How Does GoFundMe Make Money? Dissecting Its Business Model

Executive Summary:

GoFundMe is a crowdfunding platform that simply allows anyone to raise money for social causes. Campaigns can be launched in various categories, ranging from emergencies to medical.

GoFundMe makes money from platform and transactions fees as well as donations provided by users.

Founded in 2008, GoFundMe has become one of the world’s most successful crowdfunding platforms. The platform’s campaigns have raised over $15 billion from 200 million donations globally to date.

How GoFundMe Works

GoFundMe is a crowdfunding platform that allows people to raise money for various causes.

Examples of GoFundMe campaigns include, but are not limited to:

  • Medical, for instance, financing a cancer treatment or paying for a surgery
  • Emergency, such as helping victims affected by natural disasters
  • Education, for example by helping kids to finance their schoolbooks
  • Memorial, for instance by honoring the passing of a friend

… and many more. Users can set up campaigns within a matter of minutes. All it takes is to set a fundraiser goal (e.g., raising $20,000), add a campaign description, as well as pictures and videos. Fundraising is also available for entire teams, such as sports clubs or families.

Afterward, users can share their campaign with friends, family, and anyone of relevance. GoFundMe allows to distribute the campaign via email, text messages, or social media.

For larger organizations, GoFundMe offers GoFundMe Charity, a tool that allows them to track their campaign progress, collect recurring donations, create branded campaigns, and sell tickets for events.

The GoFundMe platform can be accessed by either visiting its website or by downloading its mobile apps (available for Android and iOS devices).

A Short History Of GoFundMe

GoFundMe, which initially started out as CreateAFund, was founded in 2008 by Brad Damphousse and Andrew Ballester.

The duo met in the mid-2000s when they moved to California to become involved in the local startup scene.

Prior to launching GoFundMe, they were working on Paygr, a platform that allowed its members to sell services to the public (similar to online marketplaces like Fiverr or Upwork).

When they launched CreateAFund, which enabled social media users to raise money for any type of cause, the crowdfunding industry just started to take off.

Both Indiegogo and Kickstarter recently launched their respective platforms. But instead of raising money for a noble cause, their platforms were aimed at funding products that would be developed when a certain threshold of money was raised. Famous examples include the Peloton Bike or the card game Exploding Kittens.

Unfortunately, CreateAFund’s model did not take off as expected. So, the team got back to the drawing board, redesigned the platform, and rebranded the company to GoFundMe. They re-launched as GoFundMe in May 2010.

gofundme old website
Wayback Machine

In its early days, the team decided to bootstrap the platform and not take any outside investment. For the first few years of operation, GoFundMe’s team was only comprised of four members in total. Nevertheless, the platform grew at a steady rate from day one.  

By 2012, GoFundMe was expanding its user base by 20 percent every month. Furthermore, the platform pulled in over $3 million in monthly donations all while operating in over 10 countries across the globe.

In 2015, after 7 years of bootstrapping, the startup finally raised its first-ever round of outside funding. Not only that, but the investors (including Accel, Greylock Partner, TCV, and more) acquired a controlling stake in GoFundMe.

Both Damphouse and Ballester got their well-deserved pay-day. Alongside the funding round, the founding team relinquished control of day-to-day operations to a new leadership group.

Rob Solomon, who previously served as a group president at Groupon, became the company’s new CEO. David Hahn, LinkedIn’s former Head Of Product, joined him as COO.

Under the new leadership, GoFundMe’s business continued to expand by adding more markets, hiring new employees, and even acquiring competitors (such as CrowdRise in 2017). Part of the reason for the company’s success was simply its noble mission and the virality that came with it – for both good and bad.

Over the years, GoFundMe helped to facilitate multiple fundraisers that resulted in millions of dollars donated to a noble cause. For instance, over $12 million were raised to help the victims of the Las Vegas shooting.

Nevertheless, the company had its fair share of issues throughout its existence. There had been countless reported instances where people tried to take advantage of a tragedy by creating accounts on behalf of victims, but pocketing the money for themselves.

GoFundMe, in response, implemented various security measures around their campaigns. For example, it introduced a verification process to ensure the fundraiser is who they claim to be. Furthermore, campaign earnings are withheld until all necessary verification steps are completed.

And sometimes GoFundMe can be used to just have a good laugh. That’s at least what comedian Josh Ostrovsky thought when, in 2018, he started a campaign in support of making Kylie Jenner the youngest-ever self-made billionaire. His goal of raising the remaining $100 million fell short by a little less than… $100 million.

In March 2020, right before the global outbreak of the coronavirus pandemic, GoFundMe announced that Solomon would go back to being an investor and effectively be replaced by Tim Cadogan.

Cadogan would oversee the most critical time in the firm’s history. The coronavirus pandemic, which caused many to lose their jobs and sometimes even lives, led to a surge in new campaigns that were created.

Meanwhile, GoFundMe started a variety of initiatives, for example, partnering up with Yelp to promote fundraises for local businesses. However, its most successful campaign was yet to come.

In June 2020, after the tragic passing of George Floyd, a campaign was set up in his name. It managed to raise over $14 million and broke the record for individual donations with 500,000 donations.

In 2020 , the platform managed to cross $10 billion in lifetime donations. Throughout 2021, GoFundMe remained the center of attention. For example, it caught some heat after not taking off a fundraise for Kyle Rittenhouse.

Others, such as Joe Exotic from the Netflix show Tiger King who created a campaign to cover his legal fees, continued to (ab)use the platform for semi-serious purposes. In other instances, the company had to suspend campaigns, such as the Freedom Convoy movement supporting the Canadian truckers.

The firm’s continuous success also allowed GoFundMe to make another acquisition in January 2022. That month, it acquired Classy,  a nonprofit fundraising software company, in an all-equity deal.

Meanwhile, families hit by skyrocketing inflation became the biggest seekers of donations throughout 2022. Unfortunately, inflation also had its effect on GoFundMe, too.

In November, GoFundMe announced that it just laid off 94 employees, equal to 12 percent of its workforce. CEO Cadogan cited that reduced budgets and inflation led to a decline in donations on GoFundMe.

Over $17 billion have been donated across all GoFundMe campaigns. More than 500 people are now employed by the company.

How Does GoFundMe Make Money?

GoFundMe makes money from platform and transactions fees as well as donations provided by users.

how does gofundme make money
gofundme.com

Fees are paid by the person, team, or organization that runs the campaign – not the donors themselves. For instance, if a person donates $100 to a cause, then the donor receives anywhere between $90 to $98, depending on the location.

The platform fee is paid in exchange for the ability to raise money on GoFundMe’s website. It is used to cover their cost, for instance, to pay for servers or employees.

Meanwhile, the transaction fee covers the cost of processing the user’s payment. For most countries, it’s equal to 2.9 percent plus a small, fixed fee of ($0.30 in the United States).

Both fees vary per country. While, for instance, GoFunMe only charges a 2.9 percent transaction fee in the United States (at no additional platform fee charges), it’s platform fees in Belgium are 5 percent alongside a transaction fee of 2.45 percent.

Additionally, GoFundMe Charity applies a different fee structure depending on the type of plan that users are subscribed to. However, in most countries, such as the US, Canada, Australia, UK, and most major European countries, a platform fee is not applied.

Lastly, a small portion of GoFundMe’s revenue comes from the donations that it receives directly from its users. Donors have the option to not only donate to a campaign, but also directly to GoFundMe.

The business model strategy that GoFundMe pursues is predicated on a) simplifying the donation process and b) giving donation seekers access to as many potential donors as possible.

Traditionally, raising money for a good cause came with a whole set of challenges. Users had to organize expensive in-person fundraisers and get rich people to show up – both very costly endeavors that would be taken out of what’s being raised.

The internet has largely democratized access to both capital and larger audiences. One of the most powerful examples of that democratization is Patreon, which has enabled creators to make a full-time living from their biggest fans.

Similarly, GoFundMe has enabled regular people to raise money for all kinds of causes and financial needs. As a result, people seeking donations can directly target the types of donors that have the most in common with them.

For example, a trucker losing his leg in an accident can now appeal to a much greater audience that potentially relates to his struggles (i.e., other truck drivers), which means he or she is likelier to reach a certain fundraising goal.

Additionally, there’s no financial risk for those seeking donations since starting a campaign on GoFundMe is free. However, the free access and potential reach does create a whole new set of problems.

In the past, malicious actors have used GoFundMe to scam donors. The platform, as a result, has adopted a variety of different security measures. These include but are not limited to:

  • using machine learning and human reviewers
  • providing donors with money-back guarantees
  • investing in security and authorization tools to ensure payments go through safely

.. and so much more. By ensuring donors that their money is being handled responsibly and actually goes to legit causes, it can simply attract a much greater number of them.

And the more donors it attracts, the more attractive GoFundMe becomes to donation seekers. Since GoFundMe’s revenue grows proportionally to the donation volume on its platform, it is incentivized to maximize user growth.

Lastly, more campaigns also have a virality effect baked into them. Many GoFundMe campaigns, for better or for worse, are heavily reported on. The added awareness inevitably leads to more donors joining the platform.

Interestingly, GoFundMe has since expanded vertically into charities. GoFundMe, given that charities tend to be more reputable than individuals, can likely attract even more funding from those campaigns, which again means more revenue for the platform.

GoFundMe Funding, Valuation & Revenue

Interestingly enough, GoFundMe raised venture capital only once in its life. In 2015, world-renowned investors such as Greylock, Accel, TCV, and more invested in the company’s one and only round.

The amount raised was not disclosed. Meanwhile, the company was able to amass a valuation of about $650 million. That valuation has most likely increased exponentially ever since.

Consequently, the company has also been extremely secretive in disclosing revenue figures to the public. GoFundMe, in all likeliness, is already profitable considering it had only raised one round of funding over its 12-year lifespan.

Hi folks, Viktor checking in! Years of experience in various tech-related roles have led me to start this blog, which I hope provides you with as much enjoyment to read as I have writing the content.