It can be a tough task to ensure that grants and charity funds get into the right hands, and show the path the money takes around the world. A Seattle startup backed by Bill Gates is working to make it easier.
Sunlight Payments is working with Pathfinder International, a non-governmental organization that has a presence in 19 countries and focuses on women’s reproductive health, to test a system that electronically tracks grants and payments. The two organizations just completed a test to move funds from Pathfinder’s office in Massachusetts to people and organizations on the ground working on projects in Tanzania and Uganda.
With the test completed, Sunlight Payments says it will begin fully marketing its system to philanthropic organizations worldwide.
The idea for the service can be traced back several years to Gates himself and one of his frequent investment collaborators, Intellectual Ventures, which is helmed by Nathan Myhrvold, who was CTO at Microsoft while Gates was running the show. Traditionally, when donors wire or transfer money to other organizations as part of a philanthropic project, they lose the ability to track where exactly the money ends up. The recipients could then transfer money over to several subcontractors, adding another layer of complexity to the process.
“The path that the dollar takes from those large donors to get all the way down to the nurse practitioner that puts the vaccine shot into a kids arm or the women’s health visits that happen in Tanzania, it hops at least three times before it gets to its destination,” said Aaron Sparks, Sunlight Payments founder and CEO. “In some cases it’s hopping way more than three times, and so think about the number of opportunities as those moneys are changing hands between those parties for somebody to take a piece.”
Sparks at the time was working as Intellectual Ventures’ senior director of finance. In an interview with GeekWire, he described himself as a financial “Swiss Army Knife” and a fixer, but said he had gotten about all he could out of that position. One day, he was pulled into one of Intellectual Ventures’ “invention sessions,” where the company hashes out big ideas. This one, which included Gates, focused on how to increase transparency when transferring money for philanthropic projects. They wanted a way to make donors feel confident that their money would get where it needed to go as it changed hands several times throughout the process.
And so the idea for Sunlight Payments was born.
It works somewhat similar to Blockchain, the public ledger that tracks cryptocurrencies like Bitcoin, but with some key differences.
The transparency only goes one way. A donor drops the funds into what Sparks referred to as a “project bucket.” The donor could invite the organization it’s working with into the bucket and authorize them to use the money for certain purposes. That organization could then bring its subcontractors in to use the money for their dedicated needs. And the donor would be able to see all this activity, down the chain, though the other organizations would not be able to look up the chain.
Sunlight is looking to solve several common problems in the process of transferring funds from nonprofits and NGOs to organizations working on projects in developing areas, such as: logistical issues with multiple fund transfers; lack of vetting of partners and vendors, lack of trust between groups that don’t know each other; and technological barriers.
Sunlight says its system increases transparency and saves money because of simplified payment processing and “optimization of bank and foreign exchange fees,” with help from its financial services provider Bank of America-Merrill Lynch. Sunlight’s technology also includes tools for finding reliable vendors and fraud protection and detection programs.
The nine-person company was founded in 2015 and has been working with a team of payment, fraud detection and distributed systems experts from Amazon, KPMG and Deloitte to build out its first test platform. Before coming to Intellectual Ventures, Sparks did stints at KPMG and Deloitte.
Over time, Spears said Sunlight has learned a few lessons. One of the most important was that the system needed to run smoothly in areas without a lot of cell signal. The cell networks in test regions in Uganda and Tanzania were roughly equivalent to 2G strength. For reference, the first iPhone released in 2007 ran primarily on 2G networks.
“We learned a lot about how your application needs to work when in you’re in an environment like that,” Sparks said.