How one company is leading the digitalization of China’s charity sector

On September 8, an advertisement for Tencent’s 9-9 Charity Day appeared on the giant screen of Pangu, a “7-star” luxury hotel next to the National Stadium in Beijing. The event offers online fundraising platforms like WeChat for non-profit groups to collect money via Tencent. Interestingly, on September 5, e-commerce giant Alibaba launched their first Alibaba 9-5 Charity Week to raise money via offline events and online sales.

Tech giants’ participation in charity and China’s promising digital payment environment has shifted the country’s donation and charity event participation into the highly mobile and digitalized era. While on the streets of London, volunteers from different NGO organizations carry buckets to collect funds they raise from passers-by, in Beijing, Chinese donors are more familiar with tapping the “Donate” button on their phone to make digital transfers.

This is how Software-as-a-Service (SaaS) applications in the charity sector are growing. TechNode interviewed Mary Yi, CEO and founder at Lingxi (灵析)—the largest grantmaking management, donor retention, and event participation client relation management (CRM) solution provider in the country—to decipher how tech is influencing the way organizations optimize fund management.

Digitalizing China’s Charity

“Lingxi is our natural response to China’s traditional charity fundraising and event management,” Yi said. As a Sichuan local, Yi signed up to be a volunteer for the 2008 Wenchuan 8-magnitude earthquake that resulted in the death of around 70,000 people. The earthquake struck on May 12. By May 21, according to data recorded by China’s Central Youth League (in Chinese), over 200,000 registered volunteers were working in Sichuan.

“If we had a more advanced and standard digital operation system, we could have allocated the massive [capital and logistics] resources we received better. The earthquake was a lesson, and it’s the direct reason why I wanted to build Lingxi.”

Later, Yi invited two engineers with experience at Amazon’s CRM background, and started Lingxi in 2012 with another co-founder, hoping to bring China’s charity to the digital age.

Replacing hand recording, which previously required professional staff very familiar with procedures and Microsoft Office, Lingxi’s basic products allow organizations to tailor their own digital event participation sheets and backend data collection preferences. A donor’s behavior and a grant’s origin can be analyzed while an organization’s financial situation, including gifts received and financing allocated, can also be synchronized with local digital servers.

A long way to go

However, China’s charity industry is still young compared to the rest of the world. Blackbaud, a company most similar to Lingxi in the US, was founded in 1981, around the time the charity industry in China got started.

“We have a long way to go. The charity industry in China is unique. On the one hand, we lack very systematic management solutions for charity organizations, and the whole sector is still in a transition period to a more standardized, professional, and transparent one. On the other hand, the fast development of digital payment and internet services are forcing us to change the way we strategize. Also, the country has been demonstrating very complicated social challenges – and more forces will join to share the government’s burden,” Yi said.

But the industry is vast and complicated.

By the end of 2017, according to the Development Book of Charity in China (2018) (in Chinese), the total number of China’s domestic non-profit organizations hit 801,083. Among them, 6,322 are foundations, 373,194 are social groups, and 421,567 are private groups.

Yi told TechNode that Lingxi now has around 45,000 institutional users (including non-paying users), and 10,000 are active. In 2017, Lingxi-supported fundraising was around RMB 85 million, less than 0.05% of the total RMB 155.8 billion (expected) Chinese donors and social organisations raised for the same year. But the RMB 85 million was 34% of the RMB 250 million Lingxi has helped raised since its founding in 2012, a sign of the company’s recent strong performance.

Yi indicated that she’s not worried about market share or potential competitors.

“There were two waves of new players who wished to enter the charity SaaS field with millions of RMB financing, but both finally failed. The market is big and small. Once you have secured the leading charity players and established your reputation, there is little chance for a new player to squeeze in,” Yi explained and offered TechNode a list (in Chinese), acknowledged by Tsinghua University, displaying charity organizations demonstrating the highest level of social credit. Among the top 20 institutional organizations, 16 are Lingxi’s users.

However, the company faces challenges like fundraising capability amid fierce competition in the digital grant-making field. Due to privacy regulation, donors’ information will only be collected if an organization chooses to use Lingxi’s platforms to launch event and collect funds or insert Lingxi links in other event pages.

Big players

Tencent’s 9-9 Charity Day platform, however, doesn’t allow any external links. According to data acknowledged by Yi, in 2018, Tencent’s 9-9 Charity Day helped raised in total over RMB 1.4 billion (including Tencent’s own donation, corporate donation, and individual donation), around 560% of Lingxi’s fundraising volume recorded in 6 years.

Non-profit groups also have to compete with individual fundraising projects initiated by people directly. Shuidi-Chou (水滴筹, in English: Water Drop Fundraising), an online fundraising platform which publishes verified health-related fundraising projects, has taken a capital injection of RMB 210 million from giants including IDG Capital and ZhenFund. To some, the platform is more transparent as it displays a fundraiser’s ID information and hospital documents. Since its establishment in 2016, Shuidi Chou has helped over 550,000 families and raised over RMB 6.2 billion.

TechNode asked Lingxi why organizations are still willing to cooperate with the company, as there are already powerful charity platforms, as well as tech giants leveraging ecosystem advantages.

“Our target users are institutional ones. It’s true that an organization can leverage Tencent’s power to receive a good amount of donations during the event. But Tencent keeps donors’ data for their own. Lingxi is organizations’ own CRM service provider – we help organizations to monitor legal user data and establish their own donor resource base,” Yi explained. “The core mission of Lingxi is to improve internal management efficiency and simplify procedural operations. A charity organization may want to have multiple fundraising channels, but in the end, they still need to know who are the targets, and who are the driving supportive force. This is where we are.”

Ta Foundation, an animal protection foundation, now keeps a donor retention rate of 35.78% with Lingxi’s support. Ta Foundation also participated in the 9-9 Charity Day event and raised over RMB 500,000 from 33,776 WeChat donations, though far behind their target of RMB 2.9 million.

Yi’s claims were also confirmed by a founder of a social welfare non-profit organization who wished to stay anonymous: “The 9-9 Charity Day is a big event, but NGOs [for lesser known or sensitive social issues] like us can hardly grab a good piece – too many organizations participate in it [and not all organizations can receive the target amount of funds].”

In 2018, 5,498 charity fundraising registered for 9-9 Charity Day’s WeChat platform for digital donation.

Tech, security, and trust-based financing

But Yi doesn’t want to label Lingxi as a big data or AI platform—at least for now. “We are clear and confident about our mission and tech strengths, but it’s not fit to add labels before we formally decide to enter related fields,” she explained. “At the moment, data security is a core project.”

According to Yi, including the cost of tech personnel, Lingxi’s annual tech expenses account for around 65% of total expenses. Alibaba Foundation, one major power behind the e-commerce giant’s 9-5 Charity Week, also asked Lingxi to design an exclusive service system.

“We have to put money into security – it’s the life of the clients. Giants like Alibaba will invite third-party tech power to test the system we made for them to ensure a consistent security guarantee,” Yi said, and explained that at an early stage, for a company whose tech infrastructure plays key operation role, a healthy expense structure is crucial, and profit margin has to be reduced to tailor tech needs.

Additionally, Lingxi’s team is cautious about blockchain’s application in the field. “We now have the capability to use the technology in our projects, but the industry shall still face a few challenges. Regarding financing, expense making, and charity source allocation taking place offline, there’s no absolute solution to ensure that all data and events recorded and transferred to digital devices are true. If we don’t have a proper solution to tackle the original nodes, the industry shall think twice.”

By the time of the interview, Lingxi has had two rounds of financing. “It’s really interesting. We didn’t ask for any money, and our clients volunteered to introduce financing sources. Our core leading team thought about Lingxi’s future development and potential strategic alliance we might need, and agreed to take two.”

Yi told us that Lingxi is not interested in advertising to boost reputation or market share. “We create supply – digital management tools and systems – to make our clients and potential clients see how convenient things can be. We reckon this is also practical for startups who are struggling to survive China’s declining economic growth.”

TechNode then asked Yi if the Chinese economy’s slowdown would jeopardize charity organizations’ fundraising performance and hence reduce market demands for Lingxi. She was optimistic about Lingxi and sees the hard times as an opportunity to show bigger potentials.

“It’s true that the overall macro economy will influence the donation willingness of a donor, either institutional or individual ones. People might say, someone who usually donates to ten organizations would reduce the number to two – but this is not absolute,” Yi explained. “First, the declining economy may raise society’s attention to more social problems and increase their willingness to contribute. Second, this is where Lingxi cuts in. What an organization needs to do more is donor retention management and internal operation control. Among those fundraising events for the same or similar good causes, this time, only good service, efficient management, and reliability will win the market.”

TechNode also asked what other charity sectors would be eager to embrace tech breakthroughs. “Progress and performance evaluation, including donors’ concern of the transparency of money spent, is a trend. And efficiency upgrade is still an evergreen topic,” Yi said.