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Startup Profile: GoFundMe
Funding for Your Dreamsby Frank Wang, MBA '13
There's no doubt that the Internet has changed the way in which entrepreneurs pursue opportunities. By going online, anyone can start a business from their computer — whether it's selling products or providing a service. However, in order to do so, you still need capital to get started. Gofundme.com, a San Diego, California-based technology startup, looks to provide just such a channel to entrepreneurs.
The premise of GoFundMe is pretty simple: people have dreams or goals, but they need money to attain them. After creating an account on the GoFundMe.com website, users create a donation page that describes their goal and how much money they need to make it happen. After creating the page, users start sharing their ideas page through communication vehicles and can then watch the donations accrue in real time. It's bootstrapping for the digital age.
Origins of the GoFundMe Team
GoFundMe was founded by CEO Brad Damphousse and CTO Andy Ballester. Damphousse graduated from Emerson College in Boston with degrees in integrated marketing and new media design and has work experience in Web design and product management. Ballester graduated from the University of Illinois at Urbana-Champaign with a degree in computer engineering. They worked on dozens of projects together at the same company in the mid-2000s. Realizing each other's talents — Damphousse's design proficiency and Ballester's technical expertise — they decided to formally go into business together in the summer of 2008 by creating a website called Createafund.com.
Createafund was an online platform where users could create any sort of fund. The progress of the first version was slow, and the team needed to figure out how to monetize the project. They came up with the strategy of offering monthly subscriptions to larger organizations and a "light" version for individual fund starters.
After monitoring these two segments, it became apparent that there was a larger market opportunity in the light version. To meet the demands of this user segment, Damphousse and his team decided to break off and rebrand the site by creating GoFundMe. They felt that the rebranding better catered to the users of the light version, and it proved to be a success as their growth began to rise steadily and user engagement increased.
With the website's popularity increasing, Damphousse and Ballester began to market GoFundMe as a crowdfunding/donation website. For each user transaction, GoFundMe charged a 5 percent transaction fee, while donors were not charged anything.
The company's metrics serve to gauge user experience, and the founders aim to eliminate barriers for users. For example, one of their greatest growth opportunities was switching from using PayPal as their primary payment platform to WePay, which is an alternative platform that also offers online payments. They found that with PayPal, users had to do more work to complete a transaction, which often discouraged them from using the website or making donations. They performed an A/B testing analysis and integrated WePay's platform as a payment system. The results were clear: WePay won, but Paypal still remained available to users who were more familiar with it.
Crowdfunding and Its Users
When Damphousse and Ballester first started GoFundMe, their advertising was targeted to nonprofit organizations looking for an easy channel to accumulate their donations. However, as they grew, they found that users were visiting the website to collect donations for a multitude of purposes.
Take Jennifer Haron, for example. She wanted to surprise her husband with a trip to New York City for his birthday. Within three weeks of using GoFundMe, she was able to reach 92 percent of her $1,000 goal. And then there's German Cadenas, who was admitted into Arizona State University's Ph.D. program (in psychology). Due to Cadenas' international status, he would have had to pay full out-of-state tuition. By using sites like YouTube and other blogging platforms, he advertised his page with GoFundMe and was able to raise $19,540 (as of March 2012), nearing his goal of $25,000.
Online crowdfunding has become increasingly popular with sites like Kickstarter.com and Fundly.com. Kickstarter is a pledge-based crowdfunding model for personal projects, where investors have a stake in their investments. Fundly.com is a similar crowdfunding platform that targets the same market as GoFundMe. They also allow the funding of any cause.
The San Diego Technology Scene and the Entrepreneurial Spirit
Startups like GoFundMe are on the forefront of the emerging San Diego technology startup scene. It is often thought that to be a successful technology company, a move to the San Francisco Bay area is essential. So why did GoFundMe start in San Diego? According to Damphousse, not buying into San Francisco and "being here in San Diego, helped us cultivate an attitude of creativity/creation, rather than competition."