GoFundMe’s $500 Million Valuation – How Medical Crowdfunding is Eating the World

Yesterday, Techcrunch reported that GoFundMe was raising capital at an expected $500 Million valuation.  Some folks have been surprised at how big the valuation is but when I heard the number I was surprised how small it was.

I’ve been saying for a while that GoFundMe is a $1B company.  Here’s why.

Medical Crowdfunding is Eating the World.  

Last May I gave a presentation on the trends in the medical crowdfunding space at NYU Stern’s crowdfunding conference. The presentation was called “Medical Crowdfunding is Eating the World” and argued that within five years, medical crowdfunding would be the biggest vertical of all crowdfunding.

Less than a year later, I think it is safe to say that this prediction is going to come true, and probably a lot sooner than I thought. Medical crowdfunding is already the #1 category of three of the world’s top ten crowdfunding platforms including GoFundMe, GiveForward and YouCaring with medical crowdfunding accounting for anywhere between an estimated 25%-70% of the dollars contributed on these platforms.  On top of that, the world’s the second largest crowdfunding platform IndieGoGo, recently joined the club this past December with the launch of IndieGoGo life.

Why is Medical Crowdfunding Eating the World

There are three reasons.

1.  Medical crowdfunding is an insanely massive market.

2.  Our healthcare system is shit and trending shittier.

3.  Medical crowdfunding changes lives.

Massive Market

Deloitte estimates that Americans spend $400 Billion a year on out-of-pocket medical expenses.  This is an insane amount of money.  And these are just the expenses that insurance doesn’t cover like, co-pays, travel expenses to and from treatment, and lost wages.   These are the things people raise money for when they run medical crowdfunding campaigns.

When you compare the potential size of the medical crowdfunding vertical with the size of, say, the technology crowdfunding vertical, it’s not even close.  The need for medical crowdfunding is far greater than the need for technology crowdfunding.  As a rough comparison, in 2013 venture capitalists invested $29.3 Billion into early and late stage technology companies.  Even at the height of the bubble, the total amount invested by VCs topped out at $105 Billion.

$400 Billion vs $29 Billion

If I had to hazard a guess, I would estimate the potential size of the medical crowdfunding market at roughly an order of magnitude bigger than potential size of the technology crowdfunding market.   Simply put, not everyone needs seed capital to start a business or a Bro app. But EVERYONE does need healthcare.

Our Healthcare System is Shit and Trending Shittier

Every 30 seconds an American family goes bankrupt due to medical costs, and the situation is actually getting worse for the average American.

This graph below is called the Milliman Medical Index.  It shows that the cost of healthcare for an average family of four more than doubled between 2002 and 2012.

Millimen Index

The average family of four now has more than $20,000 per year in healthcare costs.

On top of that, families are paying more out-of-pocket today than ever before as insurance premiums and workers’ contributions continue to outpace wages.

Screen Shot 2015-04-24 at 12.20.03 PM

In sum, our healthcare system is broken, and over the past decade or so, it’s only gotten worse for people.  In comes a solution.

Medical Crowdfunding Changes Lives

Medical crowdfunding saves lives.  It keeps people out of bankruptcy.  And it provides millions of people with hope in their darkest and most difficult days.

All you have to do is watch either one of these videos below and you intuitively “get” why these campaigns are popping up everywhere.

(Justin’s GiveForward Campaign) (Mark and Jenny’s GiveForward Campaign)

Medical crowdfunding is not a frivolous activity.  It’s not potato salad.  It’s not a fad.  Medical crowdfunding is the same thing people have been doing for centuries when a loved one is sick — coming together and letting that person know that he is not alone.

Medical crowdfunding is empowerment. It’s compassion. It’s love.  And that’s why it’s eating the world.

—–

Part II

If Medical Crowdfunding truly is eating the world, why now?  In part two, I’ll discuss the evolution of crowdfunding from 2008-2015, the demographics of the space and why medical crowdfunding is just now crossing into the mainstream.

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4 thoughts on “GoFundMe’s $500 Million Valuation – How Medical Crowdfunding is Eating the World

  1. Brock says:

    Ethan. My favorite article of yours so far.

  2. Tom says:

    Nice. Take a peak at experiment.com for scientists wanting to raise money for experiments to work on all types of diseases and problems.

    Tom.

  3. Lorien says:

    I had no idea that medical crowdfunding existed beyond a few sweet stories of people getting help. Thanks for the info; this gives me hope that the people who need it are getting helped by the people who really want to help…and there isn’t the “What’s in it for me?” mentality that sullies the soup. I agree on people working hard and profiting abundantly from their work. I do not agree on large institutions sucking the life blood out of folks who are trying to provide a decent life for their families. Screw that noise.

  4. […] Part One of the post laid out the reasons why medical crowdfunding is quickly becoming the largest category in crowdfunding. Part Two of this blog post answers the question of “why now?” […]

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