Nonprofit groups direct more dollars to mission once online, entrepreneur says

Monday, September 25th 2000, 12:00 am
By: News On 6

Vinay Bhagat believes that he has seen the future of the nonprofit sector, and it is wired.

Mr. Bhagat, founder and CEO of the year-old Austin company Convio Inc., is blazing trails by building a bridge between nonprofit agencies and high-tech. His software company provides online management and fund-raising ideas for nonprofit groups, which he says often lack the internal resources to automate their operations. By providing a presence online, Mr. Bhagat says, nonprofit groups can slash costs and target potential donors. The nonprofit sector makes up about 7 percent of the U.S. business market but has been overlooked by the tech world, Mr. Bhagat says. He believes that is all about to change and predicts that during the next 10 years, the Internet will explode with nonprofit organizations. His company recently presented a forum on using the Internet as a marketing and development tool for nonprofit organizations in Dallas. He spoke with Dallas Morning News special contributor Paula Felps about the future of nonprofit agencies online.

DMN: What made you turn your attention to the nonprofit sector?

BHAGAT: I used to be a consultant and I was living in Hong Kong and got involved in some pro bono work, helping an AIDS hospice raise money. That was the first real exposure I'd gotten to nonprofits, and it was very eye-opening. I learned about the passion they have for what they're doing but also the difficulties they face in raising money.

A few years later, I was living in Austin and volunteering at PBS, and my observation was that there was no automation in raising money and a lot of inefficiencies. My thinking was that someone needed to develop a software configuration that would allow nonprofit organizations to use the Internet the way that corporations do.

DMN: How did you go about becoming the person to develop that configuration?

BHAGAT: First, I had to make the mental leap, so I spent several months reading about space on the Internet and interviewing hundreds of organizations about how they operate and what they need. I talked to everyone from the people at the local PBS station to national organizations, like the CEO of the Red Cross. It became very clear to me that yes, this was something that could be solved and yes, we could create a company to solve it.

DMN: How is this changing the way nonprofit organizations market themselves or conduct fund-raising campaigns?

BHAGAT: The way that nonprofits are organized, they spend 80 percent of their money on administrative costs. The Internet can streamline that and cut costs there, so more of the money they raise goes directly to their programs. Nonprofits are a very relationship-based sector. It's about reaching out to people who are able to give, and until now it has been a human capacity issue. With the Internet, a lot of those obstacles are removed.

What we're doing is twofold: One, we provide them with a technological infrastructure that allows them to get the most out of the Internet, using the same formulas that have been successful in the for-profit sectors. And secondly, we help teach them how to best use the Internet, how to apply that knowledge to use technology most effectively.

DMN: What is the most effective use of technology for them? Does that mean using the Internet as a fund-raising tool?

BHAGAT: Yes, but it's a lot more than that. It's an integrated way to transfer the entire relationship online — everything from promotions to asking for donations to RSVPs for specific events to producing content that serves as a newsletter. Essentially what they'll do is migrate how they've done business via paper to the Internet.

DMN: What are some of the immediate benefits of that?

BHAGAT: First of all, there's the personalization aspect. Imagine if you supported a youth organization and sponsored a specific child. Instead of getting something in the mail every month telling you how that child is doing and what they might need money for, you could go online and see that information updated regularly. You'd see how your funds are applied, and you'd see the immediate results.

It's using the same one-to-one personal technology that has proven successful for businesses like You make it so that the site recognizes the individual and provides them with their own personalized information.

DMN: Other than being able to reach a higher volume of people, what are the benefits of that type of technology application for nonprofit groups?

BHAGAT: One big thing is that it saves them a lot of paper, and there is a perception that paper ... [mailings] are a big waste of money. So if someone is getting e-mail reminders, for example, instead of paper mail-outs, they feel that their money being used more wisely.

By saving money, nonprofits actually will be able to raise more.

Nonprofits will be able to spend more on doing the good that they set out to do.

Obviously, if you can save money on paper and mailing, you'll have more to spend on programs.

DMN: Will it also increase the capabilities of what the organizations can offer its supporters?

BHAGAT: Absolutely. They will increase the value of what they provide for their supporters. One thing about Internet marketing that is so attractive is that it's permission-based.

You aren't doing a spam; you're reaching people who have an interest in your organization. So you can provide them with information that is useful to them, such as a newsletter, or direct them to your Web site.

The big value for nonprofits is in renewals and retention, and the Internet takes away a lot of the elements that have made people uncomfortable, such as phone solicitations or junk mail.

The Internet is much less invasive, and when people have a more positive experience, they are more likely to become repeat donors.

DMN: If this is such a great cost-cutting idea for nonprofit groups, why hasn't it been implemented until now?

BHAGAT: It's the natural timing of things. Three or four years ago, the entire technology industry focused on Fortune 500 companies getting online; it's just now drifting down to smaller businesses.

If I were an Internet pioneer, I would have gone after for-profits first, too, because initially the software was so costly to build and deploy that smaller businesses and nonprofits couldn't do that. Now it's economically feasible for them.

DMN: Are there any nonprofit groups that wouldn't benefit from Internet marketing?

BHAGAT: The impact of this obviously is going to be stronger on organizations that raise their funds through direct-mail marketing. If someone is raising the bulk of their money from just a few benefactors, they probably won't see much value in using the Internet. But the Internet is applicable to the vast majority of organizations. It probably is better for medium and large groups right now; it's hard for small nonprofit groups, at this juncture, to really profit off the Internet. But it will hit that point in just a matter of a few years.