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How GoFundMe Is Redefining The Business Of Disaster Relief

Families in need used to look to nonprofits and government. Now they can raise their own funds in record time–assuming they have a click-able story.

How GoFundMe Is Redefining The Business Of Disaster Relief
[Illustration: Brian Stauffer]

Hewitt Bauguss Sr., 95, worked for most of his life as a ranch foreman in a tiny desert town in West Texas, population 837. His children settled 500 miles east, in greater Houston, and Bauguss, a World War II veteran, decided to join them in 2001. He moved into a trailer home in the suburb of Brazoria and established a routine: grocery shopping with his children and grandchildren, long talks with men of his generation at a local diner. Bauguss was living in the trailer when Hurricane Harvey began to pummel the Gulf Coast in August. As the floodwaters rose, he evacuated, not long before neighbors spotted alligators swimming outside his door.

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Kourtney Rodefeld, Bauguss’s granddaughter, visited the trailer two weeks later. “At first you drive up and it looks okay,” she recalls. “But when you open the door it just hits you: mold everywhere, and the carpet still wet weeks after. The smell would really knock you over.” Knowing her grandfather’s savings were limited, Rodefeld jumped into action. She wrote to trailer home manufacturers, asking for help. No one responded.

So she turned to the crowdfunding site GoFundMe. Naming the campaign “Housing for Hewitt Bauguss, WW2 Vet,” Rodefeld posted an image of her grandfather’s trailer, marooned in Harvey’s turbid waters, along with a portrait of him. Donations from across the country surpassed her $25,000 goal in a matter of days. A month after the flood, Bauguss was able to use the funds–minus the 5% fee that GoFundMe levied, along with 2.9% for processing–to put a down payment on a new trailer home. Rodefeld was willing to accept GoFundMe’s fees because, “they’re always up and running,” she says. “They’re trustworthy.”

Victims of events like Hurricane Harvey have traditionally relied on organizations such as the Red Cross, working in tandem with the government, to deliver aid in the form of food, water, and emergency shelter in the wake of disasters. And when it comes time to rebuild their lives, they have looked to insurance, FEMA, and other programs for assistance. The relief, in other words, is standardized, and often comes attached to a mountain of paperwork.

Today, disaster victims have an additional, more personalized option available to them: crowdfunding. In the past few months, the seven-year-old GoFundMe, which hosts campaigns for everything from college tuition to veterinary bills, has emerged as something of a leading disaster-relief organization–minus the bureaucracy. In the two months following Hurricane Harvey, GoFundMe and its sister site, CrowdRise, managed to funnel $65 million to victims and charities. (The Red Cross, by way of comparison, authorized $190 million in direct financial assistance over roughly the same time frame.) Millions more have been raised through hundreds of GoFundMe campaigns for people affected by Hurricane Maria, and the site is home to dozens of campaigns focused on rebuilding efforts in the Caribbean and Florida after Hurricane Irma tore through in early September.

GoFundMe donations can be vital in getting families back on their feet, with no strings attached. They’ve also been lucrative for GoFundMe: The company took in an estimated $3.5 million in fees from Harvey campaigns alone. This year, the company expects to easily top the roughly $100 million in revenue it generated in 2016. With each natural disaster or yawning gap in the social safety net, its revenue climbs higher–prompting competitors to try replicating that success, or undermine it.

But since reaching a point of ubiquity, GoFundMe has faced increasing criticism for its business model. The company recently announced that it’s dropping its mandatory 5% fee for donations to personal campaigns in favor of a tip-based model, similar to that of rival crowdfunding site YouCaring. (YouCaring’s 15% suggested tip is discretionary, but opt-in by default; GoFundMe now suggests a 5% tip.) At the same time, GoFundMe is continuing to invest in the side of its business dedicated to nonprofit donations, where the mandatory 5% fee still applies.

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GoFundMe CEO Rob Solomon has a response for anyone squeamish about his company’s for-profit model: The site does more than just process donations. “GoFundMe at its essence is a storytelling platform,” he says. “You don’t want to see the monolithic nonprofit” during crises; “you want to see the stories it tells with regard to how it’s helping people.”

Even more directly, GoFundMe’s 40 million donors want to see families telling their own stories, as Rodefeld opted to do–with the assistance and expertise of the company. After an organizer creates a campaign, GoFundMe provides advice on how to maximize contributions through, for example, sharing pictures and progress updates. (In late October, it launched an in-house film division, GoFundMe Studios, designed to further amplify campaigns with viral potential.) The company also manages a nimble customer-service operation and guarantees that all funds reach their intended cause and recipient, refunding donations up to $1,000 in cases of fraud or misrepresentation.

As GoFundMe’s influence increases, so too does Solomon’s interest in making campaigns go viral. “We’re focused on growing the platform in such a way that it helps campaign organizers raise the most money possible. That’s what they want: the highest yield. In order to do that you have to have a Silicon Valley mind-set: the best people, the best technology, the best process.” To build “category-defining companies in this day and age”–as Silicon Valley investors expect and GoFundMe intends to do–“you need the best,” he says. Together, they’re starting to change how society responds in times of crisis. But what does it mean to entrust care for the needy to platforms that reward the most compelling, shareable content?

As Hurricane Harvey’s floodwaters upended RVs and inundated houses throughout Houston, many residents used crowdfunding platforms to tell their stories. [Photo: Marcus Yam/Los Angeles Times/Getty Images]
During Harvey, rival crowdfunding site YouCaring became a Houston favorite, thanks to Texans defensive end J.J. Watt, who used the platform to raise more than $37 million for flood relief in just two weeks. “We want to grow and to become the largest, most loved, and most trusted crowdfunding site in the world,” says YouCaring CEO Dan Saper. When YouCaring launched in 2011, its founders were motivated by the belief that crowdfunding sites taking 5% or more “out of the pockets of the people who are in dire need” were “just wrong.”

If YouCaring is nipping at GoFundMe’s heels, Facebook is the giant casting a shadow. The social network introduced personal fundraising tools in March, a complement to the nonprofit fundraising features it rolled out in 2015. After a disaster like Harvey, Facebook allows users to easily donate to a selection of nonprofits by clicking a button at the top of their News Feeds. (It used to charge nonprofits around 5%, but dropped those fees in November.) In addition, Facebook has developed a Community Help API for organizing local volunteers, like blood donors, and established a $50 million matching fund dedicated to natural disasters.

CEO Mark Zuckerberg underscored the company’s interest in digital philanthropy with a recent trip to the Disaster Research Center at the University of Delaware. “Social capital is really important in disaster response and recovery,” says Tricia Wachtendorf, director of the center, who was among the experts presenting to Zuckerberg. “Connections ended up saving lives.”

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As GoFundMe and others promote the idea of direct aid, traditional nonprofits are in an awkward position. When it comes to immediate disaster relief, they argue that they are often better positioned to use dollars effectively than individuals might be. For example, nonprofits can use pallet systems to organize food supplies, significantly lowering distribution costs. They are also quick to note that donations made via their own websites involve no added fees (though an organization such as the Red Cross does allocate money to administration and fundraising expenses). But nonprofits aren’t complaining when funds arrive via GoFundMe, Facebook, or other means, after good Samaritans set up campaigns on their behalf. “While I wish you might be using a different [site], on the flip side, it’s money that we would not otherwise have,” says Heather Icenogle, director of annual giving and events for the Houston Food Bank. Since Hurricane Harvey, her organization has received $6.5 million via its own website, $1.6 million via Facebook, and $200,000 via GoFundMe. The donations made it possible for the food bank to distribute more than 12 million pounds of food in the three weeks following the storm.

Private organizations have embraced GoFundMe as well. Diane Probst, president and CEO of Rockport-Fulton Chamber of Commerce, launched a campaign that is nearing its $500,000 goal. “The only drawback is the fees. But somebody has got to do the admin,” she says. In Rockport, located 200 miles southwest of Houston, she plans to use the GoFundMe campaign to rebuild homes, with the blessing of Rockport’s elected officials. “If you don’t have the housing, you don’t have the workforce for the community.”

Most GoFundMe campaigns go toward specific needs. But in Rockport, Probst is thinking in broader terms–addressing infrastructure, and even hiring caseworkers to review aid applications. In another era the city government might have borrowed from a community bank to rebuild local homes, and paid interest fees on the debt. Today, there is a privately run chamber of commerce and a page on GoFundMe. “It just really pulls the heartstrings of people,” Probst says. “Our world is not so bad after all.”

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About the author

Staff writer Ainsley (O'Connell) Harris covers the business of technology with a focus on financial services and education. Follow her on Twitter at @ainsleyoc.

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