When Erin DeRuggiero saw a national news story about Oklahoma tornado victim, Barbara Garcia, she was so moved she set out to help the stranger rebuild her home. From 1,500 miles away in Minneapolis, DeRuggiero launched a campaign for Garcia on the personal crowdfunding site GoFundMe.
"Barbara could have been my mother, my grandmother, my neighbor or my friend," DeRuggiero wrote about her goal to raise $60,000 to help the uninsured Oklahoman. To date, she's raised $63,770.
San Diego-based GoFundMe has no shortage of heart-tugging stories of people raising money for everything from cancer treatment and college tuition to international adoptions. Since its launch in 2010, in fact, it's attracted 1.3 million donors who've raised more than $83 million for various causes. In the month of May alone, donors raised $10.5 million.
Yet, its own mission wasn't initially so clear. In fact, it took a few years for cofounders Brad Damphousse and Andrew Ballester to find their niche and figure out how to make it work.
"It all started in 2008 when I was looking for a way to save up for a vacation," says Damphousse, who was consulting with startups on product management and user experience at the time. When setting up an online banking account for his vacation fund proved more troublesome than he'd expected, he teamed up with Ballester to build their own saving site, Coin Piggy.
Their concept was to make it easy for people to set aside money using debit-card transactions while also matching them with discounted items related to their savings goal. The problem, they quickly realized, was that debit-card fees would effectively penalize users for saving. Coin Piggy never saw the light of day.
Related: Pivot or Persevere? The Key to Startup Success
It wasn't all for naught. One of the site's tools "Request a Savings Gift" seemed to have potential. That same year, they launched CreateaFund to help people launch personal fundraising campaigns, promote their causes through social media and collect contributions. "Much like Evite, you could invite the people in your life to participate in saving for your goal," says Damphousse.
The Lesson Learned
GoFundMe's evolution is a common one, says Bryan Pearce, a partner with Ernst & Young in Boston. "People joke that the one thing certain about a business plan is it will never end up the way you have it," he says.
Budding companies often go through iterations because of the "passage of time," he says. "Even if you think of staying with your idea, the world around you may be changing." The more entrepreneurs learn about market needs, the better they can hone. "Entrepreneurs often take up an idea because of a personal itch that needs to be scratched," he says. Sometimes, they discover bigger itches.
But at some point, entrepreneurs need to focus. "The entrepreneurs who are successful take a survey of the landscape and then choose the best path," he says.
The idea had legs, but was logistically challenging. At the time, services like PayPal couldn't divide payments between two parties, making it impossible to charge a small percentage of the fundraising. In order to make money, they decided, they'd need to target small and medium-sized charities and charge a subscription fee. "This is where we lost our way," says Damphousse, explaining that getting charities on board was no easy task.
They continued to offer the service to individuals for free, and "as we're struggling to sign on paying clients the people signing up for free packages was beginning to grow," he says. "The good news is we were finally beginning to find our product market fit."
In 2010, they went back to their roots -- helping individuals raise funds -- and rebranded their idea as GoFundMe, focusing completely on individual causes. A few months later, PayPal improved its adaptive payment service, making it possible to split a single transaction between two parties. Though the process was still cumbersome, it allowed the duo to charge a 5% fee. "If users didn't like our model or weren't successful they didn't have to pay a thing," says Damphousse.
Related: Vision Versus Hallucination -- Founders and Pivots
While GoFundMe grew slowly, Damphousse and Ballester were concerned that without a more eloquent payment system the site wouldn't get enough bandwidth. They turned their attention to developing a different idea, this one for helping individuals promote their services.
Six months into working on their newest idea, they realized that neither company would be successful if they didn't have focus. It wasn't an easy decision, "but we let the data do the talking," says Damphousse. With little attention or marketing, GoFundMe was steadily attracting users.
They had the idea. They had the business model. Now they just needed to commit. "We looked at the cards we were dealt and decided if we could really focus we would be successful," he says.
These days the company employs a total of 18 people, including the two founders, in its San Diego offices and is still growing by leaps and bounds. Payment volume grew 500% in 2012 and so far in 2013 business has tripled.