Flourish Turns Pocket Change into Global ChangeBy Blaire Meckler
Flourish is using roundup technology to make charitable donation revenues more predictable for nonprofit organizations. I sat down with co-founder Braden Fineberg, University of Pennsylvania, ’19, to hear all about how he and co-founder Zach Morrow, Baylor University, ’18, came up with the idea for Flourish and their plans to scale up a three-sided SaaS platform.
Small Change for Big Change
Flourish co-founder Zach Morrow grew up in the nonprofit world and continuously came up against a major challenge in the space: a lack of predictability in donation revenues. Studies show that somewhere between 60 and 90% of all first-time donors cease to contribute to the same organization the following year. That amount of churn can pose a real challenge to organizations simply trying to hire staff and support projects to propel their missions forward.
“Of the 1.5 million nonprofits in the country, more than half of them don’t have endowments…There’s a huge long tail that makes up roughly 85% of the market of organizations that really struggle with cash flows to the point where they cannot hire unless they go out and find a donor willing to cover the salary for the year.”
-Braden Fineberg, Co-Founder, Flourish
Co-founders, Zach Morrow and Braden Fineberg created Flourish to fix this problem head on. Flourish uses roundup technology to allow users to donate to any nonprofit organization in the country of their choosing in small dollar increments. You simply link up your debit or credit card to the app, choose the organization(s) you’d like to support, and the app does the rest. So, when you spend $2.50 at a convenience store, the app will automatically round up to $3.00 and the difference of $0.50 will be donated to your chosen nonprofit.
Flourish gives people an easy and relatively passive way to give back to causes they care about for an amount that won’t make a big dent in their bank accounts. Not only can they choose causes that they want to support, but they can even choose the particular project at that organization that they want to support. This kind of transparency is attractive to donors who want to know precisely the impact that their contribution is making. And users receive text message-based updates with photos of actual projects they have helped to get off the ground. Nonprofits can either accept donations passively on Flourish or, for $50 per month, they can gain access to information on their donors and receive predictive revenue models based on donations received. Ultimately, Flourish hopes to enable their nonprofit clients to take these predictive models to banks to raise debt at lower interest rates. In addition to roundup donations, Flourish also allows users to make one-time donations, and they are currently beta testing a new feature that allows users to set up custom rules tying donations to personal indulgences, e.g. ‘when I spend over $50 on dinner, please donate $1 to my charity.’
Charitable Giving is Large, but Unpredictable
Charitable giving in the U.S. grew to a record high of $410 billion in 2017, and of that $287 billion, or 70% of total donations, came from individuals, rather than foundations or corporations. Online giving, in particular, is growing fast, up 12% in 2017, compared to 4% growth in overall giving. And while millennials made up only 11% of total donations in 2017, 84% of millennials give to charitable organizations, as compared to 72% of baby boomers and 59% of gen Xers. So, while millennials may not be able to give as much per capita today, the data suggests that as they earn more, they are likely to make up a more significant percentage of donations over time.
There are many companies helping nonprofits to raise money online, and even a handful who are also using roundup technology to do it. Classy is a notable giant in the space, with the backing of Salesforce, offering software to handle all of a nonprofit’s fundraising needs in one place, from crowdfunding pages, to peer-to-peer campaigns, to managing events. RoundUp App, Coin Up, and Donate Your Change are also using roundup technology to help build recurring donor revenue streams for nonprofits, but they don’t provide the deeper level of predictive data analytics offered by Flourish. Ride-sharing platform, Lyft, even offers a “Round Up & Donate” feature to all of its riders. Fortunately, there are a lot of players in the service of helping nonprofits to secure more steady revenue streams. The barriers to entry are quite low, and there is little stopping large corporate sponsors or banks with far greater resources and access to hoards of customers from offering similar services themselves. Clearly what distinguishes Flourish from the rest is the robust level of data and insights they deliver to the nonprofits that sign up with them. Their revenue model of a flat $50 per month easily covers the donations of roughly two users per month and does not grow with the donation size the way other models do. Plus, if Flourish’s data can truly grant these organizations access to cheaper capital from banks, that would be a huge value add in itself.
Nonprofits, Meet Data Science
Zach Morrow had spent over 10 years in the nonprofit space before graduating from Baylor in 2018. All too familiar with the constant struggle of being unable to predict future donation revenue streams, he felt there had to be a way to apply technology to fix it. In December 2017, through a mutual friend, he linked up with Braden Fineberg, who was pursuing degrees in engineering & data science at the University of Pennsylvania. Together, they realized that by breaking up individual donations into micro-donations, they could increase the sample size of the revenue data and use that to create predictive revenue models. Fineberg recalls throwing together a prototype that would soon become the Flourish app over the course of a weekend.
“I built it over a weekend. It was not working, it wasn’t even functional. I sent it to Zach, he put it on his phone and came back to me a month later and said, ‘I just talked to 50 organizations. They want it!'”
-Braden Fineberg, Co-Founder, Flourish
This instant market validation propelled them forward, and they spent the next several months building out the app, adding logos for each organization on the platform and filling out the roundup technology to link to individuals’ debit cards. By the spring of 2018, they had closed their first round of funding from an individual angel investor based in Austin, TX allowing them to continue to focus their efforts full time on Flourish. Morrow, having just graduated from college, turned down an offer in private equity, and they hired their first full-time employee to focus on sales to nonprofit organizations. They were able to contract out additional engineers and designers to help build out the platform and by summer, they launched in private beta mode with two nonprofit organizations on board. By October 2018, Flourish had officially launched to the public, allowing users to donate to any of the 1.5+ million nonprofit organizations in the country.
One year into the operation, they are signing up new nonprofits to the platform at a rate of roughly 50% growth each month. The company just raised money from Rough Draft Ventures and Dorm Room Fund and are currently out raising their first equity seed round for up to $1 million from a mix of angel and venture capital investors. They hope to close this round in the spring and use the funds raised to double their core team to eight employees and continue to scale up the platform.
A Look to the Future
Flourish’s main focus in the near term will be to scale up the business on either side of the platform to allow them to build more robust data sets to generate predictive cash flow models for their nonprofit clients. They hope to eventually gain access to all of the revenue streams of their nonprofits (not just those donated via Flourish) so that they can present a more complete financial picture to their clients and, ultimately, their banks.
“The goal is to really sit between consumers, nonprofits and corporations and service all three in a way that allows the finances to make sense.”
-Braden Fineberg, Co-Founder, Flourish
Flourish sees a big opportunity for corporate sponsors to come in and co-brand causes on the platform, offer targeted rewards to donors or even match donations 1:1. This would earn corporations some major goodwill from consumers, while generating another steady revenue stream for Flourish’s nonprofit clients. I am eager to follow their progress towards their goals and watch as Flourish turns small change into big change.