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UPDATED: October 30, 2014 NO. 20 MAY 17, 2012
Mass Producing Charity
A venture capital investor uses his business savvy to maximize the impact of his philanthropic work
By Li Li

EMBRACING A NEW LIFE: Two-year-old Shi Shuanglan is ready to be discharged from a hospital in Beijing where she received heart surgery sponsored by Ai You (COURTESY OF AIYOU HUAXIA)

Since 2006, the foundation has raised more than 200 million yuan ($31.7 million). By the end of March, 13,015 children had received surgeries sponsored by Ai You. The foundation paid all expenses that were not reimbursable by medical insurance for rural families and a proportion of the out-of-pocket expenses for urban families, depending on how dire the family's financial situation was.

The number of surgeries performed with the foundation's funding has given Ai You bargaining leverage when dealing with its partner hospitals. In 2009, the foundation set price caps on the treatment of 18 congenital heart diseases and also required hospitals to give a package price for treating each child beforehand, covering all the procedures from blood tests to post-operation medication.

The foundation has developed an online database, which records the status of each aid recipient, from application to hospitalization to the completion of surgery. By logging into this platform, every donor can also check the information and status of the children they sponsored. After a surgery is performed, the foundation will directly send the money to the concerned hospital's account so that the family won't misuse the aid for other purposes.

Copying the procedures it had established for supporting children with heart defects, Ai You set up a similar program for leukemia-affected children from impoverished families last May, which has benefited nearly 200 children.

The foundation is also setting up a rehabilitation center in Shanghai for orphans receiving birth defect surgeries, where they can receive high-quality post-operation care until they recover fully and are physically qualified to return to their orphanages. This program has received 1.5 million yuan ($238,000) in financial aid from the Central Government.

Wang recruited the foundation's board directors and donors mainly from his CEO friends. Different from other charitable organizations, the administrative and operational expenses of Ai You do not come from donations, but are separately funded by Wang and some foundation board directors. The foundation has outsourced its accounting services to an accounting firm. Since its establishment, the figures under investment, total liabilities, administrative costs, financing costs, staff wages and benefits and administrative office expenses on the foundation's annual reports have always been zero.

Wang said that such a design is to allow donors to the foundation to clearly see where their money goes and how many lives they have helped save. "This arrangement introduces unprecedented transparency in the operation of a charitable organization. As the package price of one surgery is usually around 20,000 yuan ($3,175), donating 1 million yuan ($158,730) equals saving 50 children. The math is as simple as this," Wang said.

According to Wang, a large part of his foundation's value comes from its innovative combination of commercial acumen and charity work. "I regard myself as a social investor, who has introduced a corporate governance structure to a charitable organization. I am creating a model I believe is replicable by other people enthusiastic about charitable causes," Wang said.

Despite being a veteran investor, Wang has refused to invest the balance on the foundation's account. "People might question why you invest in this project instead of that one. For the time being, transparency and credibility are of the utmost importance to charitable organizations in China," Wang said.

Last June, the Red Cross Society of China came under fire after a 20-year-old micro-blogger claimed to be the general manager of Red Cross Commerce and flaunted wealth by posting photos of her extravagant lifestyle. As a result of the credibility scandal, donations to charities have plunged nationwide.

While Ai You's operational model is extremely innovative it has been questioned by some people working for charitable NGOs. Gao Guangshen, Vice Secretary General of the Sun Culture Foundation, a Hong Kong-based NGO dedicated to education and poverty relief initiatives, told The Economic Observer, a Beijing-based business weekly, that excessive emphasis on zero operational costs tends to mislead the public into believing that charitable organizations shouldn't need any operational costs, which could hinder the survival of a large number of small NGOs in China.

Wang also admitted that his foundation wouldn't operate with "zero costs" forever. He said he is waiting for the day when the general public has a better understanding and deeper trust in charitable organizations and less doubt about the use of their donations and those working for charitable organizations become more professional.

Wang believes that it will be 10 to 20 years before the general environment for charitable causes in China becomes mature. "Until then, it is only natural that there will different opinions over how charitable organizations should be run," Wang said.

Email us at: lili@bjreview.com

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