This week I turned my attention to Donor Advised funds (or DAFs) and shared my coffee break with Adam Nash, Co-Founder and CEO of Daffy.
Daffy is a platform facilitating charitable giving by integrating it into consumers’ regular budgets. Users set a yearly target and choose the regularity of the payments into a fund – putting their charitable donations to work and unlocking tax-deductible benefits. One-off payments can also be made, opening out the function flexibly.
This approach has allowed their users to save an estimated $2 million on taxes last year, as well as increasing charitable donations to US causes.
Isabelle Castro – Hi, Adam. How are you?
Adam Nash – I’m great. Great to be here.
Isabelle – Nice to meet you. So what gets you up in the morning?
Adam – Oh, you know, with, with four kids and two dogs, there’s always something that gets me up in the morning. But, in all seriousness, I always start every morning with a family routine, drop the kids off for school, get everything ready. It’s set, right? It actually centers my day. It gives you something that you have to do in the morning. It’s personal. And then when you’re done, you kind of grab the coffee and get going.
Isabelle – Yeah, nice. I like to have a routine in the morning too. What brought you to founding Daffy. What was the journey?
Adam – Oh, Daffy is a simple story but unique because it started during the pandemic. I think that during the pandemic, for a lot of us, we saw how many people were struggling. And we were doing a lot of things to try and take action and help other people in our community. My co founder, Alejandro, and I were thinking about new applications and things that we could build together. And we were very impressed that over the last decade and fintech that companies like Acorns, and Wealthfront had done so much to help people save and invest every day, I mean, Acorns helps millions of people save money that they otherwise wouldn’t have saved. And I thought, what if we could do for giving what we had done for saving and investing. And you know, the research does show that if people set a goal for their giving, and commit, and automate it, they give, on average, 32% more, and that’s a big number. That means Americans could be giving over a trillion dollars more over the next 10 years. And so we started the company. It was in stealth. Daffy launched in September 2021. And we raised our Series A of funding in February of 2022.
Isabelle – Nice, nice. Yeah. When I read about you guys, it seems like you’re doing something really, really unique. Why did you choose to provide a donor-advised fund over other kinds of charitable giving frameworks?
Adam – Well, you know, it might seem like a frivolous detail. But it turns out that when you’re handling people’s money, you want to do exactly the right things from a regulatory and legal standpoint, and the donor-advised fund has been around for decades. It’s a very well-known type of account. It has tax advantages and is basically the right financial back end for your giving. The problem of the donor-advised fund quite frankly, is that most people have never heard of it. If you’re not wealthy and you don’t have a financial advisor or professional accountant. No one has probably told you that this type of account that exists but it’s basically like a 401 K for charity, you know, just like you put money aside in a 401 k or IRA to save for retirement. A donor-advised fund is an account where you can put money aside for charity, get the charitable deduction off your tax. taxes, and then have the money invested tax-free so that any time you feel the urge to give, you can do it with a few taps on your phone. And that’s really the promise that we made with Daffy was to build a simple app and service to make it easier for people to give.
Isabelle – I’m going to come back to the kind of tax deductible aspect. But first of all, we’re in a economic downturn at the moment. There’s less money to go around. How does this affect charitable giving through DAFs?
Adam – Well, I think that, you know, this is actually one of the times where the donor-advised fund shows its its benefits. I mean, the truth is, when times are tough, counterintuitively, people actually usually have more of an inclination to get right when you hear stories about people suffering, not being able to put food on the table. When you see issues going around in the world, people do have this urge to give. Now, of course, unfortunately, during challenging times, not everyone has the money to give. And I think one of the best aspects of the donor-advised fund is that when I talked to people ahead of time when we were building Daffy, I learned a lot about how people think about giving. And one of the things that I learned is that people care quite a bit about the causes and organizations they support. And so one of the benefits of having a donor-advised fund is that you put money aside when times are good. So that you have money to give this meeting is being recorded as good. And so fundamentally, I think that what we’ve seen a Daffy, especially in the last year, is that as the economy has struggled, as the markets have come down, people who have money in their accounts are actually giving more than ever, right, we see donations go up month over month, quarter over quarter. And that’s because people do want to give, but if you haven’t put money aside for it, then it always becomes this decision. Well is now the right time? is now the right time? And that leaves people feeling, frankly, a little empty about the experience. They want to support organizations and they want to support them more when they think it matters.
Isabelle – Yeah. Definitely. Have an ongoing relationship with them. Right?
Adam – That’s right. And that’s actually one of the great things. I mean, I think if you talk to most nonprofit organizations, they’ll tell you what they really value are the people who support the organization, year in and year out, right, you know, they would rather have a recurring donation, someone who volunteers every year than just someone who interacts once because a campaign hits them. The problem is, we’re all busy, right? Like we have life, right? Like, if you have kids, you have family have a job, you have a social life. I mean, when I talked to the people, when I was doing the research that went into the product that we built, it really became clear to me that most people really do care about giving. It’s just that life gets in the way. And then when you ask people, How much did they actually give last year, there’s this pause that happens, people don’t feel good about the fact that they didn’t get around to it, or they didn’t prioritize it. But this is one of the places where a great service like Daffy can help. This is where software can help automate things, right? You know, how many of us would save for retirement? If it didn’t just come out of our paycheck? You know, every month, you know, most of us wouldn’t get around to it. And so there’s no reason that giving has to be different. You know, we ask people to think carefully about what their goal is for giving. Who do they want to give to? And then Daffy makes it as easy as possible just to automate that.
Isabelle – Do you think this is the kind of main way that fintech has been able to create a different experience?
Adam – Well, yeah, I think that fintech has done a lot in the last decade. And I’ve written a lot about this. Obviously, I’m the founder, I’m an angel investor. And I’ve run some of these companies, I’ve been on the board of others, the biggest thing that fintech has done is really stimulated innovation, this thinking of hey, what can we do with technology to make people’s financial lives better or easier. And unfortunately, most of the incumbents are large enough, that they don’t have a lot of time to experiment with new technologies. And frankly, there’s not a lot of impetus for them to do so. Right. They already have so many customers. And so I think fintech has really driven a lot of innovation, which forces the incumbents to then match it and copy you. You’ve probably seen that a lot of the banking services from the incumbents have gotten better in the last 10 years. Not an accident, right? That’s because of the competition. That’s because of this push from the fintech community. I also think fintech has done a great job of pushing the boundaries of looking at populations or customers that may not be prioritized by the existing industry. Right. You know, financial advice is a great example. Right? The average financial advisor is older, right around 50. Their average client is older. And so I think we saw in the last decade a lot of companies specialize in can we help younger people with their financial lives and problems even though they don’t have as much money? I think the Donor Advised funders like that I think giving is like that if you talk to most people in the industry, existing donor-advised funds, they cater to older customers who have a lot more money. You’re talking about people, not even just in the 1%, but the point 1%. And so investing in new platforms that help everyone give hasn’t been a priority. I mean, I look at it this way, in the US, there’s about 60 to 70 million American households that give to charity every year, that how many of them have donor-advised fund accounts? Maybe a million little over is what the latest research shows? To me, that looks like over 60 million people who would benefit from having a better system for giving. And that’s one of the reasons we dove in with Daffy.
Isabelle – Do you have a minimum amount that they have to give every month or every year? Yeah, what is that?
Adam – You know, it’s actually very interesting. We really do focus on this idea of having a given goal. So instead of focusing on the mechanics of like, how much money people are putting aside, or how much they donate in a given month, or in a given quarter, we actually ask them the simple question, which is, how much do you want to give this year? Right? You know, and people have different opinions about that. All different things. Some people think about a percentage of their salary, some people think about an amount of money. Some people just think about the specific organizations they support, maybe their kids’ school, or maybe their alma mater, or their church or their synagogue. But we ask them to be intentional about their giving. And the research shows that once you pick a goal, you give more. And this certainly was my personal experience, right? I didn’t know what a donor-advised fund was. I learned about it back in 2011. The company I worked for at the time, where I had been there early, went public. And as you can imagine, there were advisors and accountants around trying to help everyone and get new business. And so I learned about this donor-advised fund by my accountant asked me this very simple question, which is, well think about how much money you give to charity every year, and then multiply it by 10. And you can put that aside now, right as a tax strategy.
But I thought it was a very profound question because I had never asked myself that I budget everything. By the way, I’m so into these things. Like I’m one of these financial optimizers. I, you know, my file goes back to like, 1994. Like, it goes back forever. But I had never really thought about having a goal. I had goals for retirement, I had goals for my kids education, but what was my goal for giving. And so I picked a number, which happened to be about 10% of my salary at the time, put it aside, and a donor-advised fund. And this amazing thing happened is I can see it in my financial records. I gave more to charity every year since I started the donor-advised fund than before. And I think it’s because it’s simplified the problem for me once I had a goal, and the money was put aside, I could really focus on what mattered, which was Who did I want to give that money to? Which organizations, which causes?
Isabelle – Okay, because it was already kind of in your budgeting and in your mind that you were going to give that?
Adam – Yeah, that’s right. And you know, it’s funny, when I, when I talked to people about giving, it is very clear that giving isn’t really one problem. It’s two. There’s this question of how much money I can afford to give. And the second question of Who do I give the money to, and because it’s, those are hard problems, too hard problems, you know, it’s not just twice as hard. It’s almost like, it’s almost like the square of the problem. You people get flustered with it. You know, it’s a, it’s too complex. And I think the great thing about a system like Daffy, the great thing about having a donor-advised fund, is it separates those two problems, right? Every month, every year, you decide how much you want to put aside for giving. And then, when you do want to give, you don’t have to worry about the money piece. That wallet is already there. I mean, a lot of our members use Daffy basically as a wallet set aside for charity. And so you know, when you take your phone out of your purse, or you run into something, someone’s raising money for a charity that you believe in, you don’t have to think about whether you have the money or not. It’s right there. That’s what it’s for. That’s its purpose. And it feels good to be able to give when you want to give and not worry about, well, do I have that money in my checking account? What bills do I have to pay this month? You know, that sort of thing that really makes it hard to reach in and give when you want to give?
Isabelle – Yeah, no? I definitely have that issue. Maybe very also not to you guys after this. There is the tax-deductible aspect of DAFs. Do you think this is an influencing factor in why people turn to DAFs? And if so, how much so?
Adam – Well, listen, that charitable deduction is one of the most valuable deductions in the tax code, and it’s there for a very good reason. And unfortunately, a lot of people, if you don’t have a professional accountant, don’t take full advantage of it. But I I’ve been talking to a lot of different people all walks of life. It’s amazing how everyone cares about the receipt for their donation, right? And why do they care about the receipt,, they care about it for tax time.
What we’ve noticed though, is that that isn’t the primary motivator. So we, we do see that people want a better system for giving, like they liked the idea of having all those receipts in one place. It’s very funny, like, older people might have a folder on their desk where they print out receipts, and they keep it there. I’ve talked to dozens of people about this funny, if you’re younger, you probably have a Gmail search that you do every year to find your donation receipts. But we find that people using data, they actually just really appreciate the fact that everything’s in one place that they can get to it when they need it. Now, if you’re wealthier, or if you’ve had a good year, you run into this other fact, which is, for most of us, income isn’t a stable thing anymore. We have good years, and we have bad years or at least more challenging years. And the truth is the way the tax code is written, your tax rate is higher in those good years, and you don’t get the money back in the harder years. And so this idea of putting money aside in the good years where your tax rate is higher, getting that tax deduction, and then having the money available in the years that are more challenging, seems to also be very popular. So I don’t want to say like the taxes do matter. It just isn’t the primary motivation we’re seeing for why people give.
Isabelle – Okay, well, that’s quite a nice conclusion. But, I mean, you’re quite unique. I think I read that you’re one of the only people who are focusing on DAFs. Why haven’t more fintechs turned to DAFs?
Adam – Well, yeah, that’s a great question. Actually, you know, as when I was an exec. Executive in Residence at Greylock Partners. Like a lot of entrepreneurs, I had this list of all these ideas for startups. I think I had 82 ideas on this list. Unfortunately, we’re not all good, by the way. But if you want to see some time, I can show you but one of the lists on there was what are the great financial products that haven’t been reinvented yet, and the donor-advised fund was on there. But I think it’s really simple. I think the reason we haven’t seen a lot of fintechs in this category is that, actually, not a lot of people know about donor-advised funds, like I said, like I was fortunate enough in my career to have enough success where I ran into the donor-advised fund and ask the question, why doesn’t everyone have one, I truly believe that everyone who gives to charity regularly should have a donor advisor, whether it’s with Daffy or somewhere else, because it’s like retirement, it’s having an account set aside for that goal. But I think the other reason is, I think there’s a misperception around the donor-advised fund, based on the existing industry and the incumbents, that it’s only a product for the wealthy. And so that just isn’t a market that a lot of fintechs have gone after. So this idea of saying no, we can reinvent this product, we can rethink, what would it be like for someone who gives a few $100 a year to charity every year? What product would you build for them? What product would you build for a parent who’s trying to teach their children? The importance of giving? Right we have a family plan, etc? What would be the product you build for someone who is more successful and gets paid with stock, right, like a lot of employees at tech companies and doesn’t know that it’s much more beneficial to donate stock or even crypto to charity than to donate cash and so that all that energy went into Daffy. But I think honestly, a lot of fintech founders just don’t know about the product, or saw it as just something that wealthy people did when they’re older rather than something that could be for everyone.
Isabelle – Okay, that, well, you’ve got your niche, because of it now. So that’s good for you.
Adam – Yeah, it’s, it is a huge market, I will say, you know, charitable, giving us almost half a trillion dollars in the US every year. That’s more than 2% of GDP. I mean, all of agriculture is only about 1% of GDP. I mean, this is an amazingly huge sector. It’s an important problem for people. But because of the way the existing industry works, I think that too many people just it’s kind of out of sight out of mind. They just don’t think about it. But we really think that we can build a community of millions of people who put money aside every week or every month or every year for the causes and charities that they care about.
Isabelle – I think that is a great cause to go after. Where do you think the donor-advised fund sector is going in the next five years, and where do you hope it will end up?
Adam – Well, I think that, and not just because of companies like ours, I do think more and more people are learning about donor-advised funds. Some of it has been sensationalized. Some of it’s because you know, there’s this ongoing fascination probably too much with what does He inherited to do with their money and so when you see wealthy people do things like put their money aside in a donor-advised fund, a lot of people say what is that I’ve never heard of that before. But I also think that we’ve gone through a bit of a cultural shift. I do think the pandemic has changed how people think about philanthropy, who how they think about giving, I think there’s a lot more focus on local organizations than there were even a few years ago, you know, when we rolled out Daffy, fun story, you always roll out a product, right. And it’s never quite right the first time because you have to learn from your customers. And what we learned as we rolled out the product really optimized to give to the big national names that are famous that you know about, but there was so much demand to discover local charities, actually, we quickly rolled out a new feature, within a few weeks, they made it easy to see on a map like all the charities in your local area, and we colour code them by their cause. So you can find that food bank that’s near you, you can find that, that charity that’s focused on climate or is focused on social justice, or whatever call it speaks to you. But you can do it visibly on your phone, like as a map. But I think that we’re going to see over the next five years, donor-advised funds broaden out. And I think we’re also going to see a lot of the giving coming from donor-advised funds, a lot of those smaller donations that don’t get as much press, going to local community organizations, local charities and causes where people really feel like they’re working together to make a difference.
Isabelle – That’s great. So what’s your favorite quote?
Adam – This is a tough one. You know, I teach this class at Stanford on personal finance, I’ve done it for six years. And it’s this course that I really enjoy. Because it’s a class I wish existed when I was in school, right, so many people go to school, and no one teaches them about the basics of personal finance, or how to think about their money, even though it’s so important in your adult life. But one of the quotes I use is from Albert Einstein, I call it Einstein’s razor, where he said everything should be made as simple as possible, but not simpler. And I think it’s a good reminder, you know, in life that you know, the goal is actually simplicity is elegant simplicity is getting to the focus of things, simplicity is a great goal. But you can go too far, right? Some things do have complexity. There are real things that you have to doubt for. And so, I like that even Albert Einstein, you know, brilliant physicist, etcetera, Nobel Prize, of course, understood that as smart as you are, you can make things only so simple before you take away something of the solution that makes it powerful.
Isabelle – That’s really, really poignant. I like that. So you’ve got your curveball question. Now. It’s quite a nice one. If you had six months with no obligations or financial constraints, what would you do with the time?
Adam – Oh, well, I, it is a curveball, but actually not because I’ve actually been in this situation. As it turns out, it’s part of life and tech, and as a founder and entrepreneur, your career doesn’t just go in kind of a steady state, right? You go from company to company, take these breaks, think about. But unfortunately, my answer may not be that exciting to some people. You know, the truth is, I’ve always been a big believer in kind of building this healthy life with the people around you, I spend a lot of time with the people in my life that matter. You know, I have children, they’re young, they’re only young once. I never regret having more time to spend more time with them, to go to the ballgames, to read, to think to relax to centre with the people you care about. You know, I read this piece years ago about thinking about the frequency of things in your life. And I think about those things, right? You know, having more time off means that you can do the things that matter to you more often, right? You, you see your parents, you know, once or twice a year, that’s just once or twice a year, you know, if you have the opportunity to see them more often or play, you know like I said, do activities with your children more often or see friends that you haven’t seen in years more often. When I have time off, I like to think about every day doing one or two things that really will re-energize you that will make you feel like that was a good day, or you did something that day. And so I’d like to set aside one or two of those things, but a lot of them are people-oriented.
Isabelle – That’s really, really lovely. That’s really nice answer to that question. So how can people get a hold of you?
Adam – Oh, well, for better for worse. I’ve been on the web long enough that it’s not hard to find me pretty much everywhere. And my my, my choice of handles is not very creative. So I’m pretty much out of Nash on every service. So if you want to find me on Twitter, obviously I was a VP of product at LinkedIn through the IPO so you can always ping me on LinkedIn. Those are probably the two most common channels you know, but anyway, which is easier for people to reach me they should feel free to reach me.
Isabelle – Perfect. Perfect. Well, It sounds pretty simple so that’s good all right well thank you for coming on I’ve really enjoyed our chat and yeah have a really great rest of your day.
Adam – No of course thank you I really appreciate being here it was great to chat.
Isabelle – As always, you can chat with me on my LinkedIn or Twitter at @IZYcastrowrites. But to access great daily content, check out Fintech Nexus on LinkedIn, Twitter, Facebook, or Instagram. You can also sign up for our daily newsletter, bringing news straight to your inbox.
For more fintech podcast fun, check out the website, where you can find more fascinating conversations hosted by Peter Renton and Todd Anderson.
That’s it from me. Until next time, enjoy your downtime.