Written by Crystal Jones
GoFundMe is a for-profit organization that facilitates online donations to individuals and charities. The organization launched in 2010 and has raised over four billion dollars from more than forty million donors through crowdfunding (GoFundMe). Crowdfunding is typically defined as a process where individuals collect online donations from a large number of individuals to support their project or cause. Another crowdfunding definition provided by Hannah Forbes and Dirk Schaefer is a process of taking a business in need of investment, and asking a large group of people, which is essentially the public, to supply this investment (Forbes and Schaefer 2017). Practitioners and scholars have studied commercial crowdfunding but scholars know much less about charitable crowdfunding and donor motivations (Choy and Schlagwein 2016).
To start a campaign, individuals register for a profile which requires a revenue goal and a description of why funds are being raised. GoFundMe does not verify the authenticity of each campaign. The individual registering the page is called the Campaign Organizer. The campaign organizer can set up two different campaign types: a personal campaign or a certified charity campaign.
Personal campaigns have no restrictions or timelines and they are the most popular type of campaign. Examples include individuals raising funds for international charities, participation in a charity event, medical expenses, weddings or disaster relief. Certified Charity Campaigns are campaigns organized by individuals to support their favorite charity. Only campaign organizers that have connected with GoFundMe to receive a special notification on their website will be listed as a Certified Charity Campaign. Donors to these campaigns receive a tax-deductible receipt immediately This does not include campaigns organized by an individual to raise funds for a special event that benefit a charity. Individuals who donate to a personal campaign will not receive a tax receipt and the charitable organization will not be connected to the donor (GoFundMe).
Once donations have been collected and a beneficiary has been designated by the campaign organizer, the funds are transferred directly. The company deducts 5% from each donation and charges a 2.9% payment processing fee in addition to at thirty cent fee per donation. Fees support infrastructure, technology, payroll and benefits for GoFundMe employees. GoFundMe promotes campaigns on the homepage and pitches stories to the media to help attract more donations (GoFundMe). The definition of a for-profit organization is a business whose primary motivation is increasing revenue profits and transferring that wealth to the shareholders and staff affiliated with the organization. The fact that GoFundMe is for-profit organization may be a surprise to donors who are not aware of the fee structure and believe that the organization is a non-profit. The fee structure may motivate which campaigns GoFundMe chooses to pitch to the media as the success of a campaign means more profits for GoFundMe. Individuals need to take this into consideration when organizing a crowdfunding campaign through GoFundMe or an alternative site. There are several alternative crowdfunding sites for charities to consider such as Chuffed and Indiegogo.
GoFundMe is a for-profit crowdfunding organization founded in 2010 that was acquired by Accel Partners in 2015. By utilizing technology, individuals are able to connect with a larger audience (Choy and Schlagwein 2016). GoFundMe has broadened this idea by supporting charitable causes, medical emergencies, and personal goals. In 2016, the company was listed on Forbes list of the next billion-dollar startups and it opened offices in Ireland and the United Kingdom (Adams 2016). It also currently supports offices in Canada, Australia, and some European Union countries (GoFundMe).
As a young organization, GoFundMe is still creating its vision for the future. Rob Soloman, the organizations CEO, envisions building profiles for individual donors that monitor donation activity and assist in matching causes and donors together (Ligaya 2016). The organization is also forming more partnerships with nonprofit and charitable causes.
GoFundMe currently has limited restrictions on what campaign organizers can raise funds for. In some instances, campaigns have centered around politically divisive issues. One example is a campaign organized by an individual to support Memories Pizza in Walkerton, Indiana. The restaurant refused to cater a gay wedding and a campaign organizer created a page to support the owners of the restaurant. This campaign became a symbol of the Religious Freedom Act and raised $846,057 (Adams 2016). GoFundMe made an approximately $66,000 profit and claims that it is a neutral platform which cannot decide which causes are considered worthy of support (Harris 2017). The organization does take a role in assisting a campaigns’ ability to go viral and reach individuals outside of the campaign organizer’s circle. GoFundMe will promote specific campaigns on the homepage and also pitches stories to the media. The organization encourages campaign organizers to share their campaigns with the local media to increase donation opportunities. In the Memories Pizza campaign, GoFundMe did not provide media support (GoFundMe).
What motivates a donor to support a viral campaign? One study investigates if the success of crowdfunding is because donors are motivated to donate only after seeing their network support a cause. A significant number of donors indicates to them that a project is worthwhile. This research implies that donors respond when a viral campaign supports an individual or charity that has a similar background and shared values (Choy and Schlagwein 2016).
In 2017, GoFundMe purchased CrowdRise, a software platform that allows individuals to build Facebook-like profiles creating an identity for themselves based on the causes they support (Harris 2017). The profiles will begin actively matching potential donors with campaigns to support based on their previous giving history. Research on crowdfunding has found that donors act differently to individuals and organizations when giving online. Individuals who support charitable crowdfunding are proactive donors that seek opportunities to support charities instead of passively waiting for a request (Gleasure 2016).
Ties to the Philanthropic Sector
While GoFundMe supports charitable organizations, it is a for-profit business. Certified Charity Campaigns can only raise funds through a partnership with PayPal and PayPal does not deduct a fee from each donation. GoFundMe classifies certified charities as only organizations within the United States that have a 501 (c)(3) status. When donations are made to a certified charity campaign, the donor automatically receives a tax receipt letter from the PayPal Giving Fund each month. Certified charities can send thank you notes automatically through the GoFundMe website. For organizations that are outside of the US, GoFundMe recommends a personal campaign that donates the funds to charities once when they are withdrawn (GoFundMe). It is unclear if there is a system in place to ensure that funds raised for a charity through a personal campaign are provided to the charity.
GoFundMe has created partnerships to support larger natural disasters. The organization partnered with the Direct Impact Fund, a non-profit organization which aids individuals affected by natural and man-made disasters. Through the fees collected from personal campaigns, GoFundMe is distributing part of the profits to the Direct Impact Fund. The Direct Impact Fund is then distributing funds to verified campaigns that support victims of Hurricane Irma and Hurricane Harvey (GoFundMe).
Key Related Ideas
- Chuffed is an organization designed to support fundraising efforts for charitable causes and does not take a commission. The organization screens charities to ensure they are legitimate causes. The organization is based in Australia and does not charge an administration fee but does charge a credit card fee (Chuffed).
- Crowdfunding is the process of publicly asking individuals to donate to a project, business or personal goal. Statistics show that 81% of crowdfunding campaigns fail and reach less than 20% of their goal (Schaefer 2017). Another study found that on average, crowdfunding campaigns typically last three months and raise an average of $499.32 (Gleasure 2016).
- Kickstarter is an organization whose mission is to help bring creative projects to life. Campaigns cannot raise funds or donate to a charity. In 2015, the organization reincorporated as a benefit corporation. Benefit Corporations are obligated to consider their impacts on society. A 5% fee is charged only for successful projects (Kickstarter).
- Indiegogo is an organization whose mission is to empower people to unite around ideas that matter to them and together make those ideas come to life. Projects are trying to solve everyday problems that help make communities thrive (Indiegogo).
- Andy Ballester co-founded GoFundMe and currently serves as its Chief Technology Officer
- Brad Damphousse co-founded GoFundMe and served as it’s CEO.
- Rob Soloman became the CEO and Chairman of GoFundMe after it was acquired by Accel Partners in 2010.
Reflection Question - As the crowdfunding community grows, will individuals always be motivated to donate or will donors start to become complacent to requests?
- Adams, Susan. 2016. Forbes. November 16. Accessed October 24, 2017. https://www.forbes.com/sites/susanadams/2016/10/19/free-market-philanthropy-gofundme-is-changing-the-way-people-give-to-causes-big-and-small/#1d73c2d37796
- Bloomberg. 2017. Bloomberg. October 27. Accessed October 27, 2017. https://www.bloomberg.com/research/stocks/private/person.asp?personId=41864887&privcapId=304391168
- Choy, Katherine, and Daniel Schlagwein. 2016. "Crowdsourcing for a better world." Information Technology and People 221-247.
- Chuffed. 2017. Chuffed. October 29. Accessed October 29, 2017. https://chuffed.org
- Forbes, Hannah, and Dirk Schaefer. 2017. “Guidelines for Successful Crowdfunding.” ScienceDirect 398-403.
- Gleasure, Rob, and Joseph Feller. 2016. “Does Heart or Head Rule Donor Behaviors in Charitable Crowdfunding Markets?” International Journal of Electronic Commerce 499-524
- GoFundMe. 2017. GoFundMe. October 26. Accessed October 26, 2017. www.gofundme.com
- Harris, Ainsley. 2017. FastCompany. February 13. Accessed October 26, 2017. https://www.fastcompany.com/3067472/how-crowdfunding-platform-gofundme-has-created-a-3-billion-digital
- Indiegogo. 2017. Indiegogo. October 26. Accessed October 26, 2017. https://www.kickstarter.com/charter?ref=about_subnav
- Kickstarter. 2017. Kickstarter. October 26. Accessed October 26, 2017. https://www.kickstarter.com/charter?ref=about_subnav
- Ligaya, Armina. 2016. Financial Post. December 8. Accessed October 25, 2017. http://business.financialpost.com/news/qa-gofundme-ceo-rob-solomon-on-the-fort-mac-fires-and-the-future-of-online-giving
This paper was developed by students taking a Philanthropic Studies course taught at the Lilly Family School of Philanthropy at Indiana University in 2017. It is offered by Learning To Give and the Center on Philanthropy at Indiana University.