GoFundMe is an American for-profit crowdfunding platform. It allows users to raise money for events with specific circumstances. Over the years, it has helped users raise over $9 billion with over 120 million donors. The company became the largest crowdfunding platform in 2017. GoFundMe has garnered significant attention from its services and ease of use. However, it has also gone through some ups and downs.
What is GoFundMe?
GoFundMe is a crowdfunding platform that helps users raise donations for various causes. Initially, it started as CreateAFund in 2008 under Brad Damphousse and Andrew Ballester. The founders met in the 2000s when they moved to California. They got to know each other from their involvement in the local startup scene. Before launching GoFundMe, the founders worked on Paygr, a platform to sell services to the public.
They came together to found CreateAFund, which allowed social media users to raise money. At the time, it offered them to provide any type of cause to receive funds. Simultaneously, the crowdfunding industry was taking off, which garnered some competition. Other companies like Indiegogo and Kickstarter also launched their platforms. However, they focused on launching new products and services rather than specific causes.
However, CreateAFund was different, although it did not guarantee success. The company suffered to take off according to the founders’ expectations. Consequently, the team started coming up with ways to improve their platform. Based on their discussions, they redesigned CreateAFund and rebranded it to GoFundMe. In 2010, they launched it to the public. Initially, the founders did not accept any outside investments.
For the first few years of operation, GoFundMe only employed four employees. However, the platform evolved much better than its predecessor. By 2012, GoFundMe was steadily growing, with 20% new users each month. Similarly, it got over $3 million in campaigns monthly while expanding operations to 10 countries. In 2015, it also got its first round of outside funding. However, the investors acquired a controlling interest in the company.
This transaction also brought in a new management team. The original founders left the company with substantial cash-outs. Under the new management, the company continue expanding and adding more markets. Similarly, it hired new employees and started acquiring competitors. The events helped the company grow further, although it also brought some issues. GoFundMe also became one of the most prominent crowdsourcing platforms at the time.
Over the years, GoFundMe also helped many users raise funds through its platform. Some of these included noble causes, which increased the platform’s popularity to new heights. However, it also received an influx of new users. GoFundMe’s low-security measures let some scams run through its platform. However, the company responded by adding various security measures. Today, it boasts a much safer feature for users.
How does GoFundMe work?
GoFundMe is a platform that allows users to ask others for funds. These funds can cover various noble causes. Primarily, GoFundMe covers two types of users, those who want funds and those willing to pay. The first group includes anyone who wishes to raise money for any cause. This cause can be personal or public. Usually, these users can create a campaign on GoFundMe and promote it to receive donations.
For these users, the process is straightforward. Their process starts by creating an account on the platform. Usually, this requires them to go through the sign-up process. Once users have an account on GoFundMe, they can create their fundraising campaign. However, this campaign will go through a verification process as a part of the company’s security measures. Users can enter various details, such as their goal, campaign title, how they will spend the funds, etc.
Once users fill out the details, they must choose an image and write a story. In this part, they must share their story to attract attention. GoFundMe encourages users to be honest and open about their needs. Once they go through this process, users must set up their banking information. This step is necessary to withdraw money from their campaign after receiving funds.
Once users have a campaign page, they must share it with the public. The platform does very little to help users get more funds. Instead, it relies on them promoting their campaigns by themselves. Once users create a campaign, they can also manage it and edit the details later. These tools are a part of the campaign tools offered by GoFundMe.
By then, users may have received some funds. The platform does not stop users from withdrawing these amounts at regular intervals. Instead, it encourages them to do so. Usually, users can withdraw money to their PayPal accounts. It can take between 2 to 5 days for the platform to process and send the payments. Users must plan their withdrawals accordingly based on this information.
What is the GoFundMe business model?
GoFundMe uses a crowdfunding business model, which differs from typical business practices. This model allows the company to help its users raise capital through small collective efforts. Similarly, it enables users to share their pleas with others and ask for donations. The crowdfunding business model has become common in many online businesses. Companies like Indiegogo and Kickstarter use this model as well.
However, GoFundMe takes a different approach to the crowdfunding business model. The company focuses on private causes and individuals rather than companies. Consequently, it connects users to donors who can contribute to those causes. The GoFundMe business model approach differs from its competitors. However, other companies also use a similar business model as GoFundMe.
GoFundMe also uses a C2C business model behind crowdfunding. The company connects two types of users, those who ask for donations and those who provide money. However, this is a refined version of the C2C business model. In this model, GoFundMe only provides the platform for those users to interact in the digital space. GoFundMe plays the role of an intermediary, facilitating the transactions.
Overall, the GoFundMe business model allows it to help users raise funds through the public. In exchange, GoFundMe charges a fee on each transaction or campaign. The company also provides other features that facilitate better interaction between users. GoFundMe’s business model has helped it stay relevant and become the biggest name in the industry.
How does GoFundMe make money?
People may consider GoFundMe not to make money as it facilitates donations for several causes. Despite its crowdfunding business model, GoFundMe is a for-profit company. Therefore, it still makes revenues and profits from its transactions. Primarily, GoFundMe makes money from three sources. These include platform fees, donations and transactions fees.
An explanation of each of these sources is as below.
Platform fees
Platforms fees are the primary income source for GoFundMe. The company charges this fee when a user runs a campaign. Usually, these users include individuals. However, they may also consist of teams or organizations. In some areas, the platform fees rate is 0%. Therefore, users don’t have to pay any money to start a fundraiser. These may include the US, Canada, the UK and some parts of Europe.
Donations
The platform fees charged by GoFundMe differ based on the user’s country. While platform fees used to be the primary income source for the company, things have changed. Essentially, GoFundMe allows users to receive their donations in full. Instead, the company requests donors to donate any amount of their choice.
Transaction fees
GoFundMe also makes money through transaction fees. It covers the costs associated with processing payments made to and by users. However, these fees do not go to GoFundMe. Instead, payment processing companies receive these funds. GoFundMe only collects them from users for each transaction. Usually, transaction fees come at a 2.9% rate. Similarly, it may include a fixed $0.30 fee.
Conclusion
GoFundMe has made a name for itself in the crowdfunding industry due to its prominence in the market. The company has been active since 2010, although its predecessor was founded in 2008. Like other competitors, GoFundMe uses a crowdfunding business model. However, it focuses on causes rather than helping startups. GoFundMe makes money from platform fees, donations and transaction fees.
