The Crypto Endowment for Better Childhoods | Why, What & How

Direct service nonprofits aren’t known for technological innovation.

So when they innovate with technology, they stand out.

They attract top talent who want to use the most cutting edge tools available for doing good.

They also gain an edge in the marketplace for charitable donations, leading to increased financial support to advance their mission.

First of Its Kind: Upbring’s Crypto Endowment Fund for Better Childhoods

Since 1881, Upbring has been working to break the cycle of child abuse. Its programs include foster care and adoption, residential treatment for children and youth, education and job training, family and community services, and disaster response.

As one of the largest and most comprehensive social service providers in Texas, Upbring relies heavily on donations and government contracts to fund its programs and services.

In recent years, Upbring has embraced innovation and technology as a way to better serve its clients and communities. In 2018, it launched an Innovation Lab to explore new approaches to addressing social problems. The Lab has actively sought ways to leverage emerging technologies like blockchain and cryptocurrency to further Upbring’s mission.?

Upbring has recently made waves in the philanthropy world by creating a cryptocurrency endowment: The Crypto Endowment Fund for Better Childhoods. In an interview with Kelsey Driscoll, the Senior Innovation and Partnerships Manager for Upbring’s Innovation Lab, I explored how this historic organization is leveraging private sector solutions to push the child welfare sector forward.

Some of the questions I asked Kelsey include:

• Why are you building a crypto endowment?
• What impact have you seen with the crypto endowment?
• How does the crypto endowment work?

Primer: Crypto Giving is Small But Growing Fast

Before diving into Upbring’s crypto endowment, let’s gain more context about crypto charitable giving in the United States.

At $300 million in annual donations, crypto philanthropy is massively small compared to the $458 billion donated to charities in the United States in 2021 (Giving USA).

But it is growing much faster than the charitable sector overall. According to Fidelity Charitable, crypto donations increased 10x from 2020 to 2021. During the same period, overall charitable giving in the United States increased by 6%, barely keeping up with inflation (Giving USA).

Crypto giving is small in aggregate, but individual donations are significant. The Giving Block reports that in 2022 the average crypto donation to charity ($6,295) was 31 times larger than the average online donation ($204). This leads to a higher average return on investment average (ROI) for crypto donors compared to traditional donors.

The average donor in the United States is 64 years old, while the average age of a holder of cryptocurrency is 38 years old (Newsweek). This makes crypto donors attractive prospects for nonprofit fundraising staff who are concerned about long-term sustainability. They focus on recruiting new, younger donors who have more future income-earning potential and more years left in their lives to give. In fundraising terms, the lifetime value (LTV) of a young donor is often higher than the LTV for an older one.??

Nonprofits are catching on to the growing trend of crypto giving: of Forbes’ ‘100 Top Charities of 2022’ in the United States, 49 now accept crypto donations (Giving Block). That’s up from 12 in 2019.

Ok, enough data! Let’s talk about Upbring’s (crypto) Fund for Better Childhoods.

Why is Upbring Building a Crypto Endowment?

The forward-looking team at Upbring realized that public funding, often politically vulnerable and subject to funding cuts, may not be sustainable in the long run. This led them to explore new avenues for funding and growth, and web3 and crypto emerged as a promising opportunity.

"We saw the headlines about NFTs and Beeple, and initially we were skeptical," said Kelsey, "But as we delved deeper into the potential of crypto and blockchain technology, we realized that the populations we serve, who are often left out of the traditional mainstream economy, could benefit greatly from the opportunities offered by the new web3 economy."

This realization led Upbring to launch an experiment with a crypto endowment. "We want to see if and how the crypto endowment grows, even during a bear market, and if it can provide more growth potential for funding our mission," said Kelsey.

What has been the impact of Upbring’s Crypto Endowment?

Upbring is embracing web3 and crypto to help them work with philanthropists and community leaders as trusted partners, not just transactional donors. Kelsey and her team have a lot of innovative ideas for donor engagement through blockchain technology. The team believes that web3 can facilitate transparent and efficient transactions and create new ways of engaging donors and stakeholders in the nonprofit sector.

"We want to attract younger donors and build new communities with different types of donors, including corporate partners," explained Kelsey. "Crypto has opened doors for us to connect with NFT artists, metaverse studios, ESG-focused protocols, crypto mining companies, and other social impact-driven organizations. Their customers are now part of Upbring's donor base, and without the crypto endowment, we would not have had access to these new opportunities."

"The process of accepting crypto donations has become easier, more direct, and more visible," said Kelsey. "We can now see the transactions as they happen on the blockchain, which provides immediacy and peer-to-peer transacting."

How does Upbring’s Crypto Endowment Work?

Upbring decided to make the crypto endowment its own separate entity, rather than adding crypto assets to its existing endowment. This enables them to explore the more volatile digital assets class without risking the principal and more predictable returns of their existing traditional fia-based endowment.

To facilitate the Crypto Fund for Better Childhoods, Upbring partnered with The Giving Block (TGB), a platform that helps process crypto donations for nonprofits. TGB proved to be a strategic partner in this venture, demonstrating a willingness to engage in this endowment experiment when other vendors declined.?

Donations to Upbring’s crypto endowment are tax deductible. Upbring has implemented a cold wallet for securely storing the funds in their own custody.?

Upbring is managing the crypto endowment in a very conservative way. "We are not currently engaging in yield-generating activities like collateralized lending or staking," said Kelsey. Endowment governance decisions are made by the Innovation Lab team with the Upbring Board’s approval. The Giving Block is supporting Upbring with the technical aspects of the drawdown process.

Click here to give cryptocurrency to Upbring’s Crypto Endowment Fund for Better Childhoods.

The benefits of early adoption

By running the Innovation Lab and experimenting with a crypto-based endowment, Upbring has benefitted in a number of ways that will enable them to help more youth in Texas:

• Human capital: They’re attracting bright, ambitious, and technologically-advanced people like Kelsey Driscoll to work on their team.
• Social capital: New businesses involved in crypto mining, exchanges, consumer goods and media are looking for charitable partners. Upbring is in the front of the line for leveraging web3 technology to engage with these corporate partners in new ways to advance their mission.
• Financial capital: They face less competition for crypto donations than for online giving overall, giving them an edge to cultivate relationships with this new category of donors.

I’m looking forward to tracking the endowment fund and their other web3 experiments. You can follow along too, on Twitter.

A very special thank you to Kelsey Driscoll for helping me tell this story!