Daffy Repackages Donor-Driven Fund – Tearsheet

Donor-advised funds have had a bad reputation in the past. That’s because the way these funds are put together, in all honesty, is a bit sketchy. Not quite a private foundation and not quite a public charity, the DAFs contain some pretty solid shortcomings thanks to their not-so-solid setup.

In short, wealthy individuals were able to store their money in these funds, under the guise that it was for a future charitable donation. But the tax deduction occurs before the donations are actually made. Meanwhile, there is no timeline for giving, which means the money can just sit back, relax, and grow.

It is therefore not surprising that these funds have become more popular in recent years. To give you an idea, here are some stats from a CNBC article in August 2021:

  • Over the past decade, total assets of donor-advised funds have reached $140 billion, more than quadrupling.
  • One in eight dollars donated to charity in America goes to a CFO.

But times are changing: investing is no longer a game for the wealthy, and donor-advised funds may not be either.

Daffy wants to make donor directed funds accessible to everyone.

Co-founded in 2020 by fintech veteran and former Wealthfront CEO Adam Nash, Daffy’s app essentially offers a way to automate the donation process.

“What we’ve found is that most people want to give, and they have an idea of ​​how much they should give. They just don’t get into it because life is busy,” Nash said. “We have work, we have our social life, we have family, etc. And so a lot of people can’t find the time to give the money they want to give. Daffy sort of solves that.

Source: Daffy

Daffy works like this: once the user has signed up and entered their bank details, they are asked to set their donation goal, both in terms of amount and frequency. The app then automates donations.

There is also the investment part of the application. Daffy offers nine portfolios divided into three different categories, including standard, ESG and crypto. Each portfolio has a different degree of risk and volatility, which are described as conservative, moderate or aggressive.

Wallets increase money over time so the user ends up giving more. Tax-deductible donation receipts are saved in the app.

Daffy says it currently offers 1.5 million US nonprofits that consumers can choose from to direct their giving.

As for how users can donate, they can link their bank account, use Apple Pay, credit cards, debit cards, stocks, and about 120 different crypto coins.

“Our business model is quite radical and disruptive for the industry. And so we had to quickly, in the first few weeks, implement the ability to transfer us a donor-advised fund, which we’re supporting now. The same thing happened with crypto,” Nash said.

Source: Daffy

The company makes money by charging monthly or annual fees. If the user chooses to donate with crypto, the monthly fee is around $20. Otherwise it’s $3.

One neat thing about Daffy’s app is that it acts as a kind of “donation plug adapter”. An example Nash gives is of an early Daffy user who wanted to donate to his synagogue using crypto. Because the synagogue didn’t have the tools to accept a crypto donation, Daffy came in as a middleman.

“It’s not practical for every synagogue, nonprofit, community center, zoo, or any other organization to know what the latest technology is and how to support a new coin from Coinbase,” Nash said. Fintechs like Daffy can provide a solution to this.

Daffy’s emergence shows where the financial ecosystem is at with fintech, Nash said. New tools appear regularly in all aspects of the industry, with movements in stocks, crypto and silver as a few examples.

And if the first step in fintech innovation was laying out the fresh ingredients, Daffy talks about the second step, which is testing new recipes.

“I think one of the reasons we were able to launch Daffy as quickly as we have been is how robust the fintech ecosystem has become over the last decade, frankly,” Nash said.

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