Wealth Podcast Post

Fundraising for Nonprofits with Dominic Kalms

George Grombacher December 18, 2022

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Fundraising for Nonprofits with Dominic Kalms

LifeBlood: We talked about fundraising for nonprofits, implementing a donate now pay later model, the impact this method has on donation amounts, and how to get started, with Dominic Kalms, Founder and CEO of B Generous.

Listen to learn how to help your favorite nonprofit easily raise more money!

You can learn more about Dominic at BGenerous.com, Facebook, Twitter, Instagram, and LinkedIn.

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Our Guests

George Grombacher


Dominic Kalms

Episode Transcript

george grombacher 0:15
Why put the storage G in the time is right welcome today’s guest strong and powerful dominant calms DOM Are you ready to do this?

Unknown Speaker 0:22
I am. Thanks for having me.

george grombacher 0:23
Oh, excited to have you on. Dominic is the founder and CEO of be generous. They’re a venture backed FinTech company revolution at revolutionising how people donate to nonprofits. Dominic, tell us a little about your personal lives more about your work, why you do what you do?

Unknown Speaker 0:39
Yeah, absolutely. So I was actually born in Hong Kong, grew up in Asia, live my early part of my years in Asia, then I moved to London, England, and ultimately to the United States, first in LA, and then University and grad school in New York City. And I think growing up and having such a cosmopolitan background, I saw a lot of the world, so a lot of Asia. So you’re out of North America as a kid and I learned very, very, very young age, that the world is not necessarily equal, and just in all places as it should be. And so it dawned on me very early on that there’s so many injustices so many things that are going wrong in a world if we could somehow harness the power of capitalism, to help remedy some of these issues, that that would really be the most sort of the best use of those resources, right? Helping the the broadest number of people with the least number of resources is really the most optimal way to, to affect change. And so, you know, I grew up having this instilled in me as a young age, my grandfather was a very successful entrepreneur, started a company at age 16 years old and grew to the largest consumer electronics company in Europe, ended up getting knighted by the Queen of England ended up getting inducted into the House of Lords. And today is his 91st birthday, Lord Stanley, have a funny story. So I, you know, I always was drawn to being an entrepreneur and also drawn to doing something to help the world become a better place, essentially. And eventually, after working on Wall Street for a couple of years, and working with the government for a few years after that, I settled on this very nice intersection of profit and purpose. And so using technology building private venture, capital backed technology companies that can create efficiencies in the largest underserved sector of finance in the world, which is the US nonprofit market. The United States is the most philanthropic country in the world, by far half a trillion dollars of donations in this country go toward helping other people. But the market is highly fragmented, and it’s highly inefficient. So if you can build products in a marketplace, that can create change at scale, and make this market more efficient, you can affect a huge amount of people in a positive way. And that’s really where I’ve been sort of obsessed, I guess, if you will put it for the last 10 years and building products like this.

george grombacher 2:41
Awesome. Well, thank you,

Unknown Speaker 2:44
sir. Absolutely.

george grombacher 2:46
So fragmented. And so it’s the nonprofit space United States. Its massive, but it’s fragmented and and inefficient. What? What does that mean?

Unknown Speaker 2:56
Yeah, so you know, if you want to, you know, so Well, actually, let’s start here. There are 1.7 million nonprofits in the United States. Right? And nobody really has a handle on what each of them are raising or anything like that. I mean, yeah, you have to report this data to the IRS, but 92% of those nonprofits raise under a million dollars a year. So you have an A lot of them are duplicative, right. And so they’re doing the same things. And so you have this enormous market. And I say fragmented, because in most industries, you have no seven or eight core players that are dominating, or at least you can point to, you know, the big ones in the nonprofit space. If you just take the organizations that are raising above a million dollars a year, it’s 135,000 organizations, it’s huge. The market is just huge. So it is a highly distributed, highly fragmented market, and about 100,000 new nonprofits come online every year. So it’s growing tremendously. And it’s inefficient, because, you know, a lot of nonprofits have high overheads, and they have really high expensive fundraising costs. So the average nonprofit in the US, the average overhead of us nonprofit in the in the US is about 36%. Right? So if you think about who donated $100, that nonprofit or an average nonprofit in America, $36 is going to just non programmatic work, right? Most donors obviously are not going to be thrilled to hear that. But of course, nonprofits need to operate. It’s not, it’s not fair to say they can’t have operating expenses. And at the same time, you know, donor car or donation costs, fundraising costs, if you will, are very, very high. You know, direct mailer campaigns, I’m sure, you know, we all get you go to your mail, and you see, you know, someone soliciting, those can be as high as 50%, which means every dollar that nonprofit gets is paying 50% of that out to a fundraising consultant or expert or direct mailer campaign. Right. And so I think it’s safe to say that the nonprofit industry is very well intentioned. I come from this industry on the tech side, but it can be highly inefficient in certain areas, and it certainly is highly fragmented industry.

george grombacher 4:46
Got it. So enter, be generous, and how are you going about fixing this problem?

Unknown Speaker 4:54
Yeah, so the biggest problem in the nonprofit space today is actually that the percentage of Americans who donate And the average donation amount that they give are declining significantly. So today 72% of Americans give to charity. So very high percentage, but that number used to be in the mid 80s. Right. So you see declined significantly, particularly since the oh eight crash, and the average donation amount is declining as well. And so what you have is less Americans are giving and they’re giving less on average. And of course, that leads on the other side to a liquidity problem. So half of all nonprofits today have less than one month of cash on hand. So what we’ve done is we’ve created the first ever philanthropic credit product that allows somebody instead of buying now and paying later and I’m sure you’ve heard of the buy, now pay later space allows you to donate now, and pay later. So using our product, a donor can make a charitable contribution, aka donation to a nonprofit, the nonprofit receives that donation upfront right away, the donor gets the full tax deduction for the full amount right away. But the donor doesn’t spend any money out of pocket today. And instead, they pay that donation over three, six or nine months completely for free. There’s no interest payments, there’s no transaction fees, there’s no hidden fees, and there’s no late fees. So at the end of the transaction, the nonprofit has all the money upfront, the donor has their full tax deduction, and then the donor doesn’t actually have to pay any money. So this is a completely new way to donate. It’s a credit product that’s been extremely successful in other verticals like E commerce, for example, with Buy now pay later. And we’ve introduced it to the philanthropic space, taking an infrastructure and applying it for good, essentially, if you will. And as a last point on this, I’ll say that, you know, fidelity, charitable put out this great report last year called overcoming barriers to charitable giving, where they wanted to understand why are donors giving less right, what is the reasoning for this. And in their report, they surveyed 1000s of donors, and they concluded that about 72% of donors say they want to give more to their favorite nonprofit, but they’re unable to do so their primary reason, of course, being liquidity or cash on hand. So our product is a free credit product that allows a donor essentially to take their principle donation and spread it out over a period of months without incurring any fees or costs whatsoever. But we’ll send all that money to the nonprofit today. So it not only solves the nonprofits liquidity problem, it solves the donors inability to give what they want to give, because historically, donors have been very constrained. Their only alternative way to do this was to put money on a credit card, and credit cards charge interest rates, they charge late fees, they ding your credit. And most importantly, 67% of donors are under the age of 40. Don’t have or don’t use a credit card. So our product really solves a problem for nonprofits and for donors and the data. The proof is in the pudding as I like to say, because the average one time donation last year in America was $128. Online, the average Donate now pay later donation right now is $356. So people are giving more than 150%. More using our products are double more than double simply because they can spread their payments over time at no cost to them.

george grombacher 7:54
Nice. Well, that all makes sense. So who who pays for your service? Or is it free?

Unknown Speaker 8:03
It’s completely free for the donors completely free. No cost ever for the donors. We do not charge the nonprofits subscription fees right now. And we also do not charge them integration fees right now, the only way we make money is a success fee, basically. So when a nonprofit successfully receives a donate, now pay later transaction, a percentage of that transaction is what we take basically. So it’s like the same way that like GoFundMe works or any of these other, you know, online, either crowdfunding or charitable donation platforms, basically a standard model. We also offer optional donor cover, meaning that if a donor wants to pay a portion of the fees that the nonprofit incurs, or decides to pay for the whole thing, for example, they can do that. And what we’ve seen right now is that about 80% of donors opt in to cover, right, because it’s totally optional. They don’t have to cover, but many of them do because the fees are small. I mean, we’re not talking 20 30% way, way, way under that. So it’s like a couple percent basically. And the donors can opt to cover that if they like. So that reduces the burden on the nonprofit.

george grombacher 8:58
Nice. That makes a lot of sense. What happens when somebody doesn’t complete the payments to you?

Unknown Speaker 9:06
Yeah, so basically, we say, Hey, you missed your payment. And if they say, Oh, I lost my job, or I can’t pay or whatever it might be, you’d say, Okay, no problem, we’ll put you into a hardship program. And that’ll be we’ll say things like, you can skip a payment, you can skip two payments, you can pay a portion of it down now and pay the rest later, you can pay half of it down and pay the rest later, right. And there’s all these different mechanisms. Because at the end of the day, you know, the last thing we want to do is put people into payment plans. They can’t, they can’t actually pay, right and particularly donors, right because donors are well intentioned they want to support and a lot of times people donate to nonprofits they are personally connected to and nobody wants to be in a situation the donor doesn’t and we don’t want to be in a situation where they can’t pay right so the nonprofit gets all the money up front so they’re out of the transaction. We do not clawback any money of course, right. So at this point, the donor is saying hey, I can pay will allow them to skip payments pay down pay later, but at the end of the day, if a donor simply cannot pay, we write it off as a loss.

george grombacher 9:58
Got it interesting. did a wrote down 67% of people under the age of 40? Don’t have

Unknown Speaker 10:05
a credit card, don’t have or don’t use the credit card. Yeah, a 60s, American Bankers Association, put out a report that says 67% of people under the age of 40, don’t have or don’t use a credit card. It seems high. But I mean, like, I’m 34, okay, I have credit cards, but I don’t use them. Because, you know, when I was in my 20s, like a lot of younger Americans, I’ve racked up, you know, I thought about free money on a credit card, and I racked up, you know, $15,000 worth of debt and spent, you know, seven, eight years trying to just paying the interest payments on those debt on that debt right. Now, eventually, I paid it off. But it was a good lesson for me, you know, to be careful how you use these cards. And so yeah, most people my age and around my age do not use credit cards.

george grombacher 10:44
Interesting. All right. So I imagine that well, just because something is at a hard sell, you approach a nonprofit, you say we have this wonderful program, it doesn’t cost you any money, you’re going to increase the amount of donations that you get, it’s going to be a win win for everybody. How has how has that been received?

Unknown Speaker 11:05
It has been received even better than we thought it would be received. So we thought it would be received? Well, because we did a tremendous amount of product research. And we worked with a lot of the CEOs and board members of many of the nation’s largest nonprofits to craft this product on their on our website. And in fact, it’s folks like the chairwoman of United Way Worldwide, right? The chairman of the board of the ASPCA, the chief girl of the Girl Scouts, the chairman of the board of the Boy Scouts, I mean, and on and on, right? We work with these people tangibly, as advisors, and in some cases, investors in the company to actually craft our product. We did a lot of testing, so we knew it was gonna be received well, because it solves a core problem, a real problem that nonprofits have, which is not having enough liquidity, particularly at the times of the year when they need it. Because if you consider that about 40% of all donations come in November, December. But obviously, the rest of the year nonprofits need capitals around their programs. So our product provides that liquidity upfront, but allows the donor to pay over time. So it’s been received very, very well. In fact, in our first, just about two and a half months in the market, we’ve signed up 50 nonprofits, which is a lot more than we thought we would given the average sales cycle of a nonprofit, including some very big ones, by the way, like PETA People for the Ethical Treatment of Animals, I’m sure you know, PETA, I’m sure your audience knows Pediasure. They raise over $60 million a year and other organizations like core, which raises around $76 million a year big humanitarian organizations. So if you aggregate all the all our clients up right now, and you looked at the total amount they raise every year, it’s a couple 100 million right now.

george grombacher 12:31
It’s interesting. You know, I wonder if it’s oftentimes probably harder to get great big organizations, because they already have very probably divine defined methods and systems and processes for development and doing that, or am I wrong?

Unknown Speaker 12:50
I think no, I think that’s partially true. I mean, it’s certainly true that they have defined systems, right. And they have sophisticated systems, you know, looking at a whole variety factors are how to maximize contributions. But I think, you know, I think at the end of the day, all nonprofits want to raise more money, you could go to the most successful nonprofit and American say, Would you like to raise, you know, 150%? More, they’re gonna, they’re gonna say yes. And so if we have a product that effectively can that does that, right. And you look at our data, that’s what our data shows. I mean, this is not my opinion, this is what the data shows. So if you have a product that effectively does that, I think you’re you’ll get anybody on the phone willing to listen. And then some of those nonprofits, the more innovative ones, the ones who are more front, front board thinking will say, Hey, this is a no brainer, it’s costing me basically, essentially, nothing is set up, you’re only getting charged a success fee. So that’s great. Nobody uses it, great. We’re not charged anything. And the data is compelling. The list of clients is compelling. You guys have a good background, why not? Why not give this a shot? Right. And when they give it a shot, they find that a that this really works very well. So I think, yeah, I think that’s true. It’s harder to sign up big organizations in any industry. But you’ll always get a few market leaders who are willing to give it a shot. And then if your product works, you can get more of the market that way.

george grombacher 14:02
Yeah, I appreciate it. So I’m confident you told me this, as you were, as we’re getting started, how long has this process been from when you got the idea to where we are today.

Unknown Speaker 14:15
So I got the idea seven years ago, a long, long time ago. In fact, I got the idea after talking to the Chief Operations Officer, the CEO of a firm, which is the largest one of the largest Buy now pay later companies in the world. It was inspired somewhat by her. And I kept this idea I hadn’t really didn’t talk about it for seven years, because I was running another company at the time. And then I decided, you know, to be in 2021 to pursue this idea. And so it did become 2120 21 We started a company, we raised about a $10 million venture capital round to build the product. And we raised a large credit lending facility because ultimately, this is a consumer lending product you need capital to lend in order to do this. So we raised a sizable very sizable credit lending facility with our bank partner Drake bank. Just a community bank in Minnesota. It took about two years to build the product, secure the lending licenses and the lending criteria and the lending rules build the credit box engineer the actual product design, it tested QA at a secure the lending facility and then deployed into the market. So we’ve been live now for about two and a half, three months. And it’s going extremely well. But yeah, I mean, it’s been a journey, you know, seven year conceived about seven years ago, started two years ago deployed it in the market three months ago.

george grombacher 15:28
lots of moving parts, Dominic.

Unknown Speaker 15:32
Yeah, absolutely.

george grombacher 15:34
Well, I think it’s super exciting. And such a such a no brainer, when you can help a nonprofit who, all these all these wonderful organizations are doing such important work and filling so many different needs. And if you can increase the amount of money coming in with one simple addition of this new tool. It really is. It’d be silly not to at least give it a try. So I love it. Yeah,

Unknown Speaker 16:02
I appreciate you saying that. That’s exactly our attitude. And I think we’ve seen it borne out in the market that when people are willing to try new and innovative ways to give, you know, there was there was a period I was I was taught to me with there was a period not that long ago, probably like 1015 years ago where no one had done online donations. Imagine me coming to you know, big nonprofits saying, Hey, you do 99% of your money through people writing checks, I want to create an online digital button for you to do that. I’m telling you a sizable portion of the nonprofits 15 years ago would have been like, no, that’s ridiculous. No one’s gonna give online, right? It’s like Henry Ford famously said, If I asked people, you know, what do they want? They would say they want a faster horse. Right. And the guy obviously was building cars. So I think you have a little bit of that. I think, you know, there are some nonprofits that are market leaders and others want to wait and see. But at the end of the day, you know, new fundraising methods are created all the time. This is a very interesting promising on the market dynamics and economics makes sense. So anyone who’s interested in trying learning or exploring or once give it a shot, we’d love to talk to them.

george grombacher 16:57
Love it. Well, Dominic, thank you so much for coming on. Where can people learn more about you? How can they engage with be generous?

Unknown Speaker 17:04
Well, thanks for having me. It’s been great to talk to you. Yeah, you can go to our website. It’s just the letter B and then the word generous. So just the letter B space generous, or one word be generous.com There’s no E though after B or you can look me up I’m I’m very active on LinkedIn. My name is Dominic columns with a que que LMS you can email he personally DLM ini C at be generous.com.

george grombacher 17:28
Excellent. If you enjoyed as much as I did, so Dominic your appreciation and share today’s show with a friend who also appreciates good ideas go to be generous.com Right? It is the.com Damn.

Unknown Speaker 17:40
It is a.com Yeah, just the letter D generous. Yep. The letter

george grombacher 17:43
B g n e r o u s.com. And for your favorite nonprofit that’s out there to turn them on to this as well. Because why not? Thanks again, Dominic.

Unknown Speaker 17:56
Thank you so much. Appreciate it.

george grombacher 17:58
And until next time, remember, do your part by doing your best

Transcribed by https://otter.ai

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