Daffy aims to make it easy (and cheap) for anyone to funnel money to a donor-advised fund with a few phone taps
Renowned Silicon Valley operator Adam Nash thinks you want to donate much more than you do, and he’s about to make it dead simple for you.
Such is the message we received when talking late last week with Nash, whose most recent full-time roles include as a VP at Dropbox and president and CEO of the financial advisory firm Wealthfront and who also serves on the boards of the auto e-commerce platform Shift and with the micro-investing app Acorns.
In fact, it’s that last role with Acorns that informed what he’s building now, which is a new financial platform for giving called Daffy. Freshly backed by $17.1 million in Series A funding led by Ribbit Capital, with participation from XYZ Capital, Coinbase Ventures and more than 50 notable angel investors (Reid Hoffman, Aaron Levie, Amy Chang, the list goes on), the idea is to help people to be more generous, more often, Nash said.
How, exactly? Daffy is essentially providing access to what it claims is the lowest cost, and lowest friction, way to set up and use a donor-advised fund (DAF), a kind of 401(k) for charitable giving. With DAFs, you donate some money (or stock, or even cryptocurrencies), receiving a tax break at the time of the contribution, and that donation moves into a managed investment account (think Fidelity or Vanguard) where it hopefully grows over time. At some later date, you direct the funds to the charity or charities of your choice.
DAFs have become hugely popular as a means of avoiding taxes on unrealized capital gains and they are used by both the extremely wealthy and those who perhaps aren’t billionaires but aren’t struggling to pay their bills, either. Indeed, according to the National Philanthropic Trust (NPT), the average donor-advised fund account had $163,000 as of last year, and there is now enough sitting in DAFs (more than $140 billion) that grants from DAFs to qualified charities totaled an estimated $34.67 billion in 2021, a 27% increase compared to 2019. The NPT called this a “high water mark.”
Nash said Daffy intends to open that funnel so that many more people across the economic spectrum can participate. First, he said, Daffy charges less. Whereas a customer of Schwab or Fidelity or Vanguard can set up a donor-advised fund, each charges an administration fee of 0.60% of assets, which can add up over time. (Vanguard also has a minimum required donation of $25,000 to get started.)
Daffy meanwhile requires that users make a minimum $100 one-time contribution (or $10 per week until they get there), and it charges just $3 a month, or $36 per year, regardless of the amount of assets that someone is investing. (It charges $20 a month if a user is also donating appreciated stock or cryptocurrency, which have “more expenses tied” to them, noted Nash.)
As important, he said, Daffy is as easy to use as many consumer apps and, like many of these, it’s now available to download through the Apple App Store. (The company says it is the first “fully featured” DAF available right now on the platform, and that users can “open an account, make contributions, invest the contributions, and make donations, all with just a couple of taps.”)
As for where the donations go to (ostensibly) grow, Daffy currently funnels users to nine funds, but Nash said to expect many more to appear on the platform over time.
Daffy isn’t alone in tackling this big and growing piece of the economy. CharityVest, a recent graduate of Y Combinator’s accelerator program, is chasing after similar customers, for example. But unlike some of these rivals, Daffy is offering its product directly to consumers, rather than trying to also work through employers or other corporate partners.
The question is how. Specifically, we wondered how Daffy can provide the services it is promising at such a low cost. After all, it seems possible the young outfit could increasingly attract clients to the platform who might traditionally use a more expensive DAF product but who want to save hundreds, if not thousands, of dollars in administrative costs. Asked about this, Nash, who noted that Daffy already has clients with “seven-figure” portfolios, insisted that that Daffy welcomes customers with any amount of assets.
Likely, he sees them as loss leaders. Indeed, like many financial services startups, DAFs appear to be Daffy’s first step toward many other product offerings.
“It’s definitely a wedge for something bigger but not aimed at financial services,” Nash told us last week. “This isn’t a megabank play. Our mission is to help people be more generous more often [and to make it easier for] everyone to put money aside proactively for those less fortunate than themselves.” There are “a lot of ways that people give there, and a lot of ways that organizations raise money, and these are all areas that we’re very excited about,” he continued.
In the meantime, Nash will be happy enough if Daffy becomes a habit for its users, ambitious as it may sound.
“We’re seeing more and more apps and services that are trying to help people live the life they want to live, whether it’s Calm or Headspace or some of the religious apps out there,” noted Nash. “More people are using services to be the type of person they want to be. We see no reason that wouldn’t apply to generosity and to philanthropy and charity.”