Impact certificates

One way to give or receive funding for projects on Manifund is through impact certificates. The impact certificate ecosystem is like Kickstarter meets the stock market, for charity!

How do impact certificates work on Manifund?

• Founders create a proposal for a charitable project, with a minimum funding goal.
• Accredited investors initially offer to fund the proposed project through an auction. At a predetermined date, the auction will resolve: if the total amount bid meets the minimum funding goal, the project will be funded and top bidders by valuation will receive shares in the project in exchange for money. Otherwise, the project will not be funded.
• If the project is funded, accredited investors may continue to trade shares in the active project, buying and selling based on how the projects are performing.
• After the project is complete, altruistic individuals or organizations can offer to buy up these shares in recognition of successful impact by the project.

An example of Manifund impact certificates in action

1. A research team proposes a project to develop a forecasting model to prevent pandemics. They ask for $5,000 to work on this project.
2. Investor Ivan offers to buy $3,000 of impact certs at a $6,000 valuation; other investors contribute the rest, and the project is successfully funded at this higher valuation.
3. Three months later, the forecasting model proves to be effective in predicting the trajectory of an upcoming pandemic and helping hospitals take action.
4. The Good Foundation values the project at $18,000 of impact, offering to buy up all of the outstanding certs.
5. Since Ivan owns 50% of the project's certs, his stake has tripled in value from $3,000 to $9,000; he sells them for $9,000 to The Good Foundation, netting a $6,000 profit. (Important note: for legal reasons, profits on Manifund impact certificates can currently only be used to donate to charity and can't be cashed out in the normal way.)

Why are impact certs better than regular grants?

For donors: “In an impact market, you (as the final oracular funder) only need to figure out which projects did work, which is much easier: for example, penicillin obviously worked, and flying cars obviously didn't. Then you buy the shares of those projects, and your job is done. Private investors still have to do the prediction behind the scenes, but they're only risking their own money, not charitable dollars, and they're properly incentivized to get the right answers.”
 —ACX

For investors: If you have a good eye for what projects and founders are likely to be successful, you can now earn profits off of your skill — while helping early-stage projects get off the ground.

For founders: Manifund is like a Common App for charitable funding: instead of applying one-by-one to a bunch of different grantmakers, you only need to create a single project proposal. This makes it easy to apply, even for very small amounts of funding (as low $250). Interested investors can then offer to fund your project through our site.

Like startup equity, you can keep a portion of your impact cert shares, to sell later or distribute to other people who help your project.

See also

• Impact Markets: The Annoying Details by Scott Alexander
• Explaining Impact Markets by Saul Munn
• Why Certificates? by Paul Christiano and Katja Grace
• Retroactive Public Goods Funding by Vitalik Buterin

Appendix: technical details

The Auction Mechanism

On Manifund, project proposals start with a fundraising auction, where investors can offer to fund the project at a different valuations. At a predetermined auction close date, typically a week or two after the proposal is posted, the auction will resolve as follows:

Bids will be read in order from highest valuation to lowest valuation. Bids will be paid out until all shares are bought at the price set by the lowest successful bid. If the total amount bid exceeds the minimum funding but not all shares are sold, then all bids will go through, the project will be funded, and remaining shares will go up for sale at that valuation on the market (this only happens if all bids were above the minimum valuation for the project). Otherwise, the minimum funding bar was not met by all bids combined and the project will not proceed.

For example, let’s go back to that research team with a forecasting project to prevent pandemics with a minimum funding bar of $5,000. Here are a few ways the auction could go: