On Sept. 30, former Wealthfront CEO and current Acorns board member Adam Nash launched his previously stealth fintech company, Daffy.
An acronym for “Donor Advised Fund for You,” Daffy is one of the first, if not the first, functional apps dedicated to enabling philanthropy through DAFs.
Since the fintech world rarely casts its gaze on the sleepy area of larger scale philanthropy, WealthManagement.com sat down with Nash to gather more details about the endeavor.
Wealth Management: Philanthropy is not exactly the first thing that jumps to mind when you think of fintech. What sparked this idea?
Adam Nash: I came into 2020 (pre-COVID) thinking that it would be a great year to start a company. The capabilities of cloud scaling, plethora of active and patient investors, and availability of employees willing to make the leap and take a chance on a fintech startup lined up very well in my mind.
In terms of why a DAF, my kids and their classmates bring change to school every Friday, and, at the end of the semester, the class all gets together and decides where to donate the collected funds. I looked at this and thought ‘Why not adults?’ So, I did some research and found that an uncomplicated vehicle that worked roughly similarly to how my kids were donating at their school already existed in the form of DAFs. And, importantly, there were basically no tech-integrated offerings in the space.
The simplest ideas are usually the best, I’ve found. Money is a trust business; it’s very hard to convince people to try a completely new thing and far easier to update and improve on the experience of an existing thing. So that’s what we set out to do.
WM: You mentioned that there were very few existing apps that dealt with DAFs; what exactly does an app bring to the table here?
AN: An important question to address when designing an app is, ‘When is it useful?’ For some things, your retirement account for instance, an app is useful in terms of ease of access, but it's not necessarily something you need to interact with on a daily basis or at a moment’s notice. I think that in the area of giving, the immediacy and convenience of an app can be super valuable.
Many people can relate to the scenario where they’re sitting in a PTA meeting or something and the idea of donating to, say, the teacher’s fund comes up, and everyone is gung-ho about helping in that moment, but by the time they go home, contact their advisors, wait for, complete and return the required paperwork, etc. that impulse dies on the vine and the gift never happens, despite all the best intentions. ‘Why can’t I just donate right now?’
This immediacy is additionally important, as the pandemic has nudged a lot of people out of the headspace of talking about helping others and into the mindset of actually doing something. And that has people excited. Daffy wants to offer a proactive solution, where willing donors aren’t just passively waiting around for the next fundraiser but can give to the causes they care about right now while their excitement level is still high.
WM: What kinds of assets can be donated through Daffy and where do they go?
AN: Users can donate cash through either direct bank account linking, credit, debit or Apple Pay; crypto through our partnership with Coinbase; and even stock. In the case of stock, the transfer can be initiated directly through the app, but there are some additional steps. The assets are then liquidated and invested in one of nine portfolios separated into three categories: Standard, ESG and Crypto. Each category features portfolios that range from conservative to aggressive, so that every member can pick the option that best suits their needs. Clients can then direct donations from the portfolio out to 1.5 million different charities as they see fit.
At sign-up, members commit to the Daffy Pledge, a simple commitment to proactively put money aside weekly or monthly to help others, or make a minimum one-time contribution of $100. For the Daffy Pledge, the minimum contribution is either $10 per week or $25 per month. The minimum stock donation is $1,000 and the minimum crypto donation is .001 BTC (10,000 satoshis).
WM: The capability to donate publicly traded stock and crypto is interesting, given the potential tax benefits available. How large of a focus is the tax aspect of giving?
AN: Our focus is the idea that everyone should give. Daffy offers the same potential tax benefits as any other DAF, so users who are looking to maximize savings can do so. That said, tax is not a fundamental piece. It matters, of course, particularly here in Silicon Valley when it comes to appreciated stock and crypto holdings, but for the larger public, it's not much of a driver.
WM: How are you tackling the education gap you’re facing in terms of giving and even just explaining what a DAF is?
AN: If you talk to nonfinancial professionals, almost nobody knows what a DAF is; it’s this arcane vehicle that they’ve never heard of. And that’s largely OK in our eyes because the current products and services in the space are highly optimized for the ultra-wealthy. We think the ultra-wealthy can benefit greatly from Daffy, but they’re just a small part of the much larger audience of potential givers we’re targeting.
I may be old-school in this belief, but when it comes to great software, word of mouth is still king. And charity and giving are, by their nature, very social activities. We’re leaning heavily into this social aspect. One of the first things a user gets when they sign up for Daffy is a private invitation link to send to their friends. As an online product, we have so many opportunities to touch users. We’ve produced, and will continue to invest in and produce going forward, online content to educate our users and highlight the potential of the app, very similar to what Acorns or Wealthfront offer. We’ve also striven to bake into the app itself as much transparency as possible, so users won’t necessarily need these outside resources to figure out what’s going on.
WM: What’s next for Daffy?
AN: I want to stress that this launch is very much just the first step. The speed of releasing new features is something we’re going to focus on. Ideally, we’ll be pushing new releases to the App Store every couple of weeks. We’ve already gotten a ton of feedback from users about what functionalities they’d like to see in the future; things like multiple-source giving and incorporating households, children and grandchildren, etc.
The hope when you’re early to a space like this is that you’ll catalyze a lot of innovation from outside sources as well, and we’re excited to see where things go in the next few years. That’s not to say that we’ll be resting on our laurels though; expect us to continue to innovate.
