Should the donation market be profitable?

As a social tech and a for-profit business, born in the philanthropic ecosystem, Ribon always knew that it might be challenging to prove to people how this could fairly benefit all the possible stakeholders involved, how we could create an incredible sustainable cycle that would reward its parts helping to sum resources for such a underserved sector. 

“Would Ribon thrive as a for-profit company in a non-profit environment? Would Ribon have to choose between higher profits or more charitable donations and how would the press see this?”

The answer for this question as a startup was always intuitive for the Ribon team, but as we became more aligned with our future vision of becoming a DAO (decentralized autonomous organization) and progressively adopting blockchain technology to our business, we started to see that not only we agreed that the donation market should be profitable, but we have just found out an even better way to run our business guided by the altruistic mindset that rules every part of our organization. 

I’m here to tell you how Ribon likes to answer this question by incorporating what we believe to be the best of both (or more) worlds.


“We have a visceral reaction to the idea that anyone would make very much money helping other people. Interestingly, we don’t have a visceral reaction to the notion that people would make a lot of money not helping other people. You know, you want to make 50 million dollars selling violent video games to kids, go for it. We’ll put you on the cover of Wired magazine. But you want to make half a million dollars trying to cure kids of malaria, and you’re considered a parasite yourself.” 

Dan Pallotta | TED Talk: The way we think about charity is dead wrong¹

This belief it’s rooted in cultural and religious points and may be undermining the causes we love. But the best answer to understand whether this belief is a real issue or just represents internal fears, is to see how the real market reacts to it. Here’s what we found out with a brief research:

We’ve listed 43 successful exits from for-profit startups that managed donations to charities. From these exits, two are IPOs and there are M&As of U$ 325MM and U$ 190MM, from companies that raised US $500k, US$ 7MM and US$ 40MM before exit. 72% of the 43 exits occurred recently, in the last 5 years, and 55% occurred after 2017. It’s a niche market with many exit examples.

In addition, we found:

  • 22 private companies that manage donations to charities acquired 35 startups and had no exit yet;
  • 25 startups that raised + US$ 260MM in disclosed rounds and did not exit or buy other companies.

The research is a simple list of 90 startups that are navigating well in the nonprofit sector2 and, when generating profit, have the chance to face the great challenges that we face as world citizens.

Anger attacks still occur and profiting from the donation market can be seen as greed by a portion of the population. In February 2017, JustGiving, a UK crowdfunding platform, became a media target as a scandal: it was branded as ‘JustTaking’ after using funds to pay its staff up to £ 200,000 a year3. The momentary scandal did not exempt JustGiving from being sold to Blackbaud for £ 95MM later that year4. Blackbaud is a provider of software and services designed for non-profit organizations, enabling them to build strong relationships and more. In 2019, JustGiving removed its 5% fee from the UK platform5 to donate to a cause or to raise funds for a charity. Instead, donors are asked if they would like to make a voluntary contribution to JustGiving in addition to their donation, which they must choose to opt out of if they do not want to pay.

This did not block JustGiving and dozens of other ventures from being successful. This will not block Ribon either.

When looking into Ribon’s centralized platform, we were able to create a business model and a donation cycle in which we would catalyse resources to nonprofits. Our process basically started with a foundation or private company (what we would call “big donors”) wanting to make an institutional donation to some charity, and Ribon would use the driving force of our +40K user base to help raise more money than the foundations/companies had established originally. So, at the end of the day, the extra money donated from individual users went in majority to the charity (less taxes and fees). This fee was responsible for making Ribon survive as a startup, and even after discounting Ribon’s revenue of this extra amount, the nonprofits would raise approximately 60% more than the original donation from the big donors.  A similar strategy is used, for example, by Charity Water6 (a nonprofit with 0% donation tax and separate account for overhead expenses, founded by Scott Harrison7) with great success.

We always had some contingency plans to keep our brand moving in the right direction. Until everything changed in early June 2021.



Ribon was born in the brazilian startup ecosystem, was raised as a for-profit company and grew as a social business. Our intention was always to sum resources to the philanthropic market through a sustainable business model, and our mission was to always remain true to helping end extreme poverty by 2030. 

About 5 years after the startup was founded, we suffered a major pivot concerning Ribon’s moonshot: we agreed that the donation platform of the future would definitely be decentralized. This premise seems so intuitive when you look at the engines of a DAO: anyone can join, and whoever gets involved and contributes, eventually will be rewarded for playing this role (and in our case, the reward comes in the shape of a governance token – the RibonGov Tokens8).

The fact that our original team acts and talks so naturally about decentralizing everything (our code, our governance, our decision-making, our future…) is truly inspiring. This opportunity really made us see that we created something even better than we thought originally, concerning the donation market. We can say that now we are building a company that can fairly reward its members, and our best interest transcends the barriers of our shareholders, to become something even bigger guided by a true connected community.

So if you ask us sincerely… between making money or changing the world, we choose both. And even better: we choose to make whoever joins us make money too.



References

¹Dan Pallotta | TED Talk: The way we think about charity is dead wrong:
https://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong?language=en#t-17572

²Research | Exit on Social Impact Startups:
https://docs.google.com/spreadsheets/d/1ma1llGSs0SKYD83NpnQia_bGpI9-7w9RTOfWw68no5U/edit

³JustGiving is branded ‘JustTaking’ after using funds to pay its staff up to £200,000 a year:
https://www.dailymail.co.uk/news/article-4197628/JustGiving-website-takes-20m-year.html

4JustGiving acquired by Blackbaud:
https://www.crunchbase.com/acquisition/blackbaud-acquires-justgiving–8c9ffe5e#section-overview

5JustGiving are not keeping £2 million commission from donations to Captain Tom Moore:
https://fullfact.org/online/justgiving-commission-captain-tom/

6Charity Water:
https://www.charitywater.org/

7The Spring – The charity – Water Story:
https://www.youtube.com/watch?v=bdBG5VO01e0

8Ribon Protocol Whitepaper:
https://ribon.io/wp-content/uploads/2021/07/Ribon-Protocol-Whitepaper-v.0.2.pdf

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