here are some reasons why I think this could be, but what do you think?

It’s awesome to be able to start a conversation with someone you’ve never met before at that level of detail about your business. That’s only possible because of our transparency efforts. Our donors have told us that "Because of the transparency and because of the personal stories, I can really tangibly understand that my $10 donation was an important part of this person paying for the health care that they needed."

Reed: I run into so many ugly Internet stories, like all the hostile/now banned subcultures on Reddit and all the mob-like reactions to news stories. But you get to see a different side of people.

Garey: I feel like I’m exposed to the best of humanity all the time. My hope is that we can make an impact, and it’s tangible. This is not a marketing gimmick. This is real life. These are real people who are walking around and going to school and raising families - all because other people learned about their their situation on the Internet, and did something about it.

End note: I met Garey after I wrote a two part series inspired by Watsi, Email marketing, Watsi style – five things enterprises can learn from a disruptive non-profit, and Analyzing Watsi’s creative approach to email marketing – the wrap. Garey reached out to me about delving further into the story. We went deeper into the technology of transparency, and she also gave me her reactions on the prior articles. I plan to post a follow-up that addresses those topics.

Image credits: All photos provided by Watsi, from their team trip to donor locales in Guatemala.

Disclosure: diginomica has no financial ties to Watsi. I plan to become a Universal Fund donor.