Jon Carson, a 53-year old entrepreneur from Boston, likes big, transformational ideas. He wasn’t always like that; making money used to be enough. But in 1989, he took a trip around the world and found himself on an African safari thinking about, of all things, manhole covers. Carson had just sold his consulting firm and was celebrating by watching lions, cheetahs and elephants roam the plains of Kenya. But his mind kept drifting back to a client that manufactured those big, clunky sidewalk lids. “I couldn’t quite connect that to making the world a better place,” Carson says now. “I was looking for something bigger.”
That something was the Family Education Network, which Carson built into the largest educational portal on the Internet before selling it in 2000to publishing giant Pearson for $174 million. In 2003, after taking some time off to get married and have his first child, he was ready to get back into the entrepreneurial game; he heard about technology being developed to help charities hold fundraising auctions over the Internet.
Carson was not a regular on the black-tie gala circuit, but he knew a big, transformational idea when he saw it. Auction fundraising is a $16 billion market, but thousands of private and public schools, hospitals, museums and corporations were still doing things the old-fashioned way: inviting people into a room to bid on donated goods and services to benefit a cause. “There was a big limitation to demand,” he says. “Why shouldn’t somebody working out at the Westin Hotel gym at 8 o’clock on a Saturday night be able to bid?
By then, eBay had revolutionized the world of for-profit auctions, but the nonprofit niche was still uncharted territory. Carson met with a team exploring the idea and, inspired by the potential, offered to help. Attracting investors for any startup was not easy in the wake of the dot-com bust, but Carson managed to raise $3 million from Canaan Partners and Morningside Technology Ventures to launch cMarket in 2003; last year the name was changed to the catchier BiddingForGood.com. Carson’s earlier entrepreneurial successes certainly helped his case, but so did his business model, which he argued would work even in difficult economic times: When charitable giving drops, the efficiencies of the Internet would be a lifesaver for nonprofits.
Today, in the wake of the last recession, Carson seems prescient. Donations to charity fell 11 percent in 2009 compared to the previous year, but charitable giving to online platforms rose 5 percent. BiddingForGood saw a strong surge in business; in 2010, it helped nonprofits raise $34 million, its best year ever. Although Carson does not disclose revenue figures, he says the firm has run more than 12,000 charity auctions while growing by over 60 percent annually, and should become profitable next year. Overall, the firm has raised more than $20 million in venture capital.
BiddingForGood isn’t the only company harnessing the power of the Internet to raise money for good causes. Charity Buzz also runs online auctions, but focuses mainly on celebrity events; Crowdrise, started by the actor Edward Norton, uses social networks to help charities and their volunteers attract donors; Kickstarter helps a wide variety of fundraisers, from entrepreneurs to artists, find sponsors for their projects.
What makes BiddingForGood different is its ambition to achieve economies of scale that could transform that $16 billion nonprofit auction market, which still operates largely in analog mode. The firm started slowly – it took 45 months to run its first thousand auctions – but today can run a thousand auctions in just over two months, and it plans to continue that rapid growth. Since its founding, BiddingForGood has helped nonprofits raise more than $120 million. “For me, reaching $100 million was a big milestone,” Carson says.
BiddingForGood charges nonprofits a $595 annual subscription fee for unlimited use of its auction platform and takes a cut of up to 9 percent from items sold on its online stores. It has some large clients, including foundations run by Dunkin’ Donuts and Reebok. But most of its customers are PTA moms or charity volunteers who are struggling to meet fundraising goals and want to expand their donor base by offering a quick and easy way to bid online. Using BiddingForGood’s platform, nonprofits raise $6 for every $1 they pay in fees, Carson says, and his goal is to boost that ratio to 8-to-1.
Meanwhile, more than a hundred merchants, including name brands like Brooks Brothers, have signed up with BiddingForGood to donate their goods and services. A resort in Cancun, for example, offers a free four-night vacation package as a marketing tool to attract new visitors – who might pay for extra golf or massages, extend their stay by a few days, or return the following year. “Everybody wins,” says Carson. “The nonprofit raises money, the consumer gets a trip to Cancun, and the resort gets new customers.”
Carson has learned a lot about what motivates people to donate to charity; he can’t escape the conclusion that a good deal of self-interest comes into play. There’s the last-minute adrenaline rush of outbidding another donor to “win” the prize, and the materialistic impulse to own a fancy Brooks Brothers suit (or a stapler autographed by Paris Hilton, which one lucky bidder won for $4,101). Carson himself, as the founding CEO of a for-profit company, is also clearly attempting to do well – both for himself and his investors – by doing good. But he makes no apologies for harnessing the forces of capitalism to make the world a better place. “The private sector can and should use its discipline to figure out how to solve problems,” he says. “I’m not trying to save the world. I just want to take this one corner of the world – nonprofit fundraising – and make it better.”
To Carson, that feels like a more responsible way to spend one’s life than getting rich helping to sell manhole covers. Now the father of two children, ages 6 and 8, he thinks a lot about their future, and about the effects of war, environmental damage and other problems that the charities he works with try to combat. “I feel satisfied with my work,” he says. “But given the state of the world, my biggest worry is, `Is it enough?’
Paul Keegan is a contributing writer for Fortune and Money magazines and has written for The New York Times Magazine, Esquire, GQ, and other publications.