Politics

What can Zuckerberg’s $300 million election donation really buy?

The sum is unprecedented and falls woefully short of the amount Congress should be allocating.

Mark Zuckerberg and Priscilla Chan

Mark Zuckerberg and Priscilla Chan announced they'll be donating $250 million to the Center for Tech and Civic Life and $50 million to the Center for Election Innovation and Research.

Photo: Ian Tuttle/Getty Images for Breakthrough Prize

Mark Zuckerberg has frequently found himself sitting before Congress, as lawmakers chastise him for Facebook's flaws and warn him that if he doesn't do his job, they will. Now, as the billionaire founder and his wife, Priscilla Chan, make an unprecedented donation to election infrastructure in the face of Congress' inaction on the multi-billion-dollar shortfall in election funding, the tables have turned.

On Tuesday, the pair announced they are donating $250 million to the Center for Tech and Civic Life, a nonpartisan organization that plans to use the funds to help state and local governments pay for things like hiring and training poll workers, renting polling places, buying protective gear for poll workers, purchasing equipment to process mail-in ballots, and voter education. The couple is also giving $50 million to the Center for Election Innovation and Research, which will fund outreach to inform voters about registration, mail-in voting, and other peculiarities of carrying out an election in a pandemic.

The $300 million outlay is almost as much as the $400 million Congress itself set aside in March as part of the $2 trillion CARES Act. Since then, though, Congress has failed to allocate any additional funding to help state and local officials adapt, despite reports suggesting Congress would need to spend $4 billion to truly meet the scale of the need. And yet, in mid-August, Congress adjourned without allocating any additional money for elections, leaving election officials and experts desperate to find new funding — even if that means taking it from the guy whose company stands perpetually accused of stoking chaos and confusion around elections.

"It is truly a shame that we need to rely on private donations in order to support the basic needs of our democracy, but if Congress is unwilling to step up, we need to find money wherever we can find it," said Nate Persily, a Stanford law professor and co-founder of the The Stanford-MIT Healthy Elections Project, which aims to help state and local officials safeguard the 2020 election.

"Ordinarily I would not want to look to the private sector to meet the basic budget for the infrastructure of our democracy, but we're at an extraordinary point here," said Wendy Weiser, director of the Brennan Center's Democracy program, which has produced multiple reports on the scope of the election funding gap this year. "We cannot let Congress' failure be a failure for democracy."

In a statement, Zuckerberg and Chan said the donations will "help provide local and state officials across the country with resources, training and infrastructure necessary to ensure that every voter who intends to cast a ballot is able to, and ultimately, to preserve the integrity of our elections."

But what can $300 million really buy between now and November? A whole lot and not enough.

Consider what it will take to handle the dramatic increase in mail-in voting that is likely to take place this year. Just one ballot drop box can cost as much as $10,000 to purchase and install. According to the Brennan Center's nationwide estimates, getting fully equipped for mail-in voting would cost $982 million to $1.4 billion. That includes the cost of printing ballots (at least $54 million), mailing them (at least $413 million), purchasing nearly 12,000 ballot drop boxes that would be needed to meet the estimated demand (at least $82 million), ballot tracking software ($4.2 million) and more.

In Pennsylvania alone, the Brennan Center estimates local officials would need at least $36.3 million just to cover the cost of mailing, processing and tabulating mail-in ballots. The technology governments are buying to do this work is mission critical, Persily explained. "Even if you're just talking about opening the envelopes, that could take a week for human beings to open a million mail ballots," he said. "You need to automate the process."

And yet, in many states, Weiser said even if local governments get the funding for these machines now, it's already too late for them to go through the procurement process to buy them, let alone to have them manufactured, installed and tested before Election Day. That means whatever funding comes through between now and November will predominantly be spent on personnel.

"That doesn't mean there's less of a need, there's just much greater labor costs," Weiser said, noting that governments will have to prepare for higher than usual no-show rates, as poll workers in high-risk groups opt to stay home on Election Day.

The cost of labor was already expected to be sizable, even before it became clear that states wouldn't be able to procure the equipment they need. In April, the Brennan Center estimated that simply maintaining in-person voting could cost $271.4 million nationwide.

All of which is to say that Zuckerberg and Chan's commitment can certainly make a dent, but it hardly lets Congress off the hook. It seems unlikely the donation will give Facebook much cover from its critics, either. Lately, the company has touted its efforts to register 4 million voters and surface reliable information about the election through its newly created Voting Information Center. But it's been unyielding on some of its most controversial policies, including refusing to fact-check politicians' speech and declining to take action against one of President Trump's posts that appeared to encourage violence.

Now, some watchdog groups say Zuckerberg and Chan's financial contribution is little more than a public relations maneuver to cover up for Facebook's misdeeds.

"Needless to say, this is a significant financial commitment to help state and local officials administer safe and secure elections amid unprecedented challenges, and we applaud that investment," Nicole Gill, director of the group Accountable Tech, which pushes social media companies on issues related to democracy, said in a statement. "But let's be clear: There's not enough money in the world to paper over the damage Facebook has done to democracy."

Still, Persily and Weiser said that whatever Zuckerberg and Chan's motivation may be, in the absence of leadership from Congress this funding is one of the only safeguards we currently have against a calamitous Election Day. "This is not the ideal situation," Persily said, "but if the alternative is that we have an election meltdown, I think we should take the money."

Image: Yuanxin

Yuanxin Technology doesn't hide its ambition. In the first line of its prospectus, the company says its mission is to be the "first choice for patients' healthcare and medication needs in China." But the road to winning the crowded China health tech race is a long one for this Tencent- and Sequoia-backed startup, even with a recent valuation of $4 billion, according to Chinese publication Lieyunwang. Here's everything you need to know about Yuanxin Technology's forthcoming IPO on the Hong Kong Stock Exchange.

What does Yuanxin do?

There are many ways startups can crack open the health care market in China, and Yuanxin has focused on one: prescription drugs. According to its prospectus, sales of prescription drugs outside hospitals account for only 23% of the total healthcare market in China, whereas that number is 70.2% in the United States.

Yuanxin started with physical stores. Since 2015, it has opened 217 pharmacies immediately outside Chinese hospitals. "A pharmacy has to be on the main road where a patient exits the hospital. It needs to be highly accessible," Yuanxin founder He Tao told Chinese media in August. Then, patients are encouraged to refill their prescriptions on Yuanxin's online platforms and to follow up with telehealth services instead of returning to a hospital.

From there, Yuanxin has built a large product portfolio that offers online doctor visits, pharmacies and private insurance plans. It also works with enterprise clients, designing office automation and prescription management systems for hospitals and selling digital ads for big pharma.

Yuanxin's Financials

Yuanxin's annual revenues have been steadily growing from $127 million in 2018 to $365 million in 2019 and $561 million in 2020. In each of those three years, over 97% of revenue came from "out-of-hospital comprehensive patient services," which include the company's physical pharmacies and telehealth services. More specifically, approximately 83% of its retail sales derived from prescription drugs.

But the company hasn't made a profit. Yuanxin's annual losses grew from $17 million in 2018 to $26 million in 2019 and $48 million in 2020. The losses are moderate considering the ever-growing revenues, but cast doubt on whether the company can become profitable any time soon. Apart from the cost of drug supplies, the biggest spend is marketing and sales.

What's next for Yuanxin

There are still abundant opportunities in the prescription drug market. In 2020, China's National Medical Products Administration started to explore lifting the ban on selling prescription drugs online. Although it's unclear when the change will take place, it looks like more purely-online platforms will be able to write prescriptions in the future. With its established market presence, Yuanxin is likely one of the players that can benefit greatly from such a policy change.

The enterprise and health insurance businesses of Yuanxin are still fairly small (accounting for less than 3% of annual revenue), but this is where the company sees an opportunity for future growth. Yuanxin is particularly hoping to power its growth with data and artificial intelligence. It boasts a database of 14 million prescriptions accumulated over years, and the company says the data can be used in many ways: designing private insurance plans, training doctors and offering chronic disease management services. The company says it currently employs 509 people on its R&D team, including 437 software engineers and 22 data engineers and scientists.

What Could Go Wrong?

The COVID-19 pandemic has helped sell the story of digital health care, but Yuanxin isn't the only company benefiting from this opportunity. 2020 has seen a slew of Chinese health tech companies rise. They either completed their IPO process before Yuanxin (like JD, Alibaba and Ping An's healthcare subsidiaries) or are close to it (WeDoctor and DXY). In this crowded sector, Yuanxin faces competition from both companies with Big Tech parent companies behind them and startups that have their own specialized advantages.

Like each of its competitors, Yuanxin needs to be careful with how it processes patient data — some of the most sensitive personal data online. Recent Chinese legislation around personal data has made it clear that it will be increasingly difficult to monetize user data. In the prospectus, Yuanxin elaborately explained how it anonymizes data and prevents data from being leaked or hacked, but it also admitted that it cannot foresee what future policies will be introduced.

Who Gets Rich

  • Yuanxin's founder and CEO He Tao and SVP He Weizhuang own 29.82% of the company's shares through a jointly controlled company. (It's unclear whether He Tao and He Weizhuang are related.)
  • Tencent owns 19.55% of the shares.
  • Sequoia owns 16.21% of the shares.
  • Other major investors include Qiming, Starquest Capital and Kunling, which respectively own 7.12%, 6.51% and 5.32% of the shares.

What People Are Saying

  • "The demands of patients, hospitals, insurance companies, pharmacies and pharmaceutical companies are all different. How to meet each individual demand and find a core profit model is the key to Yuanxin Technology's future growth." — Xu Yuchen, insurance industry analyst and member of China Association of Actuaries, in Chinese publication Lanjinger.
  • "The window of opportunity caused by the pandemic, as well as the high valuations of those companies that have gone public, brings hope to other medical services companies…[But] the window of opportunity is closing and the potential of Internet healthcare is yet to be explored with new ideas. Therefore, traditional, asset-heavy healthcare companies need to take this opportunity and go public as soon as possible." —Wang Hang, founder and CEO of online healthcare platform Haodf, in state media China.com.

Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.

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