The delicate economics of a no-fee fundraising platform: Meet Zeffy
Why It Matters
While online fundraising and donor management platforms often charge fees to cover their own operating costs, these small amounts can add up over time, taking valuable funds away from social purpose organizations and the communities they serve.
Fundraising software dominated the main atrium at the recent 2024 Association of Fundraising Professionals conference in Toronto.
But it was Zeffy and its no-fees-for-fundraisers platform that caught some people’s attention, as co-founder François de Kerret, gave a quick, 20-minute presentation about his platform, alongside Kitty Raman Costa of the Parkdale Community Food Bank.
For Raman Costa and her team at the Toronto-based food bank, processing donations through Zeffy – and not losing money to fees– had resulted in around $60,000 worth of savings.
That meant roughly 63,000 additional meals served to the Parkdale community.
Most fundraising software companies take a cut of each donation they process online on behalf of non-profits, or charge monthly usage fees. These fees go towards their own operating costs.
Montreal-based Zeffy, on the other hand, is entirely fee-free for non-profits. Instead, the platform encourages donors to make an optional, additional contribution to Zeffy.
Today, just over 50 per cent of donors who process their non-profit donations through Zeffy also donate to the platform’s own operating costs.
“The challenge is making it super clear for donors why they would want to support Zeffy, but not taking attention away from the star: the non-profit,” said de Kerret.
“Let’s say donors are giving to a food bank: they care how many meals [are given out] and how many families they will be able to support. So we have to make them understand why supporting Zeffy will allow this food bank and many more non-profits to get unlimited access to great technology.”
Alongside the Parkdale Community Food Bank, 30,000 charities and non-profits are processing donations through Zeffy, including YWCA Lethbridge in Alberta and Big Brothers Big Sisters of St. Thomas-Elgin in Ontario. De Kerret and Jaurou would like to see 100,000 non-profits using their service.
Sustaining revenue: Scale, negotiation and stellar user experience
Zeffy started as Simplyk and was initially conceived as a platform to match volunteers with recruiting non-profits.
However, de Kerret found that scaling s business was challenging to scale, because it took a lot of effort to get volunteers to sign up for the platform.
Instead, both de Kerret and his co-founder Thibaut Jaurou found that fundraising platforms were a “huge pain point” for many non-profits.
“They were telling us that they knew of better fundraising technologies, but couldn’t afford them,” he said. “[Fundraising platforms] were taking too many dollars away from the mission.”
Zeffy’s no-fee business model requires careful economics and planning. Not only is it challenging to predict revenue if donors are making optional contributions, but each contribution had to be high enough that they could at least cover the transaction costs to payment and credit card companies.
“We didn’t know if it would work, or if we would just lose more money on each transaction than we would earn,” de Kerret said.
They began by paying 3.2 per cent per transaction to processing costs, which meant that each optional contribution by a donor would have to be equal to, or more than, 3.2 per cent of their original donation to the non-profit.
After negotiating rates, de Kerret and Jaurou have managed to pay 30 per cent less on each transaction than before – and they’re continuing to negotiate those rates down as the volume of transactions from non-profit donors increases.
Zeffy’s business model attracted start-up funding and investment from numerous sources, including an initial round of $750,000 in 2019 and a subsequent round of $3.7 million in 2021.
Working with 30,000 non-profits is “quite an operation,” de Kerret said.
After significant amounts of A/B testing and tweaking of their online user experience, the Zeffy team can generate an optional contribution to their own running costs for more than half of all donations that they process.
While processing around $600 million in donations for non-profits in the U.S. and Canada, Zeffy has built a revenue of about $15 million this year.
Compared to other donation and fundraising platforms, Raman Costa finds Zeffy exceptional in its customer service, responsiveness to client feedback, and new feature additions.
She noted that other fundraising software providers can often have additional services locked behind paywalls, while Zeffy’s entire suite of services is available for free to non-profits.
“We’re able to manage our donor contacts through Zeffy, but a lot of other platforms charge per contact, or have different plans or tiers based on the number of contacts you have,” she said.
Zeffy users can also access trend data about fundraising campaigns and revenue.
“Zeffy is a smaller organization, and obviously the Parkdale Community Food Bank is also a small organization, so working together with a partner that’s a similar size was positive and relatable,” she said.
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