GoFundMe is changing the way people give to causes big and small

GoFundMe CEO Rob Solomon: “We’ll soon be the largest giving organisation in the world, larger than the Gates Foundation.”
Image: Eric Millette for Forbes

Late in 2012 Eliza O’Neill, a lively, talkative three-year-old growing up in Columbia, South Carolina, started stumbling over her words. “Something was just not right,” recalls her father, Glenn, then a procurement manager for a data-storage company. A series of tests brought devastating news. Eliza had Sanfilippo syndrome, a rare and incurable disease that would erase her ability to speak, destroy her motor function and kill her before she reached adulthood.

Desperate, Glenn and his wife, Cara, a pediatrician, discovered that a hospital researcher was working on an experimental gene therapy that had shown promising results in mice. But the trial needed funding. The O’Neills quickly set up a tax-exempt foundation and, at no cost, posted a fundraising appeal on a three-year-old crowdfunding site called GoFundMe. Anyone moved to contribute could click a big rectangular ‘Donate Now’ button and share the good deed on social media.

The O’Neills’ funding goal was $1 million. Three years later, spurred by a three-minute video about Eliza that has been viewed on Facebook and YouTube nearly one million times, 37,000 donors around the world have given the O’Neills’ foundation more than $2 million via GoFundMe. This May Eliza became the first child to receive the experimental therapy, and her parents are hopeful her condition will improve. “It’s a miracle that this happened,” Glenn says.

It has also been very good for GoFundMe, which takes a 5 percent cut of the money raised on the site. For hosting the O’Neills’ appeal, it has reaped more than $100,000. GoFundMe is not a philanthropy; it is an increasingly valuable for-profit business prominent on Forbes’s 2016 list of next billion-dollar startups. After achieving a reported valuation of $600 million in a July 2015 venture capital deal, it hit a growth spurt. In its first five years before the deal it channelled $1 billion in donations. Then it took just nine months to hit the second billion and only seven months to move a third billion in donations. For 2016 GoFundMe is projecting revenue of $100 million and an operating profit margin of more than 20 percent. GoFundMe is more than twice the size of the world’s next-largest crowdfunding site, Kickstarter, which focuses on artistic projects and new products. Like GoFundMe, Kickstarter takes 5 percent of the money it raises, though it doesn’t collect if campaigns don’t reach their goals. GoFundMe collects no matter what. It also im­poses a 2.9 percent credit card processing fee plus 30 cents per donation.

GoFundMe’s brass are unapologetic capitalists who see the profit motive as perfectly aligning with the company’s objective: Getting more people to give more money more efficiently to a vast array of “personal causes”. Because GoFundMe’s profits directly correlate with how much money it can persuade others to give away, the business is highly incentivised to increase the total amount people donate to others. The one million fundraisers pumping away on the site run the gamut from the Cure Sanfilippo Foundation to disaster relief for victims of the August Baton Rouge floods (6,400 GoFundMe campaigns have raised $11.2 million) to a couple who want help paying for their Prague honeymoon.

“Nobody’s been able to really harness the power of the people to raise funds,” says CEO Rob Solomon, 49, a UC Berkeley grad who grew up in Manhattan and Miami while his activist mother protested anti-gay-rights proponent Anita Bryant. “A for-profit in this space will perform better than a non-profit. You need a modern internet company to do that.” GoFundMe already channels more than twice as much as the Red Cross, which collected contributions of $604 million last year. The 135-year-old charity, where 90 percent of spending goes to programmes, has only praise for GoFundMe’s winning formula. “If GoFundMe can make money and do good deeds at the same time,” says Neal Litvack, the organisation’s chief marketing officer, “that’s probably a good thing.”

At GoFundMe’s headquarters in Redwood City, California, 60 staffers in jeans and sneakers spend their days the way many other Silicon Valley startup workers do, tapping away at workstations spread out in a 9,000-square-foot, open-plan office inside a gleaming glass-and-steel building set back from a leafy street. Meetings happen in conference rooms named for successful campaigns like Saving Eliza and Ibra’s Chair, which raised $33,000 for a Kenyan-born high school student with cerebral palsy who needed an electric wheelchair. Solomon, who has no office and works instead at a standing desk next to a window, says the developers and designers are devoted to “optimising for conversion”. That includes refining the website’s user interface to make it more likely to drive donations. Those who start campaigns can share them across multiple social media platforms with a few clicks. A mobile app lets campaign organisers create videos from photos on their phones, and the company is working on a tool that will enable live video streaming.

GoFundMe has big expansion plans. It opened a Dublin office in July to service Ireland and the UK It’s up and running in Canada and Australia and hopes to open in several European countries Solomon isn’t ready to name. Annual donations will hit between $5 billion and $7 billion by 2020, he predicts.

The vast majority of GoFundMe’s campaigns drive themselves with little input from the staff. As a result, the company operates with remarkable efficiency, maintaining a head count of just 165 (there’s a 69-person customer-service team in San Diego that returns email queries within five minutes). On average, each employee produces $606,000 in revenue. (In 2015 each of Amazon’s 230,000 employees produced $464,000.)

A handful of competitors are challenging GoFundMe with a revenue model they think will be more appealing to donors. Instead of charging a fee, they have a “tip jar”, where they ask donors to give  extra to cover the sites’ costs. Five-year-old YouCaring, in San Francisco, logged just under $300 million in donations over the past two years, according to its president, Dan Saper, who says 80 percent of donors add an average 6 percent tip. In 2014 Indiegogo, a San Francisco-based crowdfunder that focuses on entrepreneurs, introduced a no-fee site now called Generosity, which channeled an estimated $30 million to personal causes last year while asking donors for a tip of up to 15 percent. Another site, Detroit-based Crowd­Rise, charges 5 percent to 6.8 percent but asks donors to contribute extra to cover costs. Mostly a site for charities like Unicef, it runs celebrity-led fundraisers and serves as a platform for people who collect contributions for non-profits when they participate in events like the New York City Marathon.

It took a while for GoFundMe to find its formula. Its San Diego-based co-founders, Brad Damphousse, 34, and Andy Ballester, 35, are first-time entrepreneurs who joined forces in 2008 to launch a self-funded website called Create­afund, where people could post personal fund­raising drives and promote them through social media. At the time, PayPal didn’t have the capacity to divide payments among multiple parties, which meant the partners couldn’t extract a per-donation fee. During their lean first year Damphousse and Ballester tried to persuade charities to use the site on a subscription basis and built market share by offering the service free. In 2009 they got a break when PayPal made it possible to split transactions; the resulting revenue stream enabled them to continue growing organically without outside financing. In 2010 they rebranded the site as GoFundMe.

Then, in late 2014, John Locke, a 32-year-old partner at the Palo Alto venture firm Accel, was invited through Facebook to donate to a GoFundMe campaign for a scholarship fund named for a friend’s brother who had died serving in Iraq. Locke was intrigued, but it took him more than four months to persuade Damphousse and Ballester to meet with him. As negotiations progressed, Locke ran a survey of 300 people, asking them which site they’d use if they wanted to raise funds for a personal cause. Ninety-five percent named GoFundMe. “The business had gotten further along than Brad and Andy ever thought possible,” says Locke. The founders agreed to step aside and sell a majority stake.

Damphousse and Ballester sit on GoFundMe’s board but stopped talking to the media after the Wall Street Journal ran a story saying they were “reaping a fortune” on the transaction. The Journal didn’t mention a sum, but the reported $600 million valuation meant the founders got at least $300 million before taxes. Solomon says they “didn’t want people to know about the money.”

As part of the deal Locke and Accel, early investors in Facebook, brought in TCV, early backers of Net­flix, as well as Greylock Partners, also an early investor in Facebook. Together the VCs picked Solomon, then a venture partner at Accel, to run GoFundMe. He had been a manager at Yahoo during its growth years before turning around SideStep, an early travel search engine that sold to Kayak. Then at Group­on he managed the daily-deal site’s expansion from 100 employees to 7,000. He says he decided to leave Groupon before the company’s management troubles made headlines and its stock tanked. At Accel, he says, he was in no hurry to run another company but couldn’t pass up the opportunity presented by GoFundMe. “I was just blown away by what was happening,” he says. “I couldn’t believe the number of campaigns and the sheer numbers of people on the platform.”

As soon as the deal closed, Solomon moved the company’s headquarters to Silicon Valley so he could recruit talent. President and chief product officer David Hahn, 36, who’d spent nine years at Linked­In before joining Greylock, was one of the first hires. Solomon also recruited chief technology officer Ujjwal Singh, 43, from Google, and landed Dan Pfeiffer, 40, straight from the White House, where he had served for six years as a senior communications advisor to President Obama. Pfeif­fer turned down multiple offers from other companies to head up communications at GoFundMe, he says, because of “the real alignment of building a business and making an impact on the world.”

At times that impact can seem random. In September, for example, Tony Brown of Austell, Georgia, raised $2,046 to pay for a friend to compete in the Chattanooga Ironman competition; Emily Dunagan, an 18-year-old entrepreneur, raised $6,670 to buy a convection oven and a freezer for her bakery; and Tara Ritter collected more than $5,000 to pay for stomach surgery for her dog, Mavis, who had eaten a pile of rocks. (In an appreciative update, Ritter wrote, “People are SO freaking generous.”)

GoFundMe’s biggest category is medical expenses, which accounted for $400 million of the $1.5 billion raised in the past year. Only a small fraction of GoFundMe donations, those that go to foundations like Cure Sanfilippo, have 501(c)3 status and are tax deductible. The average GoFundMe campaign raises only $1,000, and a new one posts every 18 seconds.

It’s Pfeiffer’s job to filter through the flood of campaigns and pick the ones to amplify. He and his team of seven pitch feel-good GoFundMe stories daily to national and local media and promote them on social channels. In September the team pushed ‘Fidencio, the Paleta Man’, a Chicago campaign started by Joel Cervantes, a Good Samaritan who felt sorry for an 89-year-old named Fidencio Sanchez, who had returned to work selling popsicles, or paletas, from a pushcart after his daughter died. The story was covered by hundreds of news outlets, including the Chicago Tribune and ABC News, which featured a widely shared photo of Sanchez stooped over his cart. Within weeks Paleta Man had raised more than $384,000.

How do GoFundMe’s donors know that campaigns like Paleta Man are real and not a fraud staged by a couple of actors with props and a camera? Danny Gordon, 37, a Stanford law grad and former marine who heads up GoFundMe’s 20-person trust and safety department, says only 0.1 percent of fraudulent campaigns succeed. To police campaigns, GoFundMe, together with its payment processor, WePay (GoFundMe left PayPal in 2011), verifies the identities and bank information of campaign recipients. In the thousands of cases where organisers raise money on behalf of other people, GoFundMe releases funds only when it’s certain the money will go to the intended recipients or to organisers with close personal connections to them.

Gordon adds that social media is a powerful check, since donors can comb through organisers’ Facebook postings, which reveal whether organisers and recipients are who they say they are. In October GoFundMe added another layer of protection for donors. If a donor uncovers evidence of misuse or deception, GoFundMe will refund up to $1,000, and if the organiser fails to give funds to the campaign beneficiary, GoFundMe will donate up to $25,000 to the right person.

Gordon also enforces GoFundMe’s terms of service. The site won’t host campaigns that promote hate, terrorism or intolerance relating to 10 criteria, including race and gender identity. But those criteria can be difficult to interpret. Last year a campaign set up by staffers at TheBlaze, a news site started by conservative media personality Glenn Beck, raised more than $840,000 for the owners of an Indiana pizza place who temporarily shut down their business after being criticised for telling a local TV station they would not cater a gay wedding.

“At the end of the day we’re a neutral platform,” Gordon says. More broadly, he says, “GoFundMe allows us to be agents of change in our own communities; it democratises empathy.”

Indeed, many GoFundMe campaign organisers are ordinary people who get to mount effective fundraising drives without the help of an established charity. One Sunday morning in January before she’d had her coffee, Marseille Allen, 37, a probation officer and Wellesley College alum who lives in Flint, Michigan, where the water had been poisoned by lead, spent fewer than 10 minutes setting up a GoFundMe page so she could buy and distribute bottled water. She included a cellphone shot of a Flint fire hydrant spewing brown water, and within 36 hours she’d raised more than $1,000.

Though Pfeiffer’s crew didn’t promote Allen’s campaign, it gained traction. CNNMoney covered it, and Allen was interviewed by a local TV news show. In late February a fellow Wellesley alum, Hillary Clinton, posted on Facebook about it. In April Allen wrote an op-ed in the Detroit Free Press, imploring people not to forget Flint. Ultimately, she raised more than $50,000 to hand out bottled water, filters and baby wipes.

Shortly after she set up her campaign, Allen asked GoFundMe to waive its 5 percent fee. “I said, ‘This is about giving people water,’ ” she recalls. The fee was non-negotiable, but GoFundMe ran a contest to award $10,000 to the most successful Flint GoFundMe drive, a generous gesture and one that also drove more Flint campaigns and more revenue to GoFundMe. Allen won the contest and donated the $10,000 to a local non-profit, Shelter of Flint.

Why wouldn’t GoFundMe waive Allen’s fee? “We provide a platform that receives more traffic than any other fundraising platform in the universe,” says Solomon. “It’s all about how much these campaigns yield for the campaign donors.” Not to mention how much they yield for GoFundMe.