“We have crushed the Red Cross,” Brett Hagler has said, bluntly but not unkindly.
He’s got a point. Hagler is the 26-year-old founder and CEO of New Story, a startup nonprofit that has built more than 150 homes for families in Haiti who previously lived in tent slums. If you listen to NPR or read Pro Publica, you probably know that the American Red Cross raised nearly $500 million for Haiti relief, squandered much of it and built just six permanent homes.
The Haiti story is more complicated than that (as most are) but this is certain: New Story has crushed the American Red Cross when it comes to transparency and accountability, and there’s a lesson there for all nonprofits about the power of openness.
Indeed, New Story’s rapid growth–it went from an idea to an organization that raised more than $1.6 million in just a year–has been driven largely by two things: It promises to spend all of the money from donations from individuals to build houses (and none on “overhead”) and it connects those donors directly to the people they help.
As New Story says on its website: “We believe that when you give, you should know exactly who you’re helping and where the money goes.” Whether they give $5 or $5,000, donors get a video like this one showing a family moving into a home they helped finance.
Hagler started New Story at the end of 2014, after visiting Haiti on a trip organized by Mission of Hope, an evangelical charity. He saw a country in deep trouble despite the outpouring of support after the earthquake four years earlier. “It seemed like so much money had been given to Haiti,” he told me by phone. “But when you gave to an organization, you didn’t know where it was going.”
Earlier, Hagler had started a socially conscious e-commerce company called Hucksley. This time, he put his technology know-how to use to raise $6,000 so that Mission of Hope could build a home for a family in Haiti. That effort birthed New Story.
“New Story launched as quickly as possible,” Hagler has said. “We didn’t wait for a 501c3, didn’t wait for validation, didn’t wait for a beautiful website, didn’t wait for answers, and we didn’t care if we were breaking any rules.”
He enlisted help from three co-founders, all in their 20s: His boyhood friend Mike Arrieta, who went with him to Haiti and is now chief of staff for the CEO of DocuSign; Alexandria Lafci, an alumna of Teach for America; and Matthew Marshall, who built New Story’s first website. They got a big break when they were accepted into the celebrated accelerator program run by Y Combinator, which works intensively with startup companies and a few nonprofits. Hagler and his co-founders moved from Atlanta to San Francisco last summer to work with Y Combinator.
“That’s when we really got momentum,” he says. “They teach, arguably, the best practices in the world right now about how to take an idea from nothing and, six years later, you’re like AirBnB.”
Y Combinator gave New Story a $100,000 grant, and connected Hagler to movers and shakers in Silicon Valley, including the Draper Richards Kaplan Foundation, which made an unrestricted donation of $300,000, the biggest single gift so far to New Story. Other investor-donors, who cover the operating expenses of New Story, include Data Blue, HP and Moderne Ventures.
Their contributions allow New Story to tell donors that “100% of your donation directly funds home construction.” This is, by all accounts, an effective message, although it arguably perpetuates the negative connotations surrounding “overhead.” It’s the same approach and messaging used with great success by charity: water, whose founder, Scott Harrison, has advised Hagler.
New Story was also influenced by Watsi, another Y Combinator startup, which funds medical treatments for poor people around the world. It, too, tells individual donors that all of their money goes to health care and it makes a direct connection between their money and a specific recipient through an incredibly detailed set of transparency documents. “You know exactly where your money goes,” Watsi says.
All of this is, or should be, worrisome for sprawling, bureaucratic charities with high overhead–like the American Red Cross–that compete with nimble, focused and transparent startups like New Story, Watsi and charity: water.
The newcomers appeal to business people and celebrities. Last month, New Story went to Haiti with Elvis Dumervil, an all-pro football player with the Baltimore Ravens and the son of Haitian immigrants. Dumervil has pledged to build 58 homes in Haiti in honor of his #58 Ravens jersey, and he’d like to work with other NFL players–about 50 have Haitian ties–and league sponsors to build an entire community with New Story.
All that said, we shouldn’t overstate the contrast between upstarts like New Story and established mega-charities like the Red Cross. The Red Cross has done good work in Haiti, supporting hospitals, clinics and schools, all of which it details here, at last, yielding to pressures from reporters and Congress. Charity Navigator, which evaluates nonprofits, gives the American Red Cross four stars (of out four) for accountability and transparency, for whatever that’s worth.
What’s more, just like the Red Cross, New Story, Watsi and charity: water all depend on subcontractors to do the actual work they are funding–home builders in the case of New Story, medical care providers for Watsi and other water charities for charity: water. They are, above all, fundraisers. So, as they grow bigger, they will be only as effective as the partners they rely on in the field.
This will be a particular challenge for New Story, which wants to build schools, clinics and factories as well as houses, Hagler has said. He knows he’ll need good partners, perhaps even the Red Cross, someday. New Story has already expanded from Haiti to El Salvador.
Young nonprofits like New Story, Watsi and charity: water resemble the Silicon Valley startups that have unsettled the well-established incumbents in the media, retail and travel industries. These upstarts are going to raise the bar–particularly around transparency and accountability–for everyone in the nonprofit world.