Not Quite That Lean: Challenges of Building a Quality Fundraising Platform
Founding a startup company is a lot like founding a nonprofit – you have an idea and a dream to help people and probably almost no money.
A key difference is that for some startups the dream is to ultimately make as much money as possible while for others (like GiveGab) the hope is to both make money and to make a tangible, positive impact on the world.
As you might imagine, this creates a situation where it is really really hard to not focus on just the money.
Money to a startup is like oxygen to a drowning man – it’s hard to focus on impacting others when you’re gasping for air.
As the CEO, money is also how you are judged by others. You have early investors, seed investors, venture funds – it all starts to add up and everyone wants to do good, but what they really want to do is increase the value of the investment. To them, it’s about the money. I’m not saying they are not good people, but the financial investment is rightfully their focus. The more capital you raise, the more money you ultimately must make for everyone to come out ahead.
To help battle this, many business philosophies such as going “lean” are focused on spending as little money as possible early, creating the bare minimum product that your customers will accept, and gaining paying customers immediately so you can see what matters to them based on the least arbitrary way possible – how they spend their money.
For a startup like GiveGab, however, this posed a real problem.
Our dream was to become the complete Nonprofit Giving Platform – one place where nonprofits, donors & volunteers could come together and interact.
We needed to make multiple activities simple and to create a viable network – both much more expensive and time-consuming than is desirable for a startup. In this case, going lean and making money right away was not really in the best long-term interest of our customers (despite the logical and understandable wishes of many an investor).
A key example of this is how our platform is built to gain donors and process donations. We could have gone super lean – built the bare minimum to accept a meager amount of donations and essentially cut corners that would make large-scale donation processing difficult or impossible.
“Once we get huge,” the lean philosophy says, “we can figure out how to fix our issues, and besides if we lose a few customers then we’ll have plenty more so it won’t matter.”
This would have made us profitable faster and been in our best short-term interest, saving us from having to raise further capital and protecting our personal equity positions.
Our customers, however, are small nonprofits that have little money, few resources, and no room for error. We knew (and know) that even a tiny outage or technical glitch could be a massive problem for a nonprofit that depends on those donations. We would probably survive, but many of them wouldn’t.
So we made the incredibly difficult (and in the eyes of many outside investors “foolish”) choice to build our platform from the ground up as if we were going to get billions in donations all at once. This was way more expensive and delayed the time before we would be able to gain money (and especially before we would be profitable).
We have 14 employees and only 2 of us are not on the tech team (our CFO and myself our CEO). I’m currently the company’s only salesperson.
This decision put a burden on our investors and cost our exec team (who continue to have diluted equity and get paid way below market). We love our investors and (as an exec) we, of course, love ourselves too so this wasn’t always a decision that has made things easy or stress-free.
Additionally, we also made the strategic decision to only charge a percentage (rather than an upfront or monthly fee), forcing us to literally always be on the side of our customers.
We only make money if nonprofits raise money. It makes us obsessed with raising money for the nonprofits on our site. It also puts us in the same boat if the ship sinks.
We may add a monthly option at some point, but this early obsession with seamlessly raising donations has changed the very DNA of who we are. It also made us more cash-strapped until we could actually figure out how to help nonprofits raise more online donations and gain more donors.
Were these decisions good? If you’re an investor you probably don’t think so. I’m guessing that if I left GiveGab, the companies that really want to maximize near-term profits and hit their quarterly numbers won’t be knocking down my door.
But if you’re a small nonprofit that depends on these online donations and that simply cannot afford downtime or to lose even a single donor to poor tech created from cutting corners you might think differently.
GiveGab is easier, more effective, safer, and much more stable.
We’ll see how these choices play out. Recent events have really highlighted the importance of building and maintaining great technology. Customers in huge numbers are now reaching out and getting excited about working with us. Our silky smooth donation flow and history of zero downtime has become a key differentiator. Perhaps these choices will have proven to be the profitable ones after all.
Either way, we’re going to continue putting the needs of nonprofits first, attempt to maintain the right balance of mission versus profit, and hope our investors continue to be patient and supportive. Maybe I’ll write a book someday called Not Quite That Lean. If I still have a job when the book hits the stores, you’ll know it worked out.
Charlie Mulligan is the CEO and co-founder of GiveGab, inc., the Nonprofit Giving Platform.