Nonprofits and Funding

Jim Fruchterman | March 27, 2025

Note: In the following essay we reference the eight Better Deal for Data™ commitments originally proposed in our April 2024 white paper. In December 2025, we released the BD4D™ Commitments as a set of seven refined commitments.

Introduction

The Better Deal for Data has been generally well-received by nonprofit organizations. However, one of the most common concerns raised by social sector leaders is about money. While avoiding the excesses of the prevailing commercial surveillance capitalism model resonates with them, these leaders point out that all nonprofit work costs money, and often that money has conditions related to data (such as reporting on social impact). The goal of this paper is to explore this issue and offer proposals for feedback around the crucial question: which nonprofit funding models fit with the Better Deal for Data commitments and which do not? We need to explore where the line is between what is appropriate and inappropriate when it comes to nonprofits and using stakeholder data.

This working paper is one of a series we are publishing on major questions we are being asked about implementing the Better Deal for Data. It is not intended to be the final word on where the Better Deal for Data standard version 1.0 ends up on these questions. Instead, these Major Questions papers are forcing us to explore each specific question, and think through our initial answers. We are hoping to engage in more extensive debates over any controversial points.

The Money Challenge and Data

The core of the Better Deal for Data is the idea that there has to be a practical and ethical alternative to the most exploitative elements of surveillance capitalism. People are increasingly uncomfortable with the surveillance capitalism bargain because of the widespread evidence and growing understanding that their personal data is often not being used to help them (and sometimes it is being used to hurt them). In our research, stakeholders repeatedly express their concern that sharing their data leads to negative impacts on them, their families, and their businesses. They are worried that their data will be used to charge them more money for the things they buy or the money they borrow, or to pay them less for the things they sell.

Of course, part of this stems from the nature of capitalism, where it is expected that businesses should use every tool available to pay less for inputs and charge more for their outputs. However, the feeling among many of the stakeholders we engage with is that data (and increasingly, artificial intelligence) is tipping the existing power imbalance in society ever more against them. At the same time, there are a large number of organizations collecting data—nonprofit, government, and many for-profits—who seek to behave ethically and transparently with their community. These organizations are interested in committing to data use which increases their trustworthiness as stewards of data belonging to the communities they serve.

Data collection, AI, and tech innovation are expensive. Workers need to be paid, and it’s hard to imagine an interesting data use case where data processing, communication, and storage costs are not being incurred on an ongoing basis. That money needs to come from somewhere. Where should the Better Deal for Data draw the line between what qualifies and does not qualify as fair and appropriate when it comes to money?

The Better Deal Commitments and Money

In the Better Deal for Data white paper, money comes up in three draft commitments to stakeholders with respect to Data (as defined therein):

• Commitment One: We are using Your Data to benefit You, Your community, humanity, and the planet; not for private gain or profit.
• Commitment Four: We will not monetize Your Data by providing it to third parties for compensation.
• Commitment Five: You can decide if You want to make Your Data open, or want to monetize it for Your benefit.

For the purpose of this paper, we are going to focus on nonprofits and where they find money, including funding the programs where data is collected and used. We are also thinking of “money” broadly, including grants, loans, in-kind resources (such as free or discounted technology and/or cloud access), as well as payments, trading, or bartering of and for data and data related assets. Even though some surveillance capitalism companies go out of their way to explain that they never sell your data, these statements seem to be more about legal compliance than the substance of how the data gets used. The fact that these companies generate immense wealth from activities based on data use and exchange is what matters to the general public, and distinguishes the alternative offered by the Better Deal for Data.

We believe that nonprofits and other organizations committed to social good are ready to make these commitments, as long as they can find adequate funding to do their social impact work.

Impact and Compliance Data

The social sector exists to provide public or social goods where profit-making businesses fail to meet some or all of society’s needs. For an organization to obtain status as a charity usually requires identifying specific social causes for its activities, and to renounce the pursuit of private gain for individuals or third parties (this is a requirement for receiving charitable status in the United States). Charitable organizations have made a commitment to society to act primarily in society’s interest, which creates a higher expectation for their trustworthiness when it comes to stewarding data.

Many nonprofit activities are undertaken on a purely charitable basis, where there is no expected financial return from the activities of any sort. This makes it straightforward for charities to comply with Commitments One and Four. Of course, this is not the same thing as refraining from all use of data collected from charitable programs. It is typical of donors and funders to request information about charitable activities as a condition of making a grant or a donation. Broadly speaking, we can think of this donor-requested information as falling into two broad categories, impact reporting and compliance.

Impact reporting is provided to assure donors that their funding had a desirable social impact. It is typically provided as aggregated information:

• Our organization fed, clothed, and/or housed so many people last year
• We vaccinated children for half of the cost of alternative programs
• We delivered 500,000 books to poor children through our activities
• Our medical research effort created a new therapy which is 30% more effective than the status quo

It is also typical for nonprofits to tell the story of a typical beneficiary, either with explicit permission from an individual, or by creating a composite recipient without using any personally identifiable information. And, some programs exist where beneficiary identities are shared openly such as scholarship, fellowship and other awards, where the open nature of the program is disclosed at the outset (and is rather the point).

Furthermore, it is quite common for charities to be subject to compliance requirements to ensure that their activities conform to grant restrictions and regulations, free from fraud. Many nonprofits are regularly audited by independent accounting firms. Some of these compliance and auditing functions may require access to quite detailed data including personally identifiable information, say to confirm compliance with beneficiary eligibility requirements, but such access is confidential and limited to narrow purposes.

We propose that providing aggregate impact data and responding to standard audit inquiries as described are fully compliant with the Better Deal for Data. However, there are limitations. Providing a donor with raw program beneficiary data in connection with a grant is outside generally accepted practice in philanthropy, and not compliant with the Better Deal for Data. Such data access is not reasonable to meet the goals of impact reporting and compliance.

Revenue Generation

Many nonprofits pursue activities that involve revenue generation which is similar to that of for-profits. Most of these activities are regarded as charitable as well, especially if a program as a whole is expected to never generate a profit. There are many charities which provide subsidized access to food, medicine, housing, books and other needs. Selling products or services by themselves are not issues which create problems for following the Better Deal for Data.

Issues arise when data-driven revenue generation appears to be in pursuit of commercial rather than charitable objectives, or results in exploitation or harms to those it is originally intended to benefit. Some revenue practices, which we propose are not compliant with the Better Deal for Data, are listed below:

• Selling (or exchanging) donor lists including personally identifiable information such as names, addresses, phone numbers, and/or email addresses
• Providing beneficiary lists to (or sending solicitations to beneficiaries on behalf of) for-profit businesses
• Providing detailed beneficiary information to third parties for compensation or quid pro quo (even if the personal information has been stripped out)

The common thread to these problem scenarios (all of which have come up in our work) is that stakeholder data is being treated as an asset to be sold, rented or exchanged, in ways where benefits to the stakeholders are secondary (or nonexistent), and which the typical stakeholder would probably not agree to if clearly and explicitly asked. Burying consent in lengthy terms of service or policy acknowledgement does not change the issue from a Better Deal for Data standpoint.

At the same time, context matters. A clear and explicit standalone ask which transparently explains a use of data, where it is opt-in (and not opt-out), and where the program participant actually has agency in the decision (say, by not being denied a critical service if they don’t agree to an optional data use), could indeed be reasonable under the Better Deal for Data. We will now explore two of these exceptions.

Open Data and Beneficiary Monetization

Commitment Five is noting that the Better Deal for Data constraints on selling (or otherwise exploiting) stakeholder data definitely permit the stakeholder (for example, a data subject) to make their data open, or use it to obtain economic returns. The goal here is to promote the interests of stakeholders and overall social good.

For example, many medical patients might support adding imagery of parasites found in their blood to a public medical image database, as long as the images are not connected to them personally. Or, someone may operate a weather station on their property, and choose to share the location and weather data openly. A farmer who adopts a practice that diminishes land erosion, reduces fertilizer use, or captures more carbon might be very interested in receiving additional payments based on data that document these practices. A nonprofit which facilitates such payments should be allowed to retain a portion of the payments to defray their costs to provide this assistance, as long as the primary goal of such a program is benefits to the stakeholders, rather than the nonprofit. Social sector organizations often deliver products and services that aren’t profitable enough for a for-profit corporation to perform. These activities are likely to meet the standards set in the Better Deal for Data.

Conclusion: What’s Missing?

Our series of Major Questions papers are intended to explore the big issues we hear about from the many collaborators who have contributed their data use cases, their feedback, and their support to the Better Deal for Data. This paper represents our initial thinking about the intersection of nonprofits, money, and data, trying to answer the major question: which nonprofit funding models fit with the Better Deal for Data commitments and which do not?

We already know there are more topics that we could have discussed here, but may be worth exploring at greater length. We would like to get even more feedback from the community, especially:

• What additional issues come to mind about this subject?
• What did we get wrong?
• What examples do you have of nonprofit data use which should be inside or outside the Better Deal for Data, or are simply puzzles to consider?