GoFundMe is a for-profit crowdfunding platform that makes money from donations.
GoFundMe earns money by charging fees to the entity running the campaign and by charging transaction fees.
Further, it generates revenue through the GoFundMe Charity service (a fundraising platform) and donations.
What is GoFundMe Business Model? It is frequently the case with crowdfunding platforms. Fundraising for as many people as possible, no matter where they are on the planet, seems too good to be true. A business model like this may not be viable.
Meanwhile, GoFundMe takes it to the next level. There is no platform fee associated with GoFundMe. GoFundMe is an affordable alternative to well-known crowdfunding platforms such as Kickstarter and Indiegogo.
The fact that GoFundMe is making money reinforces the question of how the website operates. Is it all about the community’s generosity and kindness, or do they embellish the truth for their users?
What is GoFundMe?
GoFundMe is an easy-to-use crowdfunding platform where anyone can raise funds for charitable causes. You can launch campaigns in various categories, from humanitarian to medical. The platform allows individuals, organizations, and charities to create campaigns.
GoFundMe earns money by charging a fee to users for each donation they receive. It is referred to as platform and transaction fees. Furthermore, the company earns money from donations made by users directly to the platform.
Founded in 2008, GoFundMe has its headquarters in Redwood City, California. Since its launch, it has grown to become one of the most successful crowdfunding platforms anywhere in the world. Through its campaigns, the platform has raised more than $10 billion through 130 million donations worldwide.
How Does GoFundMe Work?
GoFundMe is a fundraising platform that lets individuals raise money for a variety of causes. GoFundMe campaigns include:
- Financial aid, for example, paying for cancer treatment or reimbursing surgical expenses.
- Assisting victims of natural disasters in emergencies.
- Helping children to pay for schoolbooks is one way to promote education.
- Pay tribute to a friend who has passed away, for example.
… As well as numerous others. A user can create a campaign in just minutes. You simply need to set a fundraising goal (say, raising $20,000), add a description, and upload images and videos. It is also possible to raise money on behalf of entire teams, such as sports teams or families.
A user can then share their campaign with friends, family, and anyone else who might be interested. GoFundMe lets you distribute campaigns through emails, text messages, or social media.
GoFundMe is available through its website, iOS, or Google Play Store.
GoFundMe offers GoFundMe Charity to large organizations. It helps them track the progress of campaigns, collect recurring donations, design branded campaigns, and sell tickets to events.
You can set up a GoFundMe campaign so that you can collect donations for a personal or public cause.
There is no All Or Nothing principle at GoFundMe; thus, any amount donated goes directly to the account of the campaign creator.
You can create a GoFundMe campaign for any of the following causes:
- Non-profit organization
Follow these steps to create your GoFundMe page:
- First, you need to create a GoFundMe account using either your email address or your Facebook account. After that, the actual procedure begins. A fundraiser can have up to five active campaigns on their account at any given time.
- You’ll be asked to describe your campaign, choose a category, specify who you’re raising money for, whether you’ll be raising money alone or with a team, and finally, the amount of donations you hope to raise.
- You must then include a cover image (or video) describing your campaign and the cause for which you are seeking funding.
- The next step is to write your entire story. An ideal fundraising statement should be candid and descriptive, explaining your motivation, what you’re raising money for, and how it will be used.
- Finally, you should ensure that your campaign is shared widely to ensure it reaches a large audience and draws substantial donations. Facebook, e-mail, and any other form of personal contact will help spread the campaign and ensure its success.
How Does GoFundMe Make Money?
GoFundMe makes money by charging fees to users who donate. Platform fees and transaction fees are the two types of fees on the platform.
Fees are paid by the person, team, or organization that manages the campaign and not the donor. If an individual donates $100 to a cause, they will receive between $90 and $98 depending on the location.
GoFundMe charges a platform fee for using its platform to raise money. These funds are used to cover their expenses, such as server fees or employee salaries.
The transaction fee covers the costs associated with processing the user’s payment. There is a 2.9 percent fee plus a $0.30 fixed fee in most countries ($0.30 in the United States).
Fees vary by country for both types. In the United States, GoFunMe charges 2.9 percent transaction fees (with no platform fees), but in Belgium, it charges 5% platform fees and 2.45 percent transaction fees.
Furthermore, GoFundMe Charities charges differently based on the plan users subscribe to. You can find detailed pricing information here.
Finally, GoFundMe’s revenue is generated in part by directly generated donations from its users. GoFundMe donors can contribute directly to campaigns or GoFundMe.
There are two fees associated with each donation:
Campaign costs are those that the organization incurs to run the campaign. An entity can be a business, a team, or an individual.
For those wishing to launch a fundraiser in the United Kingdom, Australia, Canada, the United States, or most major European countries, there is no platform fee.
For the rest of the world, the exact platform fee varies by country. For example, the platform fee in Luxembourg is 5%.
Transaction fees are collected to cover processing costs. In the United States, transaction fees are 2.9 percent plus 30 cents. The amount of transaction fees varies by country, just like platform fees. Luxembourg, for example, charges a transaction fee of 1.4 percent of the donation.
GoFundMe Charity is a powerful fundraising platform that allows organizers to raise more funds through donor engagement.
Businesses can access all donor and fundraising information in one location and create custom donation buttons and email campaigns.
Furthermore, you can integrate fundraising campaigns with third-party platforms such as WordPress, Salesforce, and Mailchimp.
There are two subscription options:
- Free: Each donation is subject to a processing fee of 1.9 percent plus 30 cents. It ensures that the fundraising organization receives 97.5% of the total donation.
- Flex: Each donation is subject to a processing fee of 2.2 percent plus 30 cents, ensuring that the organization receives at least 94.5 percent of the donation. Donors may, however, elect to cover the processing fee, ensuring that the organization receives 100% of the donation.
Many individuals and organizations prefer to contribute directly through GoFundMe. The funds are redistributed accordingly in this case.
GoFundMe Business Model
The company was founded as a for-profit crowdfunding platform. Still, in 2017, it transitioned to a non-profit donation-based model after users suggested (and demanded) that 100% of all donations would go to the cause.
The company previously charged a percentage commission on personal campaigns. As this hurt the brand’s image, the company refocused its efforts and transitioned to a donation-based model (similar to Wikipedia).
According to GoFundMe CEO Rob Solomon, accepting donations is sufficient to keep the company profitable.
Who Can Start a Fundraiser Campaign on GoFundMe?
When it comes to crowdfunding platforms, the stakes are generally high. The honest approach can save you money, time, and resources if you seek assistance from the public.
GoFundMe doesn’t charge any platform fees, making it easy for anyone to start a campaign. Additionally, the platform guides them through each step of managing one. It is all very well and suitable for those without experience, but there are times when these issues do not apply inexperience.
Sometimes, the problem lies in the inability to initiate a fundraiser on your own. GoFundMe knows about this.
As a result, your family, friends, and community members can organize fundraisers on your behalf. Moreover, GoFundMe provides you with direct access to all of the funds you raise.
However, the beneficiary of the campaign must provide all personal banking information. If your friend is fundraising on your behalf, you will receive an invitation officially designating you as the campaign’s beneficiary.
Due to the time-sensitive nature of fundraisers, GoFundMe’s processes are much faster than those of other crowdfunding platforms. In general, GoFundMe campaigns have a turnaround time of two to five business days.
Success Story of GoFundMe
Brad Damphousse and Andrew Ballester founded GoFundMe in 2008 as CreateAFund. In the mid-2000s, they relocated to California to take part in the startup scene.
Before founding GoFundMe, the team created Paygr, a platform that offered services to the general public (similar to online marketplaces like Fiverr or Upwork).
The crowdfunding industry started when they launched CreateAFund, a platform for social media users to raise funds.
Indiegogo and Kickstarter both launched their platforms recently.
However, their platforms were created to provide funding for products developed following a fundraising event.
The Peloton Bike and the card game Exploding Kittens are two well-known examples.
Regrettably, CreateAFund’s business model did not take off as anticipated. As a result, the team redesigned the platform and rebranded the company as GoFundMe. In May 2010, they changed their name to GoFundMe.
The team chose to bootstrap the platform in its early stages without seeking outside investment. When GoFundMe began in 2010, only four individuals worked on the site. Although the platform was only launched in late 2013, it has grown steadily ever since.
The number of GoFundMe users had grown by 20% per month by 2012. Moreover, the platform generated monthly revenue of $3 million through campaigns in over ten countries.
In 2015, the startup raised its first round of outside funding. Further, these investors (which included Accel, Greylock Partners, TCV, and others) took an ownership stake in the business.
Both Damphousse and Ballester received substantial payouts. Along with the funding round, the founding team handed control of the company’s day-to-day operations to a new leadership team. Solomon, a former executive of Groupon, was named CEO of the company. Former LinkedIn Head Of Product David Hahn has joined the company as Chief Operating Officer.
A new leadership team led to GoFundMe’s continued expansion, employment, and acquisitions (CrowdRise in 2017, for example). The company’s success was partly due to the noble mission and the virality that accompanied it – for better or worse.
GoFundMe has helped organize numerous fundraisers, resulting in millions of dollars being donated to worthy causes.
More than $12 million has been raised to assist victims of the Las Vegas shooting, for example.
George Floyd memorial fund recently broke a record by raising $13 million, making it the largest fundraiser in GoFundMe history.
Even so, the company experienced its share of difficulties throughout its ten-year existence. It has been reported that individuals have attempted to profit from tragedies by creating accounts on behalf of victims and pocketing the money for themselves.
GoFundMe has implemented several security measures around its fundraising campaigns in response. A verification process, for example, is in place to ensure that fundraisers are who they say they are. In addition, earnings from the campaign are withheld until all verification steps have been completed.
Additionally, GoFundMe can be used to have a good time simply. In 2018, comedian Josh Ostrovsky launched a campaign supporting Kylie Jenner becoming the youngest self-made billionaire in history. He fell just short of his goal of raising the remaining $100 million… $100 million.
As a result, GoFundMe has become one of the most popular crowdfunding platforms in the world. The company has raised more than $10 billion from 130 million donations worldwide. With more than 500 employees across eight countries, the company now boasts a global footprint.
What is the Funding and Valuation of GoFundMe?
Surprisingly, GoFundMe has only raised venture capital once during its existence. Global investors such as Greylock, Accel, TCV, and others led the company’s sole financing round in 2015.
The amount of money raised was not disclosed. Currently, the company is valued at about $650 million. Since then, that valuation has almost certainly increased exponentially.
What is the Revenue of GoFundMe?
The company has been very secretive about its revenue figures. GoFundMe has only raised a small amount of money in its ten-year history, suggesting that the service is already profitable.
Also read, The Chime Business Model.
Final Thoughts about GoFundMe Business Model
- GoFundMe is a for-profit fundraising platform. Originally called CreateAFund, the service enabled social media users to raise money for causes close to their hearts.
- GoFundMe earns money from each donation made by a user. Recently, several countries, including Australia, Canada, and the United States, waived the 5% platform fee. However, depending on the location of the fundraising campaign, each fundraising campaign must pay a 2.9 percent transaction fee.
- Additionally, GoFundMe offers a dedicated business fundraising service. The service, dubbed GoFundMe Charity, assists them in developing targeted, on-brand messages that are compatible with popular platforms such as WordPress and Salesforce.
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