GoFundMe Enters the DAF Game: What It Means for Everyday Giving

With much fanfare, GoFundMe recently announced it was rolling out its version of a donor-advised fund — which it’s calling simply a Giving Fund.

Not surprisingly, GoFundMe is excited by its new offering’s potential to increase giving. Outside observers the Chronicle spoke with also viewed this as a net positive; they say a new offering by a well-known brand is likely to be a rising tide that lifts all DAFs.

What does this development mean for charities and donors? We asked experts familiar with DAFs and how they work in philanthropy to weigh in. Here’s the skinny on what the new funds are, how they might change the DAF marketplace, what they do differently — and the same — as other DAFs, and what nonprofits can do next if they’re trying to win DAF donations.

What are Giving Funds? GoFundMe has opted to call its DAFs Giving Funds. The simpler name may help it feel more accessible to everyday donors, says Genevieve Shaker, an associate professor at the Lilly Family School of Philanthropy at Indiana University who studies fundraising, including DAFs.

“We’ve noticed in philanthropy that language can be a barrier,” Shaker says. “Even the word “philanthropy” can be confusing to people at times and make them feel like it’s something different than what they do. It’ll be really interesting to see how people respond to the language of a “giving fund,” which is more accessible and understandable.”

How Giving Funds could change the DAF marketplace. GoFundMe’s version of a DAF will be promoted to many people who haven’t heard of donor-advised funds before, says Danielle Vance-McMullen, a co-founder of the DAF Research Collaborative.

“What’s really unique is GoFundMe has an established audience who they’re marketing to that are not necessarily the type of people that have a financial advisor to tell them about DAFs or who might not naturally come across DAFs in some other way,” says Vance-McMullen, who is also a professor at DePaul University. “They’re giving through social connections and ties. So they’re just a very different audience than a lot of the other folks have.”

GoFundMe says it’s “democratizing” DAFs by bringing them to everyday donors. However, Vance-McMullen and others say there’s been a trend for years of DAFs as a tool for everyday donors. A key difference here is that GoFundMe is directing the funds to an audience of people who are giving, not pushing them as a financial-services product, says Woodrow Rosenbaum, chief data officer for GivingTuesday.

“There’s no incentive for GoFundMe to have these funds not active,” he says. “The financial incentive to GoFundMe is that these funds are actually being deployed.”

He says that upends a narrative about DAFs that’s been in play for a while. “There’s a lot of folks who look at DAFs and assume that it’s a zero-sum game — you can either grow DAF accounts or use them, but not both,” Rosenbaum says. “GoFundMe seems to be betting on the idea that you can grow the number and value of these funds and their use. And I think that’s absolutely correct.”

What the Giving Funds do that’s different. Being a later entrant to the game sometimes has advantages. GoFundMe says it’s trying to fix some of the issues nonprofits view as problematic with DAFs.

Tim Cadogan, CEO of GoFundMe, says the goal is to get money not just into DAFs, like financial-services firms do. “There’s a lot of money in DAFs, about a quarter of a trillion dollars,” he told the Chronicle. “Most of it stays there. The big goal of ours is to get the money moving.”

To that end, the company will operate more like community foundations and employee-giving funds that use DAFs to hold money that will be disbursed relatively quickly. That is, GoFundMe will suggest nonprofits people can support.

“Most people actually know what issues they care about, but might not know what organization is working on them,” Cadogan says. “We’re going to do a lot more around presenting those to our customers — things in your local area, things that are trending, organizations that are related to the ones that you’ve given to before.”

GoFundMe says its DAFs will not charge fees for credit-card processing or administrative fees.

Another common complaint among fundraisers is that some commercial DAF providers’ default setting is to not share donors’ contact information — such as their names and email addresses — when sending the money. GoFundMe’s default will be openness: Donors will have to opt-in to anonymity.

Education will be key. The simplicity of the Giving Fund name could lead to some confusion. Many campaigns on GoFundMe’s platform are peer-to-peer appeals for donations to individuals, not 501(c)(3) nonprofits, so they would not be eligible for a gift from a DAF.

Cadogan says the company will step up and focus on educating those who sign up for the funds on what DAFs are.

Other financial products, such as retirement accounts, are much more common than DAFs, and GoFundMe’s Giving Funds can help change that, says Mitch Stein, head of strategy for Chariot, a DAF payment company.

“There’s two million DAF accounts, according to the most recent National Philanthropic Trust report,” he says. “But there’s 70 million people with a 401k. We’re scratching the surface at the opportunity with DAFs. Having a company with a huge marketing engine to roll out a product that is going to inform people on the existence of DAFs is amazing.”

He adds that it won’t just be GoFundMe that will benefit from more people knowing about DAFs: “I also think it’s going to be great for every other DAF provider that will benefit from this increased awareness.”

What’s next? Adding a new player to the DAF market, especially one with a different audience, has the potential to help both charities and donors, says Rosenbaum. To get on more donors’ radars, charities should do more outreach with supporters, he says.

Small charities also have an opportunity to engage more supporters through sites like GoFundMe, where donors reach out to their friends, says Vance-McMullen, with the DAF Research Collaborative. She has seen many small charities use GoFundMe or similar sites to engage communities and friends, and this new offering offers more opportunities to interact with potential supporters.

Overall, DAFs are most effective if they’re used widely, Stein says. And so far, what’s excited him is that people are talking more about DAFs. “I get so many messages from people; it’s clearly breaking through,” he says. “That’s the hard part — what breaks through to people. And I think that this is doing that.”