To probe the legal intricacies revolving around the JOBS Act and how these new laws might impact the crowdfunding scene in the months leading to and right after the much-anticipated full implementation of crowdfunding for equity, David Drake spoke with Arnon Shafir, CEO and founder of give2gether.
give2gether is quite a revolutionary crowdfunding site because it combines aspects of game theory with crowdfunding campaigns. The founders say that by doing this, they raise more money and have higher donor participation rates. In this interview, I explore how their model works.
Drake: Arnon, your firm has grown to be the fastest growing donation-based firm in Israel and I have been very impressed with both your growth and your work. You have doubled in revenue every few months and you are using gaming and economic game theory to optimize your crowdfunding technology.
Can you tell us how the firm started?
Shafir: It all started four years years ago with an idea that was born in the minds of two senior US Economic professors, one of whom I've known for more than 20 years. In our work, the vision we had was inspiring: we wanted to “democratize philanthropy” by making fundraising simple and effective. This was back when crowdfunding just started being mentioned and social fundraising was in its infancy. You had to explain to people why there was “wisdom in the crowds”. I thought it would be great if we could harness the results of the research we had done and the insights we had discovered for doing good. Later that year we had another brilliant member join the team - today an HBS PHD - and the four of us became the co founders behind “give2gether.com”.
Drake: What made you focus on economic game theory and later on gaming - you have both experts on your board?
Shafir: We don’t just rely on the good will of the "crowd" to donate. Our research gives us unique perspective into what makes people people give/invest. This knowledge is based on 10 + years of research in game theory and behavioral economics by our co-founders.
Some of these insights include counter-intuitive ideas like limiting how much people can donate to a campaign, minimum and maximum gift levels or what should be displayed at the top of the leaderboard (largest gifts, highest impact, broadest social reach)
It may sound strange, but limiting gift size leads to higher overall participation and doubles the average donation. For example, if Charity X needs $10,000 and sets a donation limit of $25, it's much more likely to get many people donating at the lower rate to help push the charity faster to its goal. This strategy often get charities to their goals quicker than holding out for larger sums.
Gamification of crowdfunding involves including fun - mainly for younger social fundraisers, brought up on “angry birds” and “temple run”. We thought, why wouldn’t we incorporate these same motivational elements to inspire the young and the generous?
Drake: Why do you have the highest conversion rate in the world?
Shafir: Well, that’s the secret sauce as they say... We spent the last 4 years optimizing 10,000 hours of lab research out of experimental labs at UC Berkeley and analyzed hundreds of live social fundraising campaigns. To get significantly higher percentages of campaign visitors to donate, we use both intuitive and counter-intuitive approaches to maximize participation. For example, if potential donors see that a campaign isn’t likely to reach its very high fundraising goal, they might not give at all. But if, let’s say, a $50 gift makes a real difference to a lower goal, donors see their impact in more tangible and meaningful terms. Setting optimized giving levels in a campaign is critical to maximizing the probability of success. Another example would be setting minimum gift size, and (don’t panic) a maximum gift level. Saying no to money may actually get you to your goal more quickly and with more donors, increasing donor participation.
Drake: How come others have failed on implementing such advanced game theory or gamification into crowd funding?
Shafir: There are other players in this space but we combine unique insights on why people engage with a compelling platform and the expert advice needed to meet each client's unique needs. This combination is what provides our clientele with great results.
Drake: Which target markets and clients out there would be a good fit with your firm?
Shafir: Remember our mission was to democratize philanthropy - and that says it all... Any nonprofit raising $250,000 a year or more can start using give2gether in 15 seconds. Most nonprofits haven’t discovered the power of social fundraising. They are still looking for a cost effective way to financially support not only ongoing operations, but specific projects. give2gether allows them to raise more funds through the community, and practice crowdfunding for good. The are only three prerequisites needed: passion, dedication and a great cause.
Drake: Which firms are using you now and what do you encourage readers to take home from this insight to your industry?
Shafir: We welcome any registered 501 c 3 nonprofit in North America and support many charities in Europe and Israel. We facilitate a range of campaigns from ones raising hundreds of thousands of dollars (e.g. Linkin Park and Music for Relief for “Save the Children”) to the BC SPCA 2012 end of year campaign raising $80,000 (20 times as much as their previous year’s campaign) and The Anti Defamation League “new beginnings” campaign, to smaller organizations such as “Save a child’s heart” raising over $900,000 and hunger based organizations such as Latet and their campaign “giving with love 2012”. We serve hundreds of nonprofits from all verticals, helping them unleash the power of their social fundraisers
Drake: Thank you, Arnon. The US JOBS Act spurred crowdfunding globally to double in size from $1.5B to $3B and we are expecting $6B in global crowdfunding in 2013 - and that is without crowdfunding for equity becoming legal in the US this year. The JOBS Act has brought attention and momentum to the industry, and international firms such as give2gether are further enlivening crowdfunding by combining business savvy with the results of years of quality research. Our question for the startups out there - How might a carefully crafted campaign and/or gamification add value to your next crowdfunding project?
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