This week I turned my consideration to Donor Suggested funds (or DAFs) and shared my espresso break with Adam Nash, Co-Founder and CEO of Daffy.
Daffy is a platform facilitating charitable giving by integrating it into shoppers’ common budgets. Customers set a yearly goal and select the regularity of the funds right into a fund – placing their charitable donations to work and unlocking tax-deductible advantages. One-off funds will also be made, opening out the perform flexibly.
This method has allowed their customers to save lots of an estimated $2 million on taxes final yr, in addition to growing charitable donations to US causes.
Isabelle Castro – Hello, Adam. How are you?
Adam Nash – I’m nice. Nice to be right here.
Isabelle – Good to fulfill you. So what will get you up within the morning?
Adam – Oh, , with, with 4 children and two canine, there’s all the time one thing that will get me up within the morning. However, in all seriousness, I all the time begin each morning with a household routine, drop the youngsters off for college, get every part prepared. It’s set, proper? It truly facilities my day. It offers you one thing that you need to do within the morning. It’s private. After which if you’re accomplished, you form of seize the espresso and get going.
Isabelle – Yeah, good. I wish to have a routine within the morning too. What introduced you to founding Daffy. What was the journey?
Adam – Oh, Daffy is a straightforward story however distinctive as a result of it began in the course of the pandemic. I feel that in the course of the pandemic, for lots of us, we noticed how many individuals have been struggling. And we have been doing a number of issues to attempt to take motion and assist different individuals in our group. My co founder, Alejandro, and I have been enthusiastic about new purposes and issues that we might construct collectively. And we have been very impressed that during the last decade and fintech that firms like Acorns, and Wealthfront had accomplished a lot to assist individuals save and make investments day-after-day, I imply, Acorns helps thousands and thousands of individuals lower your expenses that they in any other case wouldn’t have saved. And I assumed, what if we might do for giving what we had accomplished for saving and investing. And , the analysis does present that if individuals set a purpose for his or her giving, and commit, and automate it, they offer, on common, 32% extra, and that’s an enormous quantity. Meaning Individuals may very well be giving over a trillion {dollars} extra over the following 10 years. And so we began the corporate. It was in stealth. Daffy launched in September 2021. And we raised our Sequence A of funding in February of 2022.
Isabelle – Good, good. Yeah. Once I examine you guys, it looks as if you’re doing one thing actually, actually distinctive. Why did you select to offer a donor-advised fund over different kinds of charitable giving frameworks?
Adam – Nicely, , it would appear to be a frivolous element. Nevertheless it seems that if you’re dealing with individuals’s cash, you need to do precisely the suitable issues from a regulatory and authorized standpoint, and the donor-advised fund has been round for many years. It’s a really well-known kind of account. It has tax benefits and is principally the suitable monetary again finish to your giving. The issue of the donor-advised fund fairly frankly, is that most individuals have by no means heard of it. If you happen to’re not rich and also you don’t have a monetary advisor or skilled accountant. Nobody has in all probability informed you that this sort of account that exists however it’s principally like a 401 Okay for charity, , identical to you place cash apart in a 401 ok or IRA to save lots of for retirement. A donor-advised fund is an account the place you’ll be able to put cash apart for charity, get the charitable deduction off your tax. taxes, after which have the cash invested tax-free in order that any time you are feeling the urge to provide, you are able to do it with a number of faucets in your cellphone. And that’s actually the promise that we made with Daffy was to construct a easy app and repair to make it simpler for individuals to provide.
Isabelle – I’m going to return again to the form of tax deductible side. However to begin with, we’re in a financial downturn in the meanwhile. There’s much less cash to go round. How does this have an effect on charitable giving by way of DAFs?
Adam – Nicely, I feel that, , that is truly one of many occasions the place the donor-advised fund exhibits its its advantages. I imply, the reality is, when occasions are robust, counterintuitively, individuals truly normally have extra of an inclination to get proper if you hear tales about individuals struggling, not with the ability to put meals on the desk. Whenever you see points going round on the earth, individuals do have this urge to provide. Now, after all, sadly, throughout difficult occasions, not everybody has the cash to provide. And I feel probably the greatest features of the donor-advised fund is that once I talked to individuals forward of time once we have been constructing Daffy, I discovered lots about how individuals take into consideration giving. And one of many issues that I discovered is that folks care fairly a bit in regards to the causes and organizations they help. And so one of many advantages of getting a donor-advised fund is that you just put cash apart when occasions are good. So that you’ve got cash to provide this assembly is being recorded nearly as good. And so essentially, I feel that what we’ve seen a Daffy, particularly within the final yr, is that because the financial system has struggled, because the markets have come down, individuals who have cash of their accounts are literally giving greater than ever, proper, we see donations go up month over month, quarter over quarter. And that’s as a result of individuals do need to give, however in case you haven’t put cash apart for it, then it all the time turns into this resolution. Nicely is now the suitable time? is now the suitable time? And that leaves individuals feeling, frankly, slightly empty in regards to the expertise. They need to help organizations and so they need to help them extra after they suppose it issues.
Isabelle – Yeah. Positively. Have an ongoing relationship with them. Proper?
Adam – That’s proper. And that’s truly one of many nice issues. I imply, I feel in case you speak to most nonprofit organizations, they’ll inform you what they actually worth are the individuals who help the group, yr in and yr out, proper, , they’d relatively have a recurring donation, somebody who volunteers yearly than simply somebody who interacts as soon as as a result of a marketing campaign hits them. The issue is, we’re all busy, proper? Like now we have life, proper? Like, when you’ve got children, you will have household have a job, you will have a social life. I imply, once I talked to the individuals, once I was doing the analysis that went into the product that we constructed, it actually grew to become clear to me that most individuals actually do care about giving. It’s simply that life will get in the way in which. After which if you ask individuals, How a lot did they really give final yr, there’s this pause that occurs, individuals don’t be ok with the truth that they didn’t get round to it, or they didn’t prioritize it. However this is among the locations the place an important service like Daffy can assist. That is the place software program can assist automate issues, proper? , how many people would save for retirement? If it didn’t simply come out of our paycheck? , each month, , most of us wouldn’t get round to it. And so there’s no cause that giving needs to be totally different. , we ask individuals to think twice about what their purpose is for giving. Who do they need to give to? After which Daffy makes it as straightforward as doable simply to automate that.
Isabelle – Do you suppose that is the form of fundamental approach that fintech has been in a position to create a special expertise?
Adam – Nicely, yeah, I feel that fintech has accomplished lots within the final decade. And I’ve written lots about this. Clearly, I’m the founder, I’m an angel investor. And I’ve run a few of these firms, I’ve been on the board of others, the most important factor that fintech has accomplished is de facto stimulated innovation, this pondering of hey, what can we do with know-how to make individuals’s monetary lives higher or simpler. And sadly, many of the incumbents are massive sufficient, that they don’t have a number of time to experiment with new applied sciences. And admittedly, there’s not a number of impetus for them to take action. Proper. They have already got so many shoppers. And so I feel fintech has actually pushed a number of innovation, which forces the incumbents to then match it and replica you. You’ve in all probability seen that a number of the banking providers from the incumbents have gotten higher within the final 10 years. Not an accident, proper? That’s due to the competitors. That’s due to this push from the fintech group. I additionally suppose fintech has accomplished an important job of pushing the boundaries of taking a look at populations or prospects that is probably not prioritized by the present trade. Proper. , monetary recommendation is a superb instance. Proper? The typical monetary advisor is older, proper round 50. Their common consumer is older. And so I feel we noticed within the final decade a number of firms focus on can we assist youthful individuals with their monetary lives and issues regardless that they don’t have as a lot cash? I feel the Donor Suggested funders like that I feel giving is like that in case you speak to most individuals within the trade, present donor-advised funds, they cater to older prospects who’ve much more cash. You’re speaking about individuals, not even simply within the 1%, however the level 1%. And so investing in new platforms that assist everybody give hasn’t been a precedence. I imply, I have a look at it this fashion, within the US, there’s about 60 to 70 million American households that give to charity yearly, that what number of of them have donor-advised fund accounts? Perhaps one million little over is what the newest analysis exhibits? To me, that appears like over 60 million individuals who would profit from having a greater system for giving. And that’s one of many causes we dove in with Daffy.
Isabelle – Do you will have a minimal quantity that they’ve to provide each month or yearly? Yeah, what’s that?
Adam – , it’s truly very fascinating. We actually do concentrate on this concept of getting a given purpose. So as an alternative of specializing in the mechanics of like, how a lot cash persons are placing apart, or how a lot they donate in a given month, or in a given quarter, we truly ask them the easy query, which is, how a lot do you need to give this yr? Proper? , and other people have totally different opinions about that. All various things. Some individuals take into consideration a share of their wage, some individuals take into consideration an sum of money. Some individuals simply take into consideration the precise organizations they help, perhaps their children’ college, or perhaps their alma mater, or their church or their synagogue. However we ask them to be intentional about their giving. And the analysis exhibits that when you decide a purpose, you give extra. And this actually was my private expertise, proper? I didn’t know what a donor-advised fund was. I discovered about it again in 2011. The corporate I labored for on the time, the place I had been there early, went public. And as you’ll be able to think about, there have been advisors and accountants round making an attempt to assist everybody and get new enterprise. And so I discovered about this donor-advised fund by my accountant requested me this quite simple query, which is, effectively take into consideration how a lot cash you give to charity yearly, after which multiply it by 10. And you may put that apart now, proper as a tax technique.
However I assumed it was a really profound query as a result of I had by no means requested myself that I funds every part. By the way in which, I’m so into this stuff. Like I’m considered one of these monetary optimizers. I, , my file goes again to love, 1994. Like, it goes again endlessly. However I had by no means actually considered having a purpose. I had objectives for retirement, I had objectives for my children training, however what was my purpose for giving. And so I picked a quantity, which occurred to be about 10% of my wage on the time, put it apart, and a donor-advised fund. And this wonderful factor occurred is I can see it in my monetary data. I gave extra to charity yearly since I began the donor-advised fund than earlier than. And I feel it’s as a result of it’s simplified the issue for me as soon as I had a purpose, and the cash was put apart, I might actually concentrate on what mattered, which was Who did I need to give that cash to? Which organizations, which causes?
Isabelle – Okay, as a result of it was already form of in your budgeting and in your thoughts that you just have been going to provide that?
Adam – Yeah, that’s proper. And , it’s humorous, once I, once I talked to individuals about giving, it is extremely clear that giving isn’t actually one downside. It’s two. There’s this query of how a lot cash I can afford to provide. And the second query of Who do I give the cash to, and since it’s, these are arduous issues, too arduous issues, , it’s not simply twice as arduous. It’s virtually like, it’s virtually just like the sq. of the issue. You individuals get flustered with it. , it’s a, it’s too complicated. And I feel the wonderful thing about a system like Daffy, the wonderful thing about having a donor-advised fund, is it separates these two issues, proper? Each month, yearly, you resolve how a lot you need to put apart for giving. After which, if you do need to give, you don’t have to fret in regards to the cash piece. That pockets is already there. I imply, a number of our members use Daffy principally as a pockets put aside for charity. And so , if you take your cellphone out of your purse, otherwise you run into one thing, somebody’s elevating cash for a charity that you just imagine in, you don’t have to consider whether or not you will have the cash or not. It’s proper there. That’s what it’s for. That’s its objective. And it feels good to have the ability to give if you need to give and never fear about, effectively, do I’ve that cash in my checking account? What payments do I’ve to pay this month? , that kind of factor that basically makes it arduous to succeed in in and provides if you need to give?
Isabelle – Yeah, no? I positively have that problem. Perhaps very additionally to not you guys after this. There may be the tax-deductible side of DAFs. Do you suppose that is an influencing think about why individuals flip to DAFs? And in that case, how a lot so?
Adam – Nicely, pay attention, that charitable deduction is among the most beneficial deductions within the tax code, and it’s there for an excellent cause. And sadly, lots of people, in case you don’t have an expert accountant, don’t take full benefit of it. However I I’ve been speaking to a number of totally different individuals all walks of life. It’s wonderful how everybody cares in regards to the receipt for his or her donation, proper? And why do they care in regards to the receipt,, they care about it for tax time.
What we’ve seen although, is that that isn’t the first motivator. So we, we do see that folks need a greater system for giving, like they preferred the thought of getting all these receipts in a single place. It’s very humorous, like, older individuals may need a folder on their desk the place they print out receipts, and so they preserve it there. I’ve talked to dozens of individuals about this humorous, in case you’re youthful, you in all probability have a Gmail search that you just do yearly to seek out your donation receipts. However we discover that folks utilizing information, they really simply actually respect the truth that every part’s in a single place that they’ll get to it after they want it. Now, in case you’re wealthier, or in case you’ve had a great yr, you run into this different truth, which is, for many of us, earnings isn’t a steady factor anymore. Now we have good years, and now we have unhealthy years or no less than more difficult years. And the reality is the way in which the tax code is written, your tax price is increased in these good years, and also you don’t get the cash again within the tougher years. And so this concept of placing cash apart within the good years the place your tax price is increased, getting that tax deduction, after which having the cash out there within the years which are more difficult, appears to even be highly regarded. So I don’t need to say just like the taxes do matter. It simply isn’t the first motivation we’re seeing for why individuals give.
Isabelle – Okay, effectively, that’s fairly a pleasant conclusion. However, I imply, you’re fairly distinctive. I feel I learn that you just’re one of many solely people who find themselves specializing in DAFs. Why haven’t extra fintechs turned to DAFs?
Adam – Nicely, yeah, that’s an important query. Truly, , as once I was an exec. Govt in Residence at Greylock Companions. Like a number of entrepreneurs, I had this checklist of all these concepts for startups. I feel I had 82 concepts on this checklist. Sadly, we’re not all good, by the way in which. However if you wish to see a while, I can present you however one of many lists on there was what are the good monetary merchandise that haven’t been reinvented but, and the donor-advised fund was on there. However I feel it’s actually easy. I feel the rationale we haven’t seen a number of fintechs on this class is that, truly, not lots of people learn about donor-advised funds, like I stated, like I used to be lucky sufficient in my profession to have sufficient success the place I bumped into the donor-advised fund and ask the query, why doesn’t everybody have one, I actually imagine that everybody who offers to charity recurrently ought to have a donor advisor, whether or not it’s with Daffy or someplace else, as a result of it’s like retirement, it’s having an account put aside for that purpose. However I feel the opposite cause is, I feel there’s a misperception across the donor-advised fund, based mostly on the present trade and the incumbents, that it’s solely a product for the rich. And in order that simply isn’t a market that a number of fintechs have gone after. So this concept of claiming no, we will reinvent this product, we will rethink, what would it not be like for somebody who offers a number of $100 a yr to charity yearly? What product would you construct for them? What product would you construct for a mother or father who’s making an attempt to show their kids? The significance of giving? Proper now we have a household plan, and many others? What can be the product you construct for somebody who’s extra profitable and will get paid with inventory, proper, like a number of workers at tech firms and doesn’t know that it’s way more useful to donate inventory and even crypto to charity than to donate money and so that every one that power went into Daffy. However I feel actually, a number of fintech founders simply don’t know in regards to the product, or noticed it as simply one thing that rich individuals did after they’re older relatively than one thing that may very well be for everybody.
Isabelle – Okay, that, effectively, you’ve acquired your area of interest, due to it now. In order that’s good for you.
Adam – Yeah, it’s, it’s a enormous market, I’ll say, , charitable, giving us virtually half a trillion {dollars} within the US yearly. That’s greater than 2% of GDP. I imply, all of agriculture is simply about 1% of GDP. I imply, that is an amazingly enormous sector. It’s an necessary downside for individuals. However due to the way in which the present trade works, I feel that too many individuals simply it’s form of out of sight out of thoughts. They only don’t give it some thought. However we actually suppose that we will construct a group of thousands and thousands of people that put cash apart each week or each month or yearly for the causes and charities that they care about.
Isabelle – I feel that could be a nice trigger to go after. The place do you suppose the donor-advised fund sector goes within the subsequent 5 years, and the place do you hope it can find yourself?
Adam – Nicely, I feel that, and never simply due to firms like ours, I do suppose an increasing number of persons are studying about donor-advised funds. A few of it has been sensationalized. A few of it’s as a result of , there’s this ongoing fascination in all probability an excessive amount of with what does He inherited to do with their cash and so if you see rich individuals do issues like put their cash apart in a donor-advised fund, lots of people say what’s that I’ve by no means heard of that earlier than. However I additionally suppose that we’ve gone by way of a little bit of a cultural shift. I do suppose the pandemic has modified how individuals take into consideration philanthropy, who how they give thought to giving, I feel there’s much more concentrate on native organizations than there have been even a number of years in the past, , once we rolled out Daffy, enjoyable story, you all the time roll out a product, proper. And it’s by no means fairly proper the primary time as a result of you need to be taught out of your prospects. And what we discovered as we rolled out the product actually optimized to provide to the massive nationwide names which are well-known that about, however there was a lot demand to find native charities, truly, we shortly rolled out a brand new characteristic, inside a number of weeks, they made it straightforward to see on a map like all of the charities in your native space, and we color code them by their trigger. So you will discover that meals financial institution that’s close to you, you will discover that, that charity that’s centered on local weather or is concentrated on social justice, or no matter name it speaks to you. However you are able to do it visibly in your cellphone, like as a map. However I feel that we’re going to see over the following 5 years, donor-advised funds broaden out. And I feel we’re additionally going to see a number of the giving coming from donor-advised funds, a number of these smaller donations that don’t get as a lot press, going to area people organizations, native charities and causes the place individuals actually really feel like they’re working collectively to make a distinction.
Isabelle – That’s nice. So what’s your favourite quote?
Adam – It is a robust one. , I train this class at Stanford on private finance, I’ve accomplished it for six years. And it’s this course that I actually get pleasure from. As a result of it’s a category I want existed once I was in class, proper, so many individuals go to high school, and nobody teaches them in regards to the fundamentals of non-public finance, or how to consider their cash, regardless that it’s so necessary in your grownup life. However one of many quotes I take advantage of is from Albert Einstein, I name it Einstein’s razor, the place he stated every part needs to be made so simple as doable, however not easier. And I feel it’s a great reminder, , in life that , the purpose is definitely simplicity is elegant simplicity is attending to the main focus of issues, simplicity is a superb purpose. However you’ll be able to go too far, proper? Some issues do have complexity. There are actual issues that you need to doubt for. And so, I like that even Albert Einstein, , good physicist, etcetera, Nobel Prize, after all, understood that as good as you’re, you may make issues solely so easy earlier than you’re taking away one thing of the answer that makes it highly effective.
Isabelle – That’s actually, actually poignant. I like that. So that you’ve acquired your curveball query. Now. It’s fairly a pleasant one. If you happen to had six months with no obligations or monetary constraints, what would you do with the time?
Adam – Oh, effectively, I, it’s a curveball, however truly not as a result of I’ve truly been on this scenario. Because it seems, it’s a part of life and tech, and as a founder and entrepreneur, your profession doesn’t simply go in form of a gentle state, proper? You go from firm to firm, take these breaks, take into consideration. However sadly, my reply is probably not that thrilling to some individuals. , the reality is, I’ve all the time been an enormous believer in form of constructing this wholesome life with the individuals round you, I spend a number of time with the individuals in my life that matter. , I’ve kids, they’re younger, they’re solely younger as soon as. I by no means remorse having extra time to spend extra time with them, to go to the ballgames, to learn, to suppose to calm down to centre with the individuals you care about. , I learn this piece years in the past about enthusiastic about the frequency of issues in your life. And I take into consideration these issues, proper? , having extra break day signifies that you are able to do the issues that matter to you extra usually, proper? You, you see your mother and father, , a couple of times a yr, that’s simply a couple of times a yr, , when you’ve got the chance to see them extra usually or play, like I stated, do actions together with your kids extra usually or see pals that you just haven’t seen in years extra usually. When I’ve break day, I like to consider day-after-day doing one or two issues that basically will re-energize you that can make you are feeling like that was a great day, otherwise you did one thing that day. And so I’d wish to put aside one or two of these issues, however a number of them are people-oriented.
Isabelle – That’s actually, actually pretty. That’s very nice reply to that query. So how can individuals come up with you?
Adam – Oh, effectively, for higher for worse. I’ve been on the internet lengthy sufficient that it’s not arduous to seek out me just about all over the place. And my my, my alternative of handles just isn’t very artistic. So I’m just about out of Nash on each service. So if you wish to discover me on Twitter, clearly I used to be a VP of product at LinkedIn by way of the IPO so you’ll be able to all the time ping me on LinkedIn. These are in all probability the 2 most typical channels , however anyway, which is less complicated for individuals to succeed in me they need to be happy to succeed in me.
Isabelle – Excellent. Excellent. Nicely, It sounds fairly easy in order that’s good all proper effectively thanks for approaching I’ve actually loved our chat and yeah have a very nice remainder of your day.
Adam – No after all thanks I actually respect being right here it was nice to talk.
Isabelle – As all the time, you’ll be able to chat with me on my LinkedIn or Twitter at @IZYcastrowrites. However to entry nice every day content material, take a look at Fintech Nexus on LinkedIn, Twitter, Fb, or Instagram. You may also join our every day publication, bringing information straight to your inbox.
For extra fintech podcast enjoyable, take a look at the web site, the place you will discover extra fascinating conversations hosted by Peter Renton and Todd Anderson.
That’s it from me. Till subsequent time, get pleasure from your downtime.