PayPal, the giant digital payments company that was spun off from eBay last year, has had an up-and-down relationship with the business of crowdfunding over the years, but there are some indications that this couldchange. Weve been hearingthat PayPal was interested in buyingGoFundMe the crowdfunding site that lets people raise money for both serious causes and lighter life events potentially for a price above $1 billion.
Its not clear how farconversations proceededbetween the two, or if they are still active.
Both GoFundMe andPayPal said their companies do not comment on rumor or speculation; several investors and others we contacted also declined to comment. We believeconversations took placeamong a limited group of senior people.
Co-founded byAndrew Ballester andBrad Damphousse in 2008 in San Diego,GoFundMe has been on a growth tear. In 2015, thestartup which sits alongside others like Kickstarter, Indiegogo and Tilt, all covering different kindsof crowdfunding raised what appears to be its only significant external funding: an undisclosed amount of money from a group of investors led byAccel and Technology Crossover Ventures (also including Iconiq Capital, Greylock and Meritech). A month later,it was revealed that Stripes invested in it, too.
As part of that transaction, the investors took a majority stake in the business, buying out the two founders in the process; installing an Accel venture partner, Rob Solomon, as CEO; and valuing the business at around $600 million. At the time, GoFundMewas estimated to be processing$100 million per month in funding forthe different campaignsusing its platform, growing 300 percent year-over-year.
For PayPal, a closer relationship or acquisition of a crowdfunding site would be an interesting ifsurprising turn of events.
Earlier this year, PayPal stopped offering Purchase Protection for payments made on crowdfunding platforms. The company has had a rocky relationship with the crowdfunding community, withsome notable cases of freezing accounts. Oneof the problems for PayPal is risk management, and specifically whether it would be liable forchargebacks that is, if a person contributing money decided that he/shewanted a refund.
At GoFundMe, PayPal was removed as a payment option altogether some time ago, replaced by a combination of Stripe and WePay. The reason given by GoFundMe was that these twoallowed people to pay directly with debit or credit cards on a campaign page, and gave GoFundMe more control over the payment experience.
Earlier this month,GoFundMe took the issue of purchase protection into its own hands: itlaunched its own form of limited guarantee for donors and fundraisers, who respectively can claim up to $1,000 and $25,000 in the event of a campaign gone wrong. The guarantee for now is only applicable in the U.S. and Canada.
However,thereare reasons why PayPal mightbe interested in givingcrowdfunding another chance, and perhaps getting involved in it in a deeper and more serious way.
GoFundMe, which focuses on funding causes and events, may havehad its share of controversy, but its also been a strong platform for bringing out generosity and goodwill. Its also been very popular:one source described it asprinting money.
Apotential buyer could continueto operate GoFundMe as a separate entity. Or more strategically, the company would be a strong complement to PayPals existing business, which includes its ongoingrelationship providing payments services to eBay, physical world point of sale, payments in third party apps through Braintree and P2P payments.
Getting involved with a very popular crowdfunding platform would givePayPal another channel for driving transactions, and it would open the door potentially to a raft of new users.
You probably have already seen plenty of campaigns for GoFundMe in your Facebook News Feed, some inspiring, maybe a fewbizarre and in bad taste.Altogether, thecompany said in May that it has seen 25 million donors and has raised around $2 billion total.
GoFundMe, like other commerce platforms, takes a 5% share of the total transaction volume, in addition to a small additional fee through the commerce platforms it uses. Because the site basically operates on the principles of an online social network and (today) relies on outside payment providers, it has little overhead meaning the gross margin for an operation like this is likely very high.
And integrated with PayPal, GoFundMe could become even more valuable.
Additional reporting Katie Roof