Foundation Center, GuideStar Merge, Creating Mega Data Portal
February 5, 2019 Paul Clolery
The Foundation Center and GuideStar, the two largest data and information nonprofit organizations in the United States, are merging in a deal that took about two years to consummate but was at least a decade in the making.
The organizations will be rebranded as Candid. (with a period).
The two boards signed an agreement on January 14 and the deal closed on February 1. The combined organizations will have a worldwide reach with data on foundations, individual nonprofits and what information is searched by nonprofit executives and the general public.
The organizations’ combined revenue in Fiscal Year 2017 was $36.5 million with the projection to be roughly $38 million for Fiscal Year 2019. The combined gain for 2017 was $460,117 with GuideStar generating positive cash of $718,854 and Foundation Center showing a loss of $258,737. The Foundation Center is the larger of the two organizations, with $24.4 million in revenue for Fiscal 2017 and GuideStar generating $12.08 million.
Brad Smith, president of the Foundation Center, will be president of Candid. and Jacob Harold, president of GuideStar, will be executive vice president. The combined board will initially include 12 members from the Foundation Center and seven from GuideStar, with new bylaws allowing for up to 25 board members.
“There are combined 80 years of experience with various forms of data. This is not a start-up,” Smith said.
Board members will remain on cycle until their terms expire; three-year terms for Foundation Center members and two, four-year terms for GuideStar board members. The current board chairs will be co-chairs of Candid. — Clotilde Perez-Bode Dedecker from the Foundation Center and Mari Kuraishi from GuideStar.
There was a Joint Governance Working Group made up of four board members from each parent organization. It was a temporary body for the negotiations period and won’t continue with Candid. There will be a set of board committees, each made up of a mix of board members from the two parent organizations. In place now are plans for Audit, Finance, Governance, and Executive committees.
The Foundation Center was launched in 1957 and GuideStar in 1996. The fundamental principles of both organizations have been transparency and providing access to data. GuideStar was the first non-governmental agency to provide consumers with access to the federal Form 990, initially on CD-ROMs. Digitization continued as the Internet evolved and now those forms are easily accessible and specific information can be easily found. The Foundation Center has been gathering grant and foundation information and operates or works with hundreds of libraries and other access providers from the world.
“Advances in transparency enables users to make better decisions and encourages charitable giving,” according to Harold. There are 26 million searches annually on the GuideStar system, he said, with “99 percent of them free.”
The merger makes sense from a product and service perspective, according to Smith. “GuideStar is a branded house while the Foundation Center is a house of brands,” he said. The Foundation Center philosophy is to “look at products as information portals.” Smith explained that GuideStar has a national sales program in place, which the Foundation Center lacks for its products.
“Between Foundation Center and GuideStar there are billions of pieces of data and 100,000 data partnerships. The potential for new capacity for the sector is compelling,” said Perez-Bode Dedecker.
Former GuideStar President and CEO Robert Ottenhoff called the deal “brilliant” while acknowledging the melding will have its challenges. “It’s two strong organizations both with good business models looking forward,” he said. The key will be developing scale “to be competitive.”
Said Ottenhoff: “It’s a lot of data. They have to figure out how to merge that effectively.”
Smith and Harold said it will cost roughly $20 million over three years to put the organizations together, for which they have secured foundation support. They are also launching a $52-million capital campaign, with roughly $27 million in commitments so far. The money will be used to combine 30 business systems — everything from payroll to benefits to accounting. A percentage of the money will go to a reserve fund and also a venture fund, Smith said.
Top funders so far include the Bill & Melinda Gates Foundation, the William & Flora Hewlett Foundation, the Charles Stewart Mott Foundation the Lodestar Foundation and Fidelity Charitable Trustees’ Initiative, according to Smith.
Offices will be consolidated. The Washington, D.C offices will merge into one location. The Foundation Center staff in San Francisco, Calif. will move in with the GuideStar staff across the bay in Oakland. GuideStar’s original home in Williamsburg, Va., will remain as will the Foundation Center’s operations in New York City, Atlanta and Cleveland.
No layoffs are expected due to few overlapping operations. “It’s not as if there isn’t a lot of work to do,” said Smith.
The first conversations regarding a merger started in 2008, according to Smith, when he and former GuideStar CEO Robert Ottenhoff began considering the idea. A study was authorized and performed by InfoCommerce Group of Bala Cynwyd, Pa., in 2012 to see if the idea was viable, with everyone thinking it would be full steam ahead.
“It came out, ‘Not so fast,’” said Smith. Kuraishi, Candid.’s co-board chair, said 2012 wasn’t yet the right time. Now there is a significant “maturity of the market for data and insight in the social sector,” she said.
“In 2008, it was enough to just have data to be collected, cleaning it and curating it. It didn’t really matter it was two separate organizations. The change from 2008 and 2018 is that we can get the insights,” Kuraishi said. With data scientists and data architects, there is a critical mass of information and more can be learned.
She emphasized that while the mergers bring together two large social sector information and database operations, at $38 million, it is still very small compared to what commercial firms are capturing.
“Data about the work (nonprofits) do is captured in many places. Maybe the Foundation Center and GuideStar have more of the intentional pieces of data” available but there is a lot of data not being compiled, Kuraishi said. “The value added from the data is what excites me about the combination,” she said.
She explained a “Bridge ID” was given to organizations whose data was compiled by the Foundation Center and GlobalGiving so that data could be exchanged and studied. “This is Bridge ID on steroids … to discover things we might not know the question now but answers are there on the combination of the data,” she said.
For example, the merged data will show donor and foundation responses to disasters and there might be data researchers can use to determine the difference in response to rural versus urban disasters, which potentially can change response.
Flexible and available data brings up the issue of foundations and large donors being targeted by more organizations seeking support. Smith said that won’t be the case and points to a Foundation Center experiment.
Foundation Center staff in 1956 and 1957 worried about the impact on foundations by making grant and other information available. The fear was organizations would be flooded with requests. Smith said it turned out that the more information was available, the more targeted the requests.
Even today in an age of fluid data, roughly 90 percent of U.S. foundations don’t have websites where information is readily available. That’s one of the things that worries GuideStar Founder Buzz Schmidt, who stressed he was not involved in any of the merger discussions.
“The rationale seems logical, cost efficiency and positioning data within this broader content with data in the world. Strengthening nonprofit sector data is a good thing. I think it compels foundations and nonprofits to report more extensively and more faithfully,” Schmidt said.
“It’s important for the sector to be able to counter the power that big data-accumulating firms have. I think there is a potential for Facebook and Google to really pre-empt information for the nonprofit sector. They have a tendency to want to dominate that. You can easily really screw up the nonprofit sector if you don’t have serious and respectful opinions of data,” Schmidt said.
He voiced support for Smith and Harold. “It’s two really good people in Jacob and Brad,” said Schmidt. He did warn against board composition. “They have to be very conscious power on board isn’t left in private foundations. It’s not a good idea if private foundations run the show. It should be more Main Street than foundation,” he said.
Data will be the sector’s backbone, said Perez-Bode Dedecker. “How do you put a price on accelerating social change? A knowledge economy has to be robust for the social economy,” she said.