KULA causes – http://www.kulacauses.com – has been in the works since 2010. It’s a new way for members of frequent travel programs to donate to nonprofit organizations worldwide. Gerrit McGowan, CEO of KULA Causes, Inc. moved to Boulder, Colo. in February 2011 and has spent the last year developing the company. KULA Causes, Inc. received their first round of funding in June 2011 and started building the technology platform. They now have their system and platforms in place and launched the platform a few weeks ago at SXSW Interactive at Austin, Texas.

InsideFlyer
Can you tell us a bit about KULA Causes–how will KULA Rewards work?

Gerrit McGowan
KULA is the world’s first currency for charitable giving. It’s a global currency. When you think of a currency, you can think of that currency in two simplistic pieces. There’s the way to earn it and a way to spend it. The way to spend KULA currency is very simple. We now have the largest aggregation of charities in the world where people can donate.

The innovative part is how you can earn the currency. We aren’t trying to take out of the market share of 250 billion dollars in individual giving in the U.S. We’re trying to add to that pie, which is what makes us different from most giving platforms. Our whole approach is how to turn everyday consumers into philanthropists. People that work in the nonprofit space know from so much data that people who have less tend to give proportionately more. Lower and middle income people tend to be the most altruistic with the limited funds that they have. Economic times have been tough in recent years and people simply don’t have the expendable income to give. We wanted to find a way to allow everyday consumers to participate in philanthropy.

And people are looking for experiential rewards. A holiday weekend with your loved ones is going to have a much deeper connection than a piece of electronics that could break in the next few years. Giving and philanthropy is another powerful experience and something that people hold on to and remember. It has great value for them.

There are three different applications of our currency. First is the KULA exchange where we work with various types of loyalty programs. We allow members of those programs to convert their unredeemed currency into tax-deductible charitable donations. We allow consumers to redeem points and get a tax deduction, the charity gets the cash and the program gets re-engaged members, reduced point liabilities and can create engagement and even acquisition opportunities out of that.

We can also provide unique codes on product packaging that equals some type of donation rebate. Manufacturers can create a product with the code, a consumer who purchases the product can collect the donation currency.

The final program is KULA Rewards. We work with local brick-and-mortar merchants. This is much like a coalition loyalty program, like Air Miles. We partner with local businesses and allow them to allocate the KULA currency to their shoppers. The key difference between KULA Rewards and national level coalition programs is we work with existing coalitions. We are trying to strengthen business relationships that already exist. We provide differentiators to small businesses that can’t compete with the economies of scale of big businesses. If you shop locally in your community, not only do the dollars spent benefit the community, but you can earn currency for your child’s classroom or your church or a local cause near and dear to your heart.

IF
How did you come up with the idea?

McGowan
We spent the first year or so developing the concept. I was living in British Columbia at the time. In my previous career I was a special advisor to the U.N., I had my own consultancy, worked for the remote aboriginal community and advising African governments in the field of local economic development. In that process I was always bringing together stakeholders from governments, the nonprofit community and the private sector. In these processes over the past 10 years or so, we noticed that the missing link was the way the business community and the nonprofit community work together. Businesses didn’t have an incentive to support the nonprofit community. Support was generally based on altruism or PR purposes and we wanted to find a way to measure and monetize corporate philanthropy and social responsibility. At the time living in Canada, I’d become exposed to Air Miles. One out of every two households in Canada participates in the program. I found this fascinating and starting digging in deeper to see how it works. And it didn’t take long before we realized the same system and technology that Air Miles used to motivate various customer behavior could be used in a social responsibility space to motivate customer behavior towards brands that are doing things that are socially responsible or are giving back to the communities. This was the beginning of 2010. Once I started to understand the concept, by June 2010 I sold out of my consultancy, moved to Europe to meet some consultants in the loyalty space and spent about seven months vetting the concept, working with experts, talking with brands, analysts and technology providers.

IF
How is giving through KULA Causes different than donating your miles and points through the loyalty programs that partner with the airlines and hotels?

McGowan
There are 204 frequent flyer programs in the world and 29 of them have charitable donation options and most have one or two options. The most is around 25 or 30. It’s great that programs offer donations but the value of the redemptions are relatively low. We see a number of reasons for this. Most prominently is that there’s not enough choice. Being able to donate to one large organization such as the American Red Cross doesn’t reach everyone’s affinity. If you offer a charity that provides humanitarian aid and I’ve never traveled overseas, then you aren’t reaching me. They aren’t providing an outlet that I care about. Our approach is to provide choice. And if we provide enough choice in charitable options, then there will always be something that people will be able to connect to. If you can give to your church or something that impacts your family you’ll be much more inclined to do so. Also, many of these programs partner with large organizations, but statistics in giving show very clearly that many consumers don’t want to give to these big charitable organizations. You don’t know if your donation is going to pay an executive’s salary or if it will help someone in need. People want to give closer to home to smaller organizations where they can see the impact. We provide that choice.

IF
Is it true that miles and points donated through KULA Causes will be tax deductible? How is that possible?

McGowan
We spent a great deal of time and resources in getting letter rulings from the IRS on this issue. We actually convert the points into cash. When we work with our partners they dictate the value of the currency. This is a great opportunity for brands that have a significant point liability. They can dictate the value of their currency for donation purposes. When someone converts their currency into the KULA currency and makes a donation, we convert it into cash. So that consumer is actually making a cash donation.

IF
Participants can buy KULA currency to make donations. Why would it be better to purchase KULA currency instead of making a cash donation?

McGowan
It essentially is the same thing. Members can collect KULA currency in many different ways. You could be collecting KULA currency from travel experiences, purchases at retailers and we wanted people to be able to top up or give a gift. Rather than making a cash donation, people can continue to collect the currency, they can gift the currency and allow other people to make a gift. We want to turn donors into advocates as well. We can turn them into advocates by keeping them engaged in the process of earning and redeeming the currency

IF
How do you plan on reaching your goal of contributing over $1 billion to annual charitable giving by 2015?

McGowan
The more brands in different sectors that we bring on board, the more the consumer will bring the collection of this currency into their psyche. We already have three clear entry points into the market that we are working on and we have been approached by people that want to do rewards for games, for various online and offline behaviors. There’s never been anything like this that really incents people to social responsibility and giving.

Another thing worth mentioning is that KULA is a for-profit business. It was originally started as a nonprofit until we realized we were putting ourselves in the same situation as other nonprofits. Nonprofits in the business community don’t have shared values thus they don’t communicate very well together. We made the decision last year to become a for-profit business. We know that significant profiteering off charitable giving is not good for PR and we only take a tiny fraction of transactions to keep our business afloat. What drives KULA success is transaction volume and what we contribute to giving. The more we can contribute to philanthropy, the more people will become aware of the currency and be more inclined to participate in it. Our vision in the next four years is a billion in giving and with the help of the brands we are working with now and those we’ll pick up in the future, we see that as a real possibility.

IF
KULA partners with two million charitable organizations. How did you find them all?

McGowan
That was hard work. In the U.S., it wasn’t so difficult. There are some great organizations that have been able to aggregate charities through the IRS. So we got a big chunk of them through an organization called GuideStar, who provides this content basically to every donor platform, whether its Facebook Causes or some of the other big players. No one has ever built a global charity platform before. As we added on more countries, it became increasingly more difficult. As an example, in New Zealand we petitioned the New Zealand Charity Commission, a government agency, to get access to that data. In Canada, we went through the Canada Revenue Agency.

IF
Do you have any airline or hotel partners with which members can donate their miles and points?

McGowan
We’re getting very close to announcing a major international bank. We are talking to product manufacturers, a couple of communities and we are now working very closely with a few airlines to be the first partners. We anticipate in the next 30 to 45 days to announce some major brand partners. As soon as our brands are ready to make that announcement, we’ll shout it out to the world as well.

IF
Your website states that KULA is redefining Giving 2.0–a social giving experience like you’ve never seen before. Can you expand on that statement?

McGowan
We took a lot from the loyalty marketing industry and integrated some powerful tools into our platform. We’ve got a tremendous referral and recommendations marketing suite, allowing people to share across all their communications channels. There is connectivity to social media throughout the site so if someone makes a conversion into KULA currency or earns the currency, there’s a way they can fire that out into their social media space while firing out the brand that enabled them to do so. And then once a donation is made they can share the charity they are supporting. The first group to start to do this was Facebook Causes, where there were likes and shares and tweets that enabled people to share the charities they supported with their colleagues and friends. But no one has done it in such a way that it is actually sharing brands. We really spent a lot of time trying to understand what will make a consumer post a brand into social media. Consumers tend to share brands in social media when something negative happens–bad customer service, a bad meal, a bad travel experience. The one thing we found that will cause people to share is something that is emotional and powerful, like giving. I won’t share if I bought a pair of shoes from a shoe company but if that shoe company enabled me to donate to my church, my kid’s classroom, to a charity I really care about, I’m much more willing to share. They’ve enabled me to do something meaningful and emotional that I want to share with my networks. We are the most socially-enabled giving platform. We want to drive not only the charities into the social media space but also the client brands as well.