Benetech combines technology and business expertise to solve social problems. It operates four programs - Bookshare, Route 66, Human Rights, and Miradi - focused on literacy, human rights, and environmental conservation. Three programs are revenue-generating, but overall expenses exceed revenues. Benetech aims to improve financial sustainability and demonstrate effectiveness across diverse issues.
1. NONPROFIT INVESTOR
INDEPENDENT RESEARCH FOR PHILANTHROPY
Benetech SUMMARY
Benetech uses technology innovation and business expertise to solve
Nonprofit Investor Rating: unmet social needs. It currently operates four programs, Bookshare,
NEUTRAL Route 66, Human Rights, and Miradi, in the literacy, human rights
and environmental conservation sectors.
Mission Statement STRENGTHS
Benetech combines the power of the human ▲ Strong earned income base. Three of four of Benetech’s
mind with a deep passion for social
programs are revenue generating. With an earned income base,
improvement, creating new technology
Benetech can reduce its reliance on donor funding as well as move
solutions that serve all of humanity
towards financial sustainability.
Financial Overview ▲Global impact. Benetech’s products and services are accessible to
$ in MM, Fiscal Year Ended December 31 its target population over the web, in turn allowing Benetech to scale
globally without a physical presence in individual countries.
Accrual Acctg Basis 2008 2009 2010
Revenue and Support $9.7 $8.7 $9.0 CAUTIONS
Operating Expenses $6.0 $9.7 $10.2
▼Organization currently not financially sustainable. Benetech’s
% of Total:
expenses were higher than its revenues in 2009 and 2010 due to a
Program Expenses 84.1% 87.3% 83.5% large drop in contributions between 2008 and 2010. Reasons for the
G&A 12.6% 10.5% 9.9% decline in contribution are not publicly stated. With just $0.63M of
Fundraising 0.3% 0.1% 0.6% cash and cash equivalents at the end of 2010, Benetech's operating
R&D, Bid & Proposal 2.9% 2.1% 5.9% deficit is not sustainable.
● Reliance on single revenue source. Benetech derives a significant
Year Founded: 1989
portion of program revenue from a single US Department of
Education grant. It is unclear how Benetech plans to supplement
Contact Details program revenue once the grant is fully awarded in Sep 2012.
The Benetech Initiative
480 S. California Ave. ● Broad focus requires strategic discipline. Benetech indicates that
Suite 201 a key criteria for how the organization selects the causes it
Palo Alto, CA 94306-1609 champions is sustainability. However its Human Rights program,
(650) 644-3400 which has been in operation since 2003 loses $0.73M a year. In the
context of Benetech's overall budget, this is unsustainable.
www.benetech.org
EIN: 77-0555413 RECOMMENDATION: NEUTRAL
Benetech is a unique organization at the intersection of technology
Analyst: Nadia Anggraini and social good. It has a proven record of impact, with products
Peer Review: Jason Schifman, Burt Chao currently used by several hundred thousand individuals and
organizations globally. Benetech has the potential to become a
Publication Date ‘BUY’-rated organization if it improves its financial sustainability and
June 21, 2012 diversity, as well as shows to the public that it is able to operate in a
broad range of industries and causes.
Nonprofit Investor Research | nonprofitinvestor.org
2. OVERVIEW OF BENETECH'S ACTIVITIES
Benetech was founded in 1989 by Jim Fruchterman. It was borne out of Arkenstone, another company started by
Fruchterman that developed reading machines for blind people. Fruchterman saw the value of providing affordable
tools for people with reading disabilities, and was inspired to leverage the power of technology to develop solutions for
a broader range of issues varying from education to human rights through Benetech.
As described above, Benetech does not focus on a particular sector in its work. Instead, it considers (a) areas for which
there are great needs, (b) whether there is an opportunity for technology to serve those needs, and (c) whether the
proposed business idea to serve the needs is viable and sustainable. The eventual result is the selection and
implementation of ideas that optimize for the “numbers of lives changed” 1, as measured through a metric Benetech
calls ‘Return on Humanity’ (ROH). This is illustrated by the visual below from Benetech’s website:
Benetech currently operates four programs:
Issue Solution Impact
• >125k books available
• <5% of published books • Created online library of books
• Avg. of 76 titles downloaded per
available in formats and periodicals convertible to
Bookshare accessible to people with Braille, large print or synthetic
user annually
• >150k members (across 40
visual or reading disabilities speech
countries)
• Downloaded by >1k visitors from
• Cases of human rights • Developed Martus and Human
>60 countries since launch in '03
violations and mass Rights Data Analysis Group
• Helped prove certain incidences
violence often written off as (HRDAG) tools to collect,
Human of human rights violations, inc.:
isolated incidences manage, process and analyze
Rights – Genocide against
• Limited data-driven human rights information
indigenous Guatemalan
evidence about mass • Offered as open source software
population
violence available for public access
– Peruvian civil war
• No software tools designed
specifically to manage
• Developed software tool for
conservation field projects • >4,000 users (across 140
Miradi • Environmental projects do
management of complex
countries)
environmental projects
not map well to existing
project management tools
• >44m people in the US
• Developed literacy instruction
lacking in basic literacy skills
Route 66 • Majority of literacy programs
software for adolescents and TBD – launched in '11
beginner adult readers
targeted at children only
Additionally, Benetech has a for-profit subsidiary, Bengineering, which provides engineering consulting services. It did
not have significant activity in 2008, 2009 and 2010.
1
Benetech business model overview: http://www.benetech.org/about/business_model.shtml
Benetech | Nonprofit Investor Research 2
3. PROGRAM RESULTS AND EFFECTIVENESS
Benetech tracks and records metrics associated with its individual programs, as illustrated in the diagram above. Its
Bookshare, Human Rights, and Miradi programs each have a significant user base, ranging from >1k users having
downloaded Martus since the program’s inception in 2003, to >150k Bookshare members today.
These quantitative metrics are combined with qualitative ones to build a compelling case for the organization’s
effectiveness. For example, human rights experts and investigators of truth and reconciliation commissions have
provided testimonials crediting Martus and HRDAG for playing key roles in proving the case for human rights violations
in countries such as Guatemala and Sri Lanka.
One area for which it would be helpful to have more information on is on Benetech’s metric of ‘Return on Humanity’
(ROH). ROH is a measure of the “number of lives changed” by Benetech’s programs, and the organization uses this
metric to make decisions on new programs to be launched. However, the organization’s website does not provide
additional detail on how this measure is calculated.
TRANSPARENCY
Benetech makes its documentation and financials (annual reports, forms 990) up to fiscal year 2010 available on its
website. The organization also provides details on its impact on its website.
FINANCIAL OVERVIEW
Benetech derives its revenue primarily through contributions, in-kind donations, program operations (Bookshare,
Human Rights and Miradi). It additionally derives a small proportion of its revenue through royalties, interest income,
and engineering & consulting fees, collectively depicted as ‘Other’ income in the chart below.
The majority of Benetech’s revenue is generated through its programs (Bookshare, Human Rights, Miradi) rather than
contributions, a strong indication of the organization’s financial sustainability. This growth in program revenue has
helped cushion the >50% decline in contributions experienced by Benetech between 2008 and 2010.
It is important to note, however, that a significant proportion of Benetech’s program revenue ($7.2M in 2010, $6.7M in
2009, and $6.0M in 2008) is derived from a single source: a 5-year grant awarded by the US Department of Education
totaling $32M to provide access to Bookshare for all qualified disabled students in the US. While this grant provides
Benetech with a stable source of income over multiple years, in turn reducing the need for the organization to devote
significant resources towards fundraising, it is unclear how Benetech plans to compensate for potential declines in
revenue once this grant is fully awarded in Sep 2012.
Additionally, Benetech has experience a decline in its cash and cash equivalents balance amounting approximately
$0.7M between 2009 and 2010. With only $0.63M in cash and cash equivalents in 2010 on an operating deficit of $1.0M,
this continued deficit will not be sustainable.
Benetech is a relatively efficient organization, with majority of expenses being program-related (83% - 87% of total
expenses between 2008 and 2010). While expenses largely remained flat between 2009 and 2010, there was an increase
of >$3M in expenses between 2008 and 2009, primarily driven by increases in program costs. Program costs rose from
$5.1M in 2008 to $8.5M in 2009, a sizable increase given that program revenues only increased from $6.4M to $7.4M
over the same time period. From Benetech’s annual reports, it appears that the increase in program costs between 2008
and 2009 were attributable mainly to increases in salaries and related expenses, bank collection and development
expenses, and outside services. NPI was not able to contact a spokesperson from Benetech directly to inquire about
changes in the organizations’ costs in greater detail.
Benetech | Nonprofit Investor Research 3
4. Revenue Breakdown Expense Breakdown
$ in '000 $ in '000
2010 $ (k)
+115
7,500
Program revenue
Program expenses
-729
7,340 7,224
+3
500
859
-69
350 347
0 130 0 69
Bookshare Human Rights Miradi Route 66
Launched 2002 2003 2008 2011
• Subscription: $25 set-up, • Subscription, with pricing
$50 annual fee based on ability to pay
• HRDAG projects funded • Subscription: from
• Awarded $32m govt. – Standard: $250/year
by donors individuals, instructors &
Rev. model funding in 2007 over 5 – Nonprofit: $150/year
• Martus software offered institutional users
years to provide services – Low-income (students,
for free
for free for qualified US dev. country residents:
students $25/year
• Production: >$6 per novel,
• Labor: "Train the trainer"
$50 per textbook
instruction method, relying
• Labor: >200 volunteers for
on existing Martus users
Cost model scanning & proofreading - -
to teach new ones,
• Content: partnerships with
reducing need for support
authors & publishers to 2
by Martus staff
minimize delivery cost
Among Benetech’s individual programs, Bookshare and Miradi are generating sufficient revenue to break even.
Bookshare, Miradi and Route 66 all employ a subscription model that charges individuals or organizations for the use of
products, and the Martus software in the Human Rights program stands out as the only program offered for free to the
public. The decision to offer Martus for free was in line with Benetech’s with Benetech’s principles – “We are committed
to equal access to technology. Our software is freely available, and anyone may share our technology and modify it to
suit their needs — all without asking our permission.” 3 As such, the Human Rights program will only achieve breakeven
if Benetech is able to raise sufficient funds for it through charitable contributions or government grants.
2
Bookshare overview: http://www.benetech.org/literacy/bookshare.shtml; Miradi pricing: https://miradi.org/orders/pricing;
Human Rights overview: http://www.benetech.org/human_rights/hrdag.shtml
3
Benetech Martus tool overview: http://www.benetech.org/human_rights/martus.shtml
Benetech | Nonprofit Investor Research 4
5. Fiscal Year Ended December 31 2008 2009 2010
Revenue and Expenses (Accrual Accounting Basis - Audited Financial Statements)
Support:
Donations In-Kind 113,703 105,319 183,021
Contributions 3,091,529 1,215,280 1,030,048
Revenue
Program Revenues 6,448,155 7,362,736 7,819,221
Royalties 3,912 6,193 5,844
Engineering and Consulting Fees 9,919 30,127 6,414
Interest Income 2,109 6,192 2,175
Total Support and Revenues $9,669,327 $8,725,847 $9,046,723
% Growth -9.8% 3.7%
Expenses:
Program Expenses $5,070,605 $8,454,561 $8,499,709
Management and General 761,424 1,015,577 1,008,183
Fundraising 21,064 12,429 63,055
Bid and Proposal 162,914 204,653 593,733
Research and Development 10,986 0 11,703
Total Expenses: $6,026,993 $9,687,220 $10,176,383
Change in Net Assets $3,642,334 ($961,373) ($1,129,660)
Program Costs as a % of Total Expenses 84.1% 87.3% 83.5%
G&A as a % of Total Expenses 12.6% 10.5% 9.9%
Fundraising as a % of Total Expenses 0.3% 0.1% 0.6%
THIRD PARTY RATINGS
Benetech holds close to a 5-star rating from Great Nonprofits (based on 7 reviews), and is not currently rated on Charity
Navigator, Philanthropedia or Givewell.
GET INVOLVED
• Volunteer with Benetech in a number of capacities (e.g. engineers to assist with programming, QA and research
projects, translators to help update Martus software, individuals to scan books for Bookshare)
• Donate to Benetech
DISCLOSURES
Nadia Anggraini certifies that she does not have any affiliation with Benetech and has never made a donation to the organization.
Additionally, Nadia has not supported directly competing organizations in a greater capacity than a nominal donation. NPI analysts
and NPI as an organization do not receive any form of compensation from reviewed charities.
This report is for informational purposes only and does not constitute a solicitation for donations. While the reliability of information
contained in this report has been assessed by NPI, NPI makes no representation as to its accuracy or completeness, except with
respect to the Disclosure Section of the report. Any opinions expressed herein reflect our judgment as of the date of the materials
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reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes
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Opinions and recommendations in our reports do not take into account specific reader circumstances, objectives, or needs. The
recipients of our reports must make their own independent decisions regarding any organization mentioned by NPI.
Benetech | Nonprofit Investor Research 5