GoFundMe’s $500 Million Valuation – How Medical Crowdfunding is Eating the World – Part 2
When TechCrunch reported last week that GoFundMe was raising capital at a $500 Million valuation, I decided to write a two-part blog post discussing how a crowdfunding site not named Kickstarter could attract such a high valuation. The short answer is that it has to do with the exponential growth of medical crowdfunding.
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?”
To recap from Part One, the rapid growth in medical crowdfunding over the last five years has to do with three underlying factors:
1. There is a massive healthcare problem in the US
Americans spend $400 Billion on out-of-pocket medical expenses each year for things that insurance doesn’t cover like co-pays, travel to and from treatment and lost wages)
2. Healthcare costs are rapidly outpacing wages.
Increasing income inequality is hurting average Americans. Healthcare premiums have increased close to 200% over the past 15 years while wages have only increased marginally.
3. Medical crowdfunding changes lives.
Medical Crowdfunding campaigns have become the modern day way of letting someone know “we love you. You’re not alone.”
But Why Now?
Modern day crowdfunding sites have existed since around 2008. Yet the New York Times reported in January that the tidal shift in the medical crowdfunding space is just beginning. If medical crowdfunding truly is eating the world, the next big question is why now? Why 2015? The answer has to do with changing demographics and the evolution of social norms.
1. Demographic shift – Crowdfunding is moving beyond the twenty-something-early-adopter and towards the thirty-something early majority.
To understand the story of medical crowdfunding, we need to first understand the history of crowdfunding and who were the early adopters. The story begins with Kickstarter and artists.
If we imagine someone starting a Kickstarter campaign in 2010 to produce a new album or a documentary, we could imagine that he might look like this guy. Let’s call him Sebastian.
Or if he was launching a really successful successful campaign maybe he even looked like this mustachioed gentleman.
In general, the Sebastians of the world were twenty-something, tech-savvy, early adopters. The people using Kickstarter were cool, the projects they were creating were cool, and everything about Kickstarter exuded cool. Had crowdfunding started with a different category like medical, it probably wouldn’t have caught on because it doesn’t have the same “coolness” factor, and the tech-savvy, early adopter cool kids never would have tried it. To be absolutely clear, while crowdfunding existed before Kickstarter, modern crowdfunding would never have taken off without Kickstarter.
Flash forward to 2015. If we imagine a person starting a GiveForward, GoFundMe, or IndieGoGo Life campaign she might look more like this. Let’s call her Jenny.
Jenny is a busy mom in her thirties raising money for her high school friend battling breast cancer. She’s at the age where for the first time someone in her peer group might have an early cancer diagnosis. Jenny’s not a technology early adopter. She’s the early majority. She doesn’t use crowdfunding because it’s cool. She uses it because it’s useful.
In short, crowdfunding is growing up. It was popularized by Sebastian and the cool kid crowd (arts and technology) between 2009-2011. Between 2012-2015, it began to cross the chasm beyond early adopters. Over the past few years, much of the growth in the sector has been due to the early majority adopting this technology.
Put another way — remember when your mom first joined Facebook or got a smart phone? Crowdfunding is starting to go through a similar maturation process. It’s not just for the young’ns any more. It’s for everyone. Because like Facebook and smart phones, crowdfunding is moving from cool to important.
2. Changing Social Norms – The Shift Away from American Rugged Individualism
The other tidal shift we’ve seen in the past few years has been a shift in an American values system that has traditionally placed a stigma around asking for or accepting help. This stigma stems from a false narrative of ‘American rugged individualism’ and has caused millions of families to suffer in silence rather than accept help from those who love them.
Over the past few years, however, social norms have begun to evolve. This shift, at least in part, can be traced back to 2013 after the Boston Marathon bombing when tens of thousands of people across the country rallied for the victims by setting up crowdfunding campaigns on their behalf.
One such fundraiser on GiveForward raised close to $900,000 for a young newlywed couple that both lost limbs in the bombing. Another on GoFundMe raised over $800,000 for a double amputee. At the time, these were the two most successful medical crowdfunding campaigns to date.
The Boston marathon fundamentally changed something in the American psyche and the way we perceived crowdfunding. We realized this wasn’t just about the victims. This was about all of us. Crowdfunding was our way of simultaneously giving the finger to the perpetrators of this horrible crime and offering our unified support to those who were injured or killed. It was at this moment in time that crowdfunding became a legitimate vehicle to voice our collective will. Crowdfunding had moved beyond arts and technology. Crowdfunding had become patriotic.
Most importantly, with the Boston Marathon fundraisers, there was no stigma attached to accepting help. And why should there have been? These victims didn’t deserve what happened to them, and there’s no way they could have ever planned financially for these types of expenses. Why should their financial futures have been ruined because they happened to be at the wrong place at the wrong time?
So, for a lot of people, that’s when it clicked. It took a horrible tragedy to bring us to our senses and help us realize that placing a stigma around accepting help for things outside our control is inherently unjust. Once this wall cracked, we started applying the same logic to similar events in our lives like when a friend got diagnosed with cancer or had a child born premature.
In essence, the Boston Marathon fundraisers helped break the stigma and normalize the idea of medical crowdfunding for much of the country. To be sure, in 2015 the wall has not fully crumbled. But the cracks are getting bigger and it seems only a matter of time before love and compassion triumph over shame and the damaging lie of American rugged individualism.