The acquisition was supported with $375,000 from the Bill & Melinda Gates Foundation, with $100,000 to Charity Navigator and $50,000 to ImpactMatters, a startup that applies rigorous methodology to assess nonprofit impact. Charity Navigator also received $225,000 to continue to build methodology and criteria to evaluate impact data reporting at scale.
ImpactMatters transferred its intellectual property and other assets, including its brand, to Charity Navigator. ImpactMatters staff are now a part of the Charity Navigator team and have formed its new Impact Unit. Impact audits, originally created by ImpactMatters, will continue to be developed by Impact Audit Partners.
“Rating based on impact is notoriously complicated,” Charity Navigator President and CEO Michael Thatcher said via a press release announcing the acquisition today. “Through its novel methodology, ImpactMatters has succeeded in giving donors the ability to identify high-impact nonprofits that are making the most effective use of their contributions. The acquisition of ImpactMatters will give our donors an even more comprehensive view of nonprofit effectiveness,” said Thatcher, calling it a milestone for the nonprofit sector.
The announcement of the acquisition coincides with the rollout of the second of four beacons in Charity Navigator’s new Encompass Rating System. The Impact & Results beacon continues a shift toward providing a more holistic assessment of nonprofit effectiveness, giving nonprofits and donors an easily understood assessment of effectiveness.
More than 700 service-delivery nonprofits will receive a rating based on impact. Over the coming months, Charity Navigator will launch new tools to gather nonprofit impact data and begin issuing additional impact ratings.
ERS was unveiled in late July, with 150,000 previously unrated nonprofits added to Charity Navigator’s platform of 9,000 nonprofits already in its system. The finance and accountability beacon was the first to be released, with the next three expected to come out over the next two years, Thatcher said during an episode of Fresh Research, a podcast by The NonProfit Times.
The new system will assess nonprofits based on four measures or “beacons”: Finance & Accountability; Impact & Results; Leadership & Adaptability, and, Culture & Community.
ImpactMatters was founded in 2015 by Dean Karlan, a professor of economics and finance at the Kellogg School of Management at Northwestern University, and his student while teaching at Yale, Elijah Goldberg. Karlan was among those named to The NonProfit Times’ 2020 Power and Influence Top 50.
ImpactMatters is the first organization to successfully develop a method for rating nonprofit impact at scale. It combines data made publicly available by nonprofits with theory and evidence from social science research to estimate cost-effectiveness.
“With better information on the expected impact of giving, the nonprofit sector can better achieve social progress. And with less uncertainty on the expected impact of giving, donors may give even more,” Goldberg, co-founder of ImpactMatters, said. “We are proud to bring ImpactMatters’ methodology to Charity Navigator and to advance our shared goal of making high-impact philanthropy easier for all,” he said.
Glen Rock, N.J.-based Charity Navigator reported total revenue of $3.7 million, with assets of $3.4 million, for the Fiscal Year Ending 2019. Impact Matters in New York City reported revenue of about $780,000 and assets of $600,000 in its latest available tax form, for 2018.
Charity Navigator will host a virtual event on Nov. 18 at 2 p.m. ET with a panel including Chief Ratings Technology Officer Stephen Rockwell, and Goldberg, vice president, impact ratings, along with other nonprofit industry leaders.