How GoFundMe raises money and makes money

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0:42We look forward to seeing you there. Catastrophe in California. A Los Angeles disaster movie roars to light. Whoa! This was like an 80 mile an hour blowtorch. I came out and they saw a fireball. Do you know what you're going to do now? How do I get to work? Tonight, homes in ashes. Oh, God, it's gone. I hadn't cried until I got here. Lives in chaos. When the wildfires raged in Los Angeles earlier this year, the world was shocked at the scale of the devastation, as this NBC report shows. Desperate to help people on the ground, many turned to crowdfunding websites to pledge financial support. One of the most popular of these is GoFundMe.

1:25Nearly a month after the fires started, it had raised more than$250 million. That money went to relief agencies, but also to individuals who simply posted publicly about their plight. I live in Altadena, which is the town that was destroyed by the fire. So I've been right in the middle of this personally. That's Tim Cadogan, the CEO of GoFundMe. He's British, but made California his home to build his tech career. GoFundMe is based in San Diego. When people put their story on GoFundMe, often it's potentially often the most significant things happen in their life, particularly say if it's a health issue, a family issue, maybe someone's passed away.

2:05Like, it's a really big thing. GoFundMe has generated over$30 billion in funds since it launched in 2010. This might include appeals after a natural disaster or something more commonplace, like someone trying to raise money to go to university. Lots of non-profits and small organizations use it. people like Jane Raleigh, who uses the platform to raise funds for her community dance initiatives in Washington DC. I think the things that I felt led to success in this case were definitely specificity, letting folks know exactly what I was raising money for and exactly how their funds would be used.

2:41And then also storytelling. It was a really empowering exercise for me to think deeply about how I, as the fundraiser, was connecting deeply to the thing and the community that I was raising money for, I think resonated with a lot of people and led them to donate.

3:02You're listening to the Business Leader Podcast. I'm Dougal Shaw, and my guest today is Tim Cadigan, the British-born and raised CEO of the US company GoFundMe. Tim Cadigan grew up and studied at university in the UK before moving to California in order to develop his career. After two stints with big management consultancy firms, he worked at Yahoo for five years before co-founding his own ad tech startup called OpenX. He joined GoFundMe as CEO in 2020 just when the COVID-19 pandemic was taking off. GoFundMe is one of the biggest of the so-called crowdfunding platforms. It now has more than 800 employees.

3:40There are lots of other platforms used for charitable giving too, like JustGiving, DonorsChoose, and people also raise money on Metas platforms like Facebook. I began by asking Tim Gadigan about why he decided to relocate to the USA to progress his career. I was in my 20s and I got a spot to do an MBA at Stanford in 1996. And it was a bit of a no-brainer to go to Stanford to live in California just as the internet was beginning to take off. So I spent two years there. And like a lot of Brits who go to the West Coast, I ended up never coming back for a variety of reasons. The work was one of them, but also the weather, the environment, being able to go to the mountains every weekend, those things were pretty appealing as well.

4:26But it was really interesting to get in at the sort of ground floor of the internet in the late 90s. And you've got a nice perspective on this because we often wonder, is the American approach to entrepreneurialism very different to ours in terms of risk and, you know, ideas about failure and things like that? Did you find it refreshing and very different? Honestly, a little hard for me to say because I had one job really here, which was a consulting job, Boston Consulting Group. I had not, I didn't operate in the startup environment. I really that, my whole upbringing in the startup world was America.

4:59So I don't have any lived experience here in the UK. I can say that some of the things that are classically said about the American tech work culture are true, which is very high pace. It is okay to try a lot of things and it's good to learn. I think a lot of people talk about learning from failure. It's also good to learn from success, which folks don't seem to talk about quite so much. That success is revered. So don't let anyone tell you otherwise. Success is revered, but also is there less stigma around failure? So if a company fails, a startup fails, or a product idea goes wrong, people don't hide it away so much, perhaps?

5:39No, they definitely lean into that. As long as you're quickly learning and explaining, here's what happened, here's our theory of the case, here's what we're going to do differently. That's absolutely the case. We see that even today in our product work. For instance, last year, we did a lot with AI. And obviously, a lot of companies are trying that. AI is very, very far from a silver bullet. Most of the things that we've done where we've deployed AI, we have iterated dozens of times to get it to be working the way we want for our customers. So it's a good example of like, you know, keep going, keep going, keep going, keep going.

6:17What's not working? What's not working? What's not working? Oh, we found that what's working. Why is that working? okay, let's do more of that. So that kind of cycling is both at the macro level for companies, but also at the product level in just sort of iterating very quickly. Let's talk about you moving to GoFundMe. So you arrived just before the world was waking up to the COVID situation. It was actually worse than that. It was March the 2nd, 2020 was my first day. So that was sort of the week it hit the West. It sort of started in Italy, if you remember. And by the end of that week, it was clear that it was spreading very quickly and it was hitting the US.

6:55And I had one week to meet people and then we went fully remote. A huge surge in demand for our platform. We had to figure out a lot of new things with a new way of working. And obviously, customers were needing us like never before. So it was a trial by fire for sure. It really was. But trying to think, almost abstracting it from that particular situation, at that point you're becoming the CEO of this established company that had been going for a decade at this point you'd had experience as a management consultant of two different firms you'd also set up though your own tech startup so which of those experiences do you feel you drew on more in order to be a leader that's a good question I probably the startup the interesting thing about a startup is even when it's quite small, you think, hey, company of 20 people, how complicated can that be?

7:49But when you're running the company for real, and I think a lot of your listeners are running companies that on paper aren't very big in terms of numbers of people, but you're dealing with all the issues, right? You name it from you got to get a property lease to how are you financing to you need three more employees. You just have everything happening and maybe it isn't hundreds of thousands of people, but frankly, the zeros don't matter. You're dealing with those issues and they're coming at you really quickly. So you have a belief of what you're going to create. Like with my startup, we were going to create a way of trading ad inventory in real time, a new thing, a new technology.

8:26But at the same time, you have all the problems that every business has, which how do you get the right people? How do you think about your space? How do you get the right legal contracts? How do you start to get customers? And what's your selling motion? Those are the same for everybody. And then you're trying to do your new thing. So that sort of stuff coming at you, I'd say particularly the first five years of a startup where you're, I don't think you're really quite sure whether you're going to make it or not. Maybe it's the first three that were really existential. like that level of um dynamism was pretty helpful going into an environment where yes you're right gofummi was established but a whole new level of um of uh obligation and stress was hitting us at that point in time so it was helpful one thing i read that you did uh when you joined is that you asked for an open source learning curriculum from people who are already at the company so what did that involved i did so um you know part of the reason for me seeking out a new job was i just wanted to learn something new i just wanted to get into a completely new area and just learn at a high rate and that went back to my time at consulting i loved consulting because every three or four months you go into a completely new industry so cement or airlines or insurance or car distribution and you'd learn you'd sort of sponge it up so what i thought is i'm going to do a spreadsheet, a Google sheet, and I'm going to write down all the things that I think I should get taught.

9:54And then I'll let my new team like fill it out. Cause of course there's things that they might want to teach me that I don't know. And then I let people sign up to be my teacher. So, you know, they just put their name down. I'm like, okay, I can only have like four or five teachers for a topic. Not too many people can sign up. You're the experts and we'll do hour long sessions. And you just tell me how this, that, and the other thing work. And obviously it was also designed to be in person, but that had to change because of the going remote with the COVID. But it actually worked great. And it's a really nice way to do two things.

10:25One is to learn the business, but also it's a great way to build trust pretty quickly because you're saying to people, you're the expert. I'm not coming in telling you what to do. Teach me first, and then I'll come back with some opinions. So it was a great way to get to know people and earn their trust. So when I heard that, I assumed that was your senior leadership team, but was that almost reverse mentoring could it be anyone in the organization anybody yeah no it's uh you know product managers and whoever whoever was the expert you know on that particular area might be someone quite deep within trust and safety or payments risk or something like that whoever was the subject matter expert usually two or three sometimes four people uh would sit down and school me very interesting um and tell me if you're thinking about how the company scales first of all in that in those first 10 years before you joined how had gofundme approached scaling well you know it's in a way it's a simple business which is we are trying to get people to help each other you know our job is to help people help each other the first part of that is getting to be able to create fundraisers once they can create fundraisers we try to make them as successful as we possibly can so you're constantly driving awareness that hey there's a way to ask for help online.

11:42It's called GoFundMe. Here's how you do it. And here's how we take care of you. And it's really a sort of a virtuous cycle of building awareness country by country. And then that growing from there as more people do it, and they get a little bit more familiar, their friend or relative did it, they saw they raised 1500 pounds, great. So that's the scaling model. The interesting thing is we don't sell. There are no sellers on the consumer side of our business. We do sell to nonprofits now, which is another side of the business, but we don't sell and we don't do much traditional marketing either.

12:17We tell our customers stories through the media and that attracts attention and that attention breeds comfort and familiarity. And that leads to people when they have a need in their life, setting up a fundraiser. So it's a very unusual way of scaling the business. And then the backend, we're just sort of keeping up with demand as far as we can anticipate. So is it still scaling organically in that way? Or since you've come on board, has it kind of changed again? A couple of things happened. The pandemic happened, which really elevated a lot of online platforms, right? And so the same thing was for fundraising.

12:55And I particularly noticed that in our European markets, where, take Germany, which was a small market for us before. The pandemic really changed people's appetite to do online fundraising. It's grown pretty quickly. The other thing that happened is we acquired a company called Classy, which does software for nonprofits. So we have four to five thousand major nonprofits, World Central Kitchen, Direct Relief, Salvation Army, many more. They run their fundraising on software provided by GoFundMe. So that's a whole new aspect of the business that we're operating, which has been very interesting. And increasingly, we're connecting the two because a lot of the fundraising for those charities is done by people setting up fundraisers on their behalf.

13:44So it's a really interesting intersection because those are consumers. And GoFundMe Classic, if you like, is a pure consumer play. So we're meshing those two things. That's becoming increasingly important. And we've opened a few additional countries as well. And a classic badge of success for a US tech company is to go public. Is that on your kind of sights in the future? Not really. I mean, our goal is very simple, which is help people help each other. And we have one very simple way of measuring that, which is how much money do we help people raise? The whole company is geared to that and increasing that because if we get more people successful, they're going to raise more money for what's in their life and we'll do all right.

14:27We'll be able to keep investing. and that's all we're focused on the other and we don't need additional capital we met we run the company to be able to live within our means and invest within our means um and so we've been able to do that for the last 15 years and so we don't know we don't spend a lot of time thinking about that we're just like let's keep growing what we're doing because it's making a really positive impact in people's lives let's run the company well let's make sure that we sort of take care of our P's and Q's and so that we're in control of our destiny. And we can invest. I mean, because we run the business well, we invest over$100 million a year in product technology.

15:05So, you know, I have 350 engineers and product engineering people who can build great product. So that's what we're focused on.

15:15One interesting thing about your space, which is quite a unique space, the, you know, charity fundraising donations, is that it definitely, it brings out the best and the worst in people. For example, with the LA fires, you saw an incredible amount of money, more than$250 million, I believe, raised from private individuals because they saw people's plights on your platform. Then you also see the dark side, if you like, where there will sometimes be scams or people raising money for a legitimate cause, but then they kind of keep it for themselves or it's not used in the correct way. So to what extent is part of your job to police the situation and kind of keep an eye on these things?

15:53Our business is based on trust. Like when people put their story on GoFundMe, often it's potentially often the most significant things happen in their life, particularly say if it's a health issue, a family issue, maybe someone's passed away. Like it's a really big thing. And they are trusting us with that story and then bringing in their friends, their family, their neighbors to help them. So trust is incredibly important. And we know most people in the world are good. and there's a small minority always looking for an angle gaming system. And so we're watching out very carefully for that. Now we've been doing this 15 years.

16:31We've had$30 billion raised. I think it's about 23, 25 million pounds, billion pounds. So we have a lot of data, had millions of campaigns, hundreds of millions of donations. That data all goes into a system where we can do patent recognition. So we're looking, is there anything about this that looks a bit dodgy? And if it is, we're going to investigate that. We're going to follow up. We're going to run it to ground. We're going to understand in every case, who is raising the money? Who's the money for? How is the money going to get to the person for whom it's for? And what are they going to do with the money when they get it?

17:04Those are the four basic things that we're figuring out. So we're checking all of that. And then, and maybe this is commonly known, when money is raised, it never runs through GoFundMe. All the money raised goes through third-party payment service providers. the Adjuns, Stripe, and PayPal principally. They hold the money and they also do know your customer to verify it's going to the right person before any funds are released. So we do all of that checks using the data, the team, and the technology. And then the last layer is we put in something that is unique in our industry, which is a 100 % guarantee.

17:40So you donate any amount from anywhere in the world up to one year after you put that donation in. If there was a problem, you get your money back. Now, we don't actually have to use that policy very often because it's really quite rare when things go wrong. But no system is perfect, so we put that in place. So we spend a lot of time doing this, and it's a really, really key part of the investment to make sure that people can feel comfortable. Is AI helping spot those patterns? It is. AI is helping in a lot of areas. It's helping it with some of those patterns. it's also helping us give our fundraising customers an easier experience because asking for help is really hard for most of us it's like humans don't like asking for help it's sort of hardwired so the ai helps people tune up their story you have to write their own story but it'll help you with the grammar with the sort of paragraph structure and so on we we then allow people to select titles.

18:41We'll give them a bunch of titles, three normally, that we pull from the story. And that really helps with the sort of cognitive load. Because picking a title, you're a journalist, you know, like title writing is hard, especially when it's an emotional situation. So about 70, 80 % of people pick a title that we're suggesting using AI and they perform better. We also help people set the goal. So let's say you're setting up a fundraiser and you want to run a marathon. like well how much do people raise should i raise 500 pounds 2 000 you know it's the first time i'm doing it what should i do well smart goals gives you like well the normal range is this and it'll help you set maybe something lower to start off with and then grow it over time so those are examples we're also helping donors we're doing suggested donations we're doing all kinds of things to kind of help people navigate this experience so it helps a lot Two donations are made every second on average on the platform, according to GoFundMe, and one in four fundraisers are started for someone else.

19:42Those donations are made from more than 200 countries around the world. GoFundMe is a private company and does not disclose financial information like its global revenues and profits. But I wanted to ask Tim Cadogan a bit more about how his company makes money. and can you just explain to people how as a business you make money in this in this whole setup absolutely yeah it's it's a very innovative it's different probably for most businesses that you're familiar with so a couple of principles first thing we are here to help people help each other that means the most amount of money that can get to the person asking for help is our primary goal so the way we designed our approach is the only money taken out of the donation is in the UK, 2.9 % for a personal fundraiser is taken out by the payment processes for transaction handling.

20:33If you're raising for a charity, it's 1.9 % plus 25p. That's it. So if you're a personal fundraiser, you will receive 97 out of every 100 pounds. If you're a charity, you'll get 98 out of every 100. And that is just your normal financial, the way the world works, right? Say if you go to Safeway, you know, whatever. It's the same thing everywhere. The way we make our revenue is we then ask donors, would you like to tip us? It's right there as a suggested tip, and there's a slider. It's super simple. You can slide it, no clicks to zero. So we have tens of millions of people a year interact with that slider, about three quarters of them move it around somewhere.

21:14A healthy portion say, you know, I don't want to give you a tip, which is fine. If they've given that donation, that's the primary thing. That's our revenue, right? That's how we run the business. And I love it because we're saying to the customer who has the money in the equation, we're saying, it's great that you helped someone. If you want to pay us for the service we're providing, we'd appreciate that. But we give you the choice. You decide what you want to pay us, including nothing. And is that tip opt-in or opt-out? It's opt-out. So it's set. It's very simple. It's right there. It's like, this is a tip.

21:51It's set at an amount. It sometimes varies depending on the currency, country, amount, and then you slide it wherever you want it to go. So if people aren't tipping, then there's no revenues, as it were, coming to you from that aspect of the business. Yeah, if you were to, say, give£100 and you tipped at zero, we'd get zero. Yeah, and that's a decent percent of people. But I think it's okay because we know that some people, sometimes maybe you're donating£10 and you don't have any more right now. and that's fine. But enough people do have enough and decide they like a service, they want us to keep investing in the company, building all these features and so on, and so they pay us.

22:37I mean, when you joined GoFundMe as CEO, as you said, it was this moment of COVID and lockdowns. You were forced into remote working as a compulsory thing, basically. Things have moved on now, and it's become a bit of an existential debate for many businesses about whether you adopt hybrid, you allow fully remote, or if it's five days in the office, please. And it's the kind of pendulum swung a bit more, it seems, back to let's get people in the office with some people like Meta, Starbucks, Amazon. What's your position on it and how do you see it playing out? Yeah, I mean, it's interesting. My whole career had always been in office and I couldn't envisage you know anything else so when i joined i was very gofummi had a set of offices so i was sort of planning how i'm going to be in these different offices you know every week of course that went to the went away so a couple of years of remote we're hybrid and it works great for us we have offices we have some teams that spend a lot of time there we set up um things like you know monthly meetings quarterly meetings where we have critical people come together so when they come together they do really intense work together but we've also learned to be very very effective remotely and we have people all around the country and all around the world we have for instance a development team in in Argentina you know no way to have them in the office right and they're extraordinarily effective so I think we're just open and flexible and uh and it seems to work pretty well for us and it allows us to have great talent and work in a variety of different ways So you wouldn't be one of the businesses that does some kind of, you know, five-day mandate where it has to come in.

24:15You want to look at each role and just see what works and be a bit more flexible about it. A bit more flexible. Yeah, I think it's always tough to be absolutely, you know, one way or another. I think it's, at least for us, it works. It's good to be together in person. There's a lot of benefits to that. But there's also advantage in allowing some degree of flexibility. And so far, it's working quite well for us. and then a sort of closing personal question if you look back on your business career and all the all the different twists and turns whether it's management consultancy or the startup or joining gofundme have you got any kind of personal business advice you can share that maybe you would have given yourself at the start of the journey um well there's there's one which is uh i think you have to understand yourself and your appetite for risk and what i mean by that is how much do you want to stretch yourself?

25:11So let's say you're considering a new role. Is that, let's say, 50 % of it, is it going to be really difficult, new, and challenging? And is 50 % of it going to be pretty sure you can nail it? Now, if you're risk-seeking, you might say, I want to do something 70 % really scary and challenging, 30 % like I know I can nail it. If you're more conservative and you just, you know, that degree of risk isn't for you, then maybe you're an 80-20 person the other way around. I'm a kind of a 50-50 guy. Like I like a good amount of risk, but I also like to know that I think I can get my head around about half of it.

25:49That's sort of, but I think my point of that is not that there's any one right answer. It's that you need to look at yourself and understand what makes you tick. What's about the right level of risk for you? And that may change through your career as well. It also may change in your life. Maybe you're at a phase where you have, say, young kids or something where you're like, I don't want to take as much rich. Strangely, I did the exact opposite. I just went for a lot of risk when my kids were young, which my wife had questions about. But it just depends. But the key point is to question yourself.

26:21Give yourself a framework for thinking about these decisions and then apply it in a way that works for you. And when you joined GoFundMe, was that a 50-50 one then you know it's interesting i thought it was about 50-50 and then the world just went bananas and it was like a 80 20 there was like a lot of things that i no one was prepared for and that some of the issues that we've navigated like pandemics wars insurrections major you know the the amount of weather disasters we've dealt with like i was not prepared for that Like, how could you be? So it's become an 80-20 thing, but we're getting our heads around it.

27:00It's been very dynamic, let's put it that way.

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