The End Of Pay and Pray
For years philanthropic organizations have bought fundraising software from the likes of Blackbaud and a host of other software companies, large and small, in the hope that these tools would help them raise money. The term I like for these fundraising software packages is “pay and pray.” There is no correlation between the amount of money a non-profit pays and the amount of money they raise with these tools.
I think we witnessed the end of pay and pray yesterday with the announcement that our portfolio company CrowdRise is joining forces with GoFundMe to create a single crowdfunding platform that will serve the needs of person to person fundraising, event based fundraising, fundraising for philanthropic organizations, and corporate social responsibility.
Over the past five years, CrowdRise built a suite of crowdfunding tools for philanthropic organizations, events like marathons and other races, and corporations that want to participate in social causes. Those web-based tools are used by tens of thousands of organizations to raise funds organically over the Internet. Now those tools sit on top of the world’s largest platform for charitable giving. In the six years that it has been around, GoFundMe has been used by over 2mm people to raise money from over 25mm donors. Over $3bn has been raised on GoFundMe since 2010.
I think the new GoFundMe has become the social charitable platform of choice, much like LinkedIn is the social platform for business relationships, Facebook is the social platform for staying in touch with friends and family, and Twitter is the social platform of choice for staying on top of what is happening. We will all have profiles on GoFundMe which speak to our charitable giving history and we will all have stored payment credentials on GoFundMe that facilitate one-click social action. In time, everyone who wants to raise funds from the billions of people who are on the Internet will use GoFundMe to do that. And everyone means you and me, it means charities large and small, it means corporations who want to light up social action in their employees, and it means events that want to offer charitable fundraising. One platform can do all of this and it will do all of this.
The other thing that is important to understand about a crowdfunding platform, like GoFundMe or Crowdrise, is that there are no upfront or fixed fees or minimums required to use the platform. Most crowdfunding platforms take 5% of the amount raised plus a credit card fee. So there is a direct correlation between the amount you spend for these tools and the amount you raise with them. And many charitable organizations that use these tools pass these fees onto the donor which means they keep 100% of what they raise on these platforms.
This is a revolution in the way money is raised for good causes. There is now a large scale network that exists to support charitable giving. And the tools now exist for any person or organization to participate in this network. And these tools cost relatively little, or nothing, to use. No more pay and pray.
For years philanthropic organizations have bought fundraising software from the likes ofWorth mentioning though that for certain organizations, non profits and so on you are also opening yourself up to competition. When someone gets a direct solicitation for a particular philanthropic or charity (or even a school) ‘pay and pray’ they just focus on whether they want to give money at that point in time to that organization. If in theory people only have a certain amount of money they will donate, then exposing your donors to a platform that will take some of those dollars could potentially impact what you are able to raise. And I am talking about organizations with followings that aren’t going to raise any money from the added people that they would find on the internet. For other types of organizations or charities the increased exposure is great obviously.
LE:The charity mill of bad telemarketing companies which are paid like sixty percent or more to bring in twenty-five percent after payouts and administrative costs hasn’t helped. Do you feel this is a good start to get more funding to the cause that actually needs it?http://www.cbsnews.com/news…
I get calls from boiler rooms (one example is for the police chiefs). I can’t make a judgement on what amount is fair for someone doing such a shitty job. I can assure you that I wouldn’t want to be sitting there in a cubicle or in charge of that type of organization. How much is a fair vig for such work? I am not in a position to judge that.
LE:We can assured that the workers are not sharing in the profit sharing of the company who employ them. They are telemarketers. Advertisements in newspapers for these positions are always $10-$15 with bonuses, etc.
One more thing I wasn’t talking at all about those types of operations.
I think that for philanthropy, a good engaged board makes a huge difference. While charitable boards don’t have the same fiduciary responsibilities that for profit boards do, it really helps to bring for profit best practices to the charitable world. This helps a lot. http://www.streamlinksoftwa…
I’ve seen some expensive and abysmal donor management software. This is a huge step forward. Will this be appropriate for platforms like http://main.nationalmssocie…
Where are you Charlie?? I want to see your comments!
FRED:Technology that gives back.Thanks from those who directly use it and volunteer to the various causes that use the platform.
Does this mean NPR will be able to stop radio fundraising? What will happen to all of those totes!?
Adam Sher:don’t forget the Organic Color Tee’s (Currently $26.00), 16oz Kanteen Cafe’ and NPR 40th Anniversary Book & CD Collection and other mentionables.
This seems like a very smart merger, one that will actually be synergistic. Most fundraising software is archaic and deserves to be disrupted. They have been milking the charities with their exhorbitant fees and un-flexible software.
FRED:Really hope Cyber Security is on the table this week. Even an off topic alert wouldn’t be used on a Philanthropic for the suggest we really believe deserves a post we hear has your Portfolio company Twitter buzzing.But we definitely were tempted.
this is very, very cool.
As a 20+ year fundraiser, I’m glad to see the advent of crowd funding but wanted to point out that’s only one part of the picture – Raiser’s Edge (Blackbaud) and other systems also function as a CRM that help organizations manage the entire ‘major gift’ process as well. I don’t see that being taken care of by a crowd funding platform (but admit to not having delved into the current CrowdRise platform). Major gifts (usually defined as $25K plus) are the lifeblood of a lot of non-profits, and the careful management of those relationships is key. I’ve used – and had to pay for – a number of these systems over the years and, while they are far from perfect, they have a number of functions. If CrowdRise and GoFundMe really want to put Blackbaud et al out of business, there’s another aspect to consider here.
CONTRIBUTORS:OFF TOPIC ALERT!Dollars and deals are down: In the U.S., venture capitalists deployed $58.6 billion across 4,520 deals in 2016. That’s a 16% drop in capital and a 20% decline in deal volume over 2015. Globally, investment fell 23% and deal volume fell 10% over the year prior, driven by declines in the U.S. and Asia. (European funding actually rose .) source: Erin Griffin Fortune Term Sheet——————–Did CrowdFunding to surpass VC funding in 2016?http://www.forbes.com/sites…Where is the follow-up to these predictions?
pay and pray. yes, bitcoin’s price has crashed.Next we would have the spectacle of the Satoshi Roundtable, if it were not being held at a secret venue. They behave more like Bilderbergers every day.Why would we want to build the next internet on top of this blockchain and hierarchy?
Or you can use http://www.generosity.com and fundraise for free (that’s 0% not 5%), as long as you raise for personal needs or socially minded causes.
Crowdrise and GoFundMe have a very long way to go before they’ll revolutionize the way non-profits raise the majority of their funding. Prior commenters have done a good job explaining why. In fact, these platforms often create more competition for giving to non-profits, since anyone can now launch easily create and launch a campaign. So, to some extent, they have a dilutive effect. Successful ventures? Undeniably. Game changers for the vast majority of non-profits? No. But, maybe in the future.
WILLIAM MOUGAYAR:OFF TOPIC ALERT!Would like to know your view on blaming China’s Yuan for Bitcoins tanking? This is the major reason traditional money/currency is needed. The swings in Bitcoin would ruin the financial markets. Your thought.
I agree with the blaming. Which is another reason why we shouldn’t let one nation control Bitcoin’s destiny that way.
“There is no correlation between the amount of money a non-profit pays and the amount of money they raise with these tools.”That’s true, but it’s also like saying “There is no correlation between how much you pay for your gym membership and how much weight you lose.” Again, that’s true, but who cares?What matters is effort. A great fundraiser can make tons of money with a rolodex. A disorganized one can bring in zero dollars with the most advanced tools available.
get background information on their impulse donors, and turn them into long-term committed donorsSeparate issue. What if the people donating money don’t have the resources to give in the same way that Fred/peers or people with steady jobs and incomes? But yet they get drawn in and continue to give away money that should go toward their family or their own expenses or their own future (latte factor). Not everyone should be giving away their income in this way on a regular basis. Could be considered another tax (like QVC or home shopping or Walmart) on those that are not able to really afford to do this other than a one off here or there for the entertainment or occasional positive feelings. The fact that it goes for a good cause doesn’t negate this. I am challenging the assumption that all giving is good (by anyone anytime anyplace) and I am even talking about giving to reputable, trustworthy and needy organizations. Not your point but wanted to raise it.
Agree totally. It is when sports teams use Ticketmaster. Great acquisition tool. Not rention. Not saying not a great company or that they can move another way
Agree w/your points here, especially that crowdfunding is an entry point.I’m not convinced that it’s the right way to tackle large dollar amounts that require longer relationships, even with some sort of wizardry in the algorithms + AI. The best crowdfunding campaigns typically hit the right nerves from an idea / content and design aspect, and go on to develop much bigger partnerships.
Trust people? Trust that they can manage their resources? You know that isn’t correct.To quote Fake Grimlock “IT HILLARIOUS”.
PEOPLE BAD AT ALMOST EVERYTHING. IT JUST WAY LIFE IS.
My dad actually used to do this for some of his employees.