For-Profit Charity Fundraiser Pallotta TeamWorks Shuts Down

Pallotta TeamWorks, the Los Angeles-based for-profit fundraising organization for charities has closed its doors.

On August 24th the Associated Press published a report by AP writer Andrew Bridges that the company, founded by Harvard College graduate and last spring’s Social Enterprise featured speaker Dan Pallotta, laid off its entire workforce of more than 250 people, according to a former spokesperson.

The company was known primarily for its AIDS Rides USA, long bike tours in which volunteers paid $2,000 or more to participate and solicited sponsorships from friends and family, and also its 3-day Avon Breast Cancer Walks. The AIDS Rides have been discontinued. They had raised nearly $100 million for AIDS-related charities.

When Dan Pallotta was on campus last term, he spoke of troubles involving accusations from within the fundraising community that his for-profit company overspent on overhead and thus reduced the amount of money from these mega-scaled events that went to charitable causes.
At HBS and in an exclusive interview with The Harbus prior to his visit in the spring, founder Pallotta defended his company’s yields and positioned his company’s for-profit status as a pioneering model through which the power of marketing and market-based practices could bring money in large scale to charitable causes.

In the February 4 issue of The Harbus, Pallotta told The Harbus’s featured interviewer and former AIDS Ride USA participant Kevin Lamb, “We have for-profit models that put shoes on the feet of people across the world and put computers on the desks of nearly every American household. We should recognize that we need powerful, multi-billion dollar companies to take up the important social issues and channel those resources.”

Pallotta continued, “We plan to expand our breast cancer and suicide projects and to narrow the Vaccine events to the point where we can get an effective rate of return on the donors’ investment.”

“In business schools people are encouraged to take risks, but we expect non-profits not to. I was reading recently that only recently showed a profit margin of five million dollars. But can you imagine a non-profit organization that operated for several years at a huge loss of revenue? We burden non-profits with the expectation of 100% yield, and as a result, they are extremely risk-aversive.”

In his interview and HBS visit, Pallotta also spoke of the company’s desire to focus more narrowly its operations to improve margins. He kept his personal sights on what then seemed like the long-term.

“I don’t know what the ten year goal is, but I kind of think of us as a ‘Disney of meaning.’ Disney made the animation theme park part of the American landscape. I would like to see us installing in our culture kindness and bold thinking in the face of social crises.”

Not only did Pallotta himself appear as a guest speaker for the Social Enterprise Club, but his company was featured as the protagonist in the RC Social Enterprise course last Spring.

Pallotta TeamWorks events suffered heavily from recent accusations of mismanagement, and its signature AIDS Ride faced competing events this past year organized by charities directly on a cooperative basis instead of through Pallotta’s company. Legal battles ensued.

The status of Avon Breast Cancer Walks is undecided, though the AP story reported that Avon would sponsor a series of shorter walk-a-thons next year and would eventually drop its sponsorship of the famous walks altogether by the end of 2003. Since 1998, the walks have raised well over $100 million for breast cancer causes.