Dominic Kalms - Using the Whole Whale
MMallory KassoyOct 3, 2022 at 7:40 pm34min
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00:03Speaker 1
Welcome to the using the Whole Whale podcast where we learn from leaders about new ideas and digital strategies making a difference in the social impact world. This podcast is a proud production of Whole Whale, a B Corp digital agency. Thank you for joining us. Now let's go learn something. You've got a great guest talking about some just, frankly, really old tech that I'm excited about. Because it's going to allow more money for more good, but I won't give it away. I won't spoil it because we have DOM calms the founder and CEO of the generous how's it gone?
Unknown Speaker
It's great. Thanks so much for having me on to that. Yeah,
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00:46Speaker 1
absolutely. Glad you could come on. And I'm even more excited for you to explain what give now pay later actually means for you.
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01:00Speaker 2
Absolutely. So, I don't know, Giorgio, if your listeners are you familiar with the Buy Now pay later space. But this is, you know, a market that sprung up around 10 years ago. And what these products allow you to do is exactly what the name sounds like you can buy a product now and pay for it over time. So the leaders in this space are affirmed Klarna and afterpay. Probably seen them in news recently, they've all been part of major IPOs and acquisitions. But the way it works is very simple. You can go to an e commerce website, let's say you want to buy a television and the television costs $1,000. Well, not everybody has $1,000 necessarily or wants to use a credit card with exorbitant interest rates. So what you would do is you would use a buy now pay later loan to purchase the product. And you can basically apply get underwritten and approved in about 30 seconds, at the point of sale, literally as you're checking out. So what would happen is you get approved, the money will be sent to the merchant by one of these companies, the merchant receives the $1,000, you then get the television, and you pay it off in installments, usually with some interest. Now, what's important to know about these loans is that they're very, very, very popular. So the CFPB Consumer Financial Protection Bureau just put out a report that said 56% of all Americans have used a buy now pay later loan to purchase a product online, which is unbelievable considering is an industry that's you know, not even a decade old. And one out of every five online ecommerce transactions today, or 20% of the market is purchased using Buy now pay later loans. So it's big, big business. And so what we've done is we've taken the best parts of that infrastructure, you've ripped out the worst part, which is of course, the interest payments, the consumer, I was about to say, yeah, we've taken that out. And what we've done is we've created the first ever philanthropic credit product, which allows someone instead of buying now and paying later to donate now and pay later or to give now and pay later. And so the way it effectively works is that you can go to your favorite nonprofits website, you let's decide, let's say you want to give them 100 bucks, you put in $100. And you basically get told, instead of giving $100 today, would you be able interested or open to splitting up that $100 over let's say 10 payments just to make the math very simple. And so you then split it up over 10 payments, however, the nonprofit receives the $100 today, and the donor gets the full tax deduction today for $100. Meanwhile, the donor pays nothing out of pocket today. And their first payment of $10 is due in 30 days from now, no fees, no interest, no late transaction costs, no hidden costs of any kind. So simply what you're doing is taking your donation the principle of it and spreading it out over payments. So it's more convenient and easier for the average person to pay over time. But we send all the money to the nonprofit, and we give the donor the full tax deduction right away.
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03:43Speaker 1
And it sounds it sounds awesome. And I guess that'd be honest, like it's been around in the for profit ecommerce ecosystem for so long. Why is it taking so long for this to come to nonprofits?
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03:58Speaker 2
Let's Why don't you it's very funny you say that, because when we were raising our venture capital round for this, I would talk to the VCs and all of them would be like, how has no one done this? Why like, like, I don't understand why you guys are supposed to do why didn't want to do before? And I'll give you my answer and then I'll give you what I think I'll give you my personal answer, then I'll give you what I think is a better answer. My personal answer is for a long time, Silicon Valley has ignored the philanthropic space. I mean, that's just the reality. If you look at where big innovation has occurred in the payment space in the technology world, most of it has to do with online banking payments and E commerce transactions. And I understand why that is these companies are in the business of making money. And the word nonprofit is literally in the title of right of nonprofit technology. It says nonprofit and so there's a strong misnomer that these companies can't be profitable can't be a business can't make money. However, what you know and I'm sure your listeners know is that when companies innovate in this marketplace, there's a huge amount of quote unquote profit they can make, as long as it's a sustainable and ethical fair business model. Because when I tell people all the time and they're shocked to hear this is that the nonprofit space as To find by the total amount of donations to US based nonprofits is basically the same size as the ecommerce space. Right. So last year, they were $484 billion of donations given to nonprofits. There are 1.7 million nonprofits in America, and over 200 million Americans give to nonprofits annually. And the larger the app, the average annual gift to a nonprofit in the United States is larger than the average online ecommerce transaction. So in the many ways the marketplaces are similar, one of them is saturated with credit and lending and technology products, which is the E commerce and banking world, the nonprofit space does not have that level of saturation when it comes to stuff like this. So I think that it's just been a space that's been ignored for a very long time. And the other reason, I'll tell you from more from a personal perspective, this is very, very hard to build a product like this, because not only do you need to build the technology, you need to secure a lending facility, because openly This is a lending product. So I can tell I can't get into the specific numbers, but we have a multimillionaire mean 10s of millions and more lending facility by an incredible bank foreigner that we have to community bank, Minnesota, who have you know, obviously taken a risk on us and say, Hey, we're gonna lend out a significant millions and millions of dollars worth of capital to donors who want to support their nonprofits. And that process and being regulated like a bank, and having to raise a big VC round to do this is just very, very difficult. So I think that's another barrier to entry for something like this.
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