GoFundMe Business model: how GoFundMe works and makes money
The crowdfunding today is taking a drastic turn with the introduction of new technologies such as AI, Machine learning and more. Even though the competition is mushrooming, crowdfunding is still a beacon of redemption for many small and medium range enterprises. However, apart from a profit-oriented business perspective, crowdfunding has application in terms of charity or non-profit. For instance, imagine if you have to find some funds for cancer treatment or some serious environmental issues, crowdfunding can still be the light at the end of your tunnel. One of the world’s largest fundraising and crowdfunding platform– GoFundMe is one of such kind. It can be best used to raise money for events, donations for medical treatments, soliciting funds to pay for college tuition etc.
GoFundMe is 2008 born crowdfunding business aims to help people raise funds majorly for non-profit causes. The company is based in Redwood City and was formed by Brad Damphousse and Andrew Ballester in the year 2010.
● GoFundMe has so far raised $5 billion for diverse causes
● There are over 50 million donors in GoFundMe
● An average of $4 million is raised daily on GoFundMe
● To the date, there are 2 million GoFundMe campaigns
Business Model and Revenue Streams
During its inception, the motive of GoFundMe was different; it started off as profit-based crowdfunding business, but later switched their strategies and priorities to become non-profit oriented. This transformation was based on user feedback, and it sure was an incredible decision to raise money for a real cause.
Initially, the company used to take a particular percentage of funds raised as commission, however, further decided to retreat from that strategy because it seemly affects the reputation of the organization. Today, GoFundMe is completely a donation-based crowdfunding business, similar to Wikipedia. You may hesitate to adopt a business model similar to this, anyway, according to Rob Solomon- the CEO of GoFundMe, just donations are good enough to keep the business profitable.
There are fundamentally two active entities in the GoFundMe working model- the people who seek donations and the people who are willing to donate for a cause.
How does it Work for Fundraisers?
● A Medical emergency, memorial, education, charity and non-profit are the major causes that get funded in GoFundMe.
● GoFundMe doesn’t have any All Or Nothing algorithm, so any amount raised for the cause will be transferred to the campaign generator’s account.
● To create a campaign, one has to register with the platform using the Email address or the facebook account. Fundraisers are allowed to have up to 5 active campaigns on one account at a time.
● While creating the campaign, one needs to choose the right category, specify the benefiter’s details, the goal etc.
● You need to include images, videos and also use some storytelling to narrate and present the campaign in such a way it attracts backers to spend money on.
● Once done with the campaign creation process, you have to share the same with your friends and relatives through Facebook, e-mail or any other personal connectivity.
How does it Work for Donors?
● Donors can choose any campaign listed and donate any amount they wish to. GoFundMe framed a Trust & Safety Team which ensures that all campaigns and donations are protected under the GoFundMe Guarantee.
● Donors have to register and then provide mandatory information including the amount he/she is willing to donate, name, email, nationality, address, and payment information. On completion, they are free to explore the GoFundMe platform.
How does GoFundMe Make Money?
Before 2017, GoFundMe used to get a 5% share on any donations raised on the platform. In addition, there was a ~2.9 % payment-processing fee collected on each donation, with an additional 30 cents for every donation. However, things have changed, for they don’t deduce any portion of the donation as the platform fee, everything else remains the same. (In certain countries like Denmark, the business model remains the same commission-based model).
Every penny raised on GoFundMe platform will go to the fundraisers. And instead of taking 5% of all donations, they offer a voluntary option for the donors to add a few dollars for the site.
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