💸 Chariot: The Payments Infrastructure That Charities Need
Utilizing what's known as a "Donor Advised Fund," this week's startup allows its users to give to their favorite cause with just the click of a button.
Donor Advised Funds (DAFs) are specialized accounts that allow individuals to make a charitable donation, receive a tax deduction, and then recommend future grants to the charity. However, DAFs can be painful to set up and use. On average, it can takes up to 15 clicks, 10 redirects, and 4 web pages to donate with a DAF, with every step being an opportunity for a donor to disengage. This week’s startup has created a way for users to donate with DAFs in just 3 simple clicks.
🔥 What’s the Deal?
After earning their first paychecks at Blackrock and Bain, Salomon Serfati, Drew Schneider, and Aaron Kahane wanted to donate 10% of their salary to charity. They got over 20 of their friends to join “Myten,” a digital wallet that the trio had created to help facilitate and track their donations. Yet, even though they were happy with Myten, their perception of donating would soon change when they discovered an increasingly popular way to give back— Donor Advised Funds (DAFs).
A donor-advised fund is a specialized financial account used for charitable giving. It allows donors to make a charitable contribution, receive an immediate tax deduction, and then recommend grants to 501(c) charities over time. Once considered a tool for the wealthy, DAFs have become much more mainstream and are now the fastest growing vehicle in all of philanthropy.
However, the team saw that the usefulness of DAFs could be limited. Although DAF dollars can only be used for charitable causes, donors are ironically unable to pay with them on a nonprofit’s donation form. For example, there is no way to give with your DAF if a friend sends you a link to give to the Ukraine Relief Fund at the Red Cross or another asks you to give to their charity marathon campaign. However, where there was a problem, Salomon, Aaron, and Drew saw an opportunity. With over 160 billion dollars sitting in DAFs, they began working on a simple idea: Chariot.
Charities can add Chariot’s “Pay with DAF” widget to their payment page. Donors can click the button, log in to their DAF account, and make a payment – a process that’s as easy as paying with a credit card. Chariot's seamless UI surpasses the cumbersome experience of using DAFs through third-party platforms. Additionally, nonprofits can now connect with their donors; by providing nonprofits with up-to-date donor contact information, they can now foster direct connections with their biggest DAF supporters.
🚀 Fast Facts
Industry: Fintech, Non-Profit
SDG: #17: Partnerships for the goals
Team: Salomon Serfati (CEO), Aaron Kahane (COO), and Drew Schneider (CPO)
Traction: Recently accepted to Y Combinator and is raising their seed round in August.
❤️ Why We Love It
🤑 Removing friction to speed up DAF usage
The incredibly slow and painful process that a user has to go through to donate with a DAF means that there are potentially billions of dollars of donations that go unrealized. Chariot believes that the current friction represents $395B in unrealized donations over the next 8 years, and by creating a easy-to-use payment app that reduces the whole process to just a few clicks, they are poised to capture a large of share of these untapped transactions.
Donors aren’t the only ones who enjoy greater efficiency. After making a donation through Chariot, the money goes directly to the nonprofit instead of having it pass through a third-party DAF manager. This allows the nonprofit to receive the funds much faster.
📈 A huge market created through reform
One common criticism that has been levied at the wealthiest DAFs is that because the donors have no incentive to quickly donate the money, a lot of it can sit in accounts instead of going to charities that need it. As such, the Senate has introduced bills to reform the largest DAFs and incentivize them to donate the money as soon as possible.
These looming changes can create a huge opportunity for Chariot. The money that was once sitting idely in this accounts will now need to be donated, and charities will drastically need to improve their DAF donation infastructure to receive these funds.
🧠 Raising awareness about the benefits of DAFs
As Chariot grows, it will raise awareness about the usefulness of DAFs, which give people, nonprofits, and companies many added benefits. For example, when using a DAF there is an immediate tax reduction and no minimum on donating. With its streamlined platform, Chariot is able to add to these existing benefits. For example, users only pay a 1.9% fee to Chariot, compared to the 2.9% fee that credit card companies charge on donations.
👋 Get Involved
Reach out to your favorite nonprofit and let them know about Chariot
Learn more about DAFs and Chariot at givechariot.com
Inquiries? Contact them at email@example.com
-David Alarcon (Columbia)
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