Hello! Who are you and what business did you start?
My name is Daryl Hatton. I am a founder, CEO, and lead investor of a team that created ConnectionPoint in 2009 as an early entrant and innovative pioneer in the crowdfunding industry.
ConnectionPoint is an enterprise-class crowdfunding-as-a-service platform. We are best known for our flagship product FundRazr but have multiple brands including Sponsifi, CoCoPay, and Communitty. All of these products are built upon the foundation of our ConnectionPoint advanced digital fundraising platform.
- FundRazr helps nonprofits, charities, and sophisticated individual fundraisers create sustainable funding from their community of digital donors.
- Sponsifi empowers corporations to raise money for charities as part of their employee and customer engagement corporate social responsibility programs.
- CoCoPay is a crowd-financing solution that enables companies to help their customers finance the purchase of products using all-or-nothing crowdfunding models while simultaneously creating word-of-mouth marketing.
- Communitty will be launched in 4Q 2021. It is targeted at individuals who wish to manage their portfolio of social investments i.e. charitable projects from across the ConnectionPoint ecosystem where they are more actively involved as backers and advocates.
To date, we have helped almost 200,000 projects in 40+ countries raise over $200 million using our platform.
What's your backstory and how did you come up with the idea?
Over my career, I’ve started and run multiple companies. Before ConnectionPoint, together with a business partner, I created a company and a product in the document automation space called ReFORM. We merged that company into Optio Software of Atlanta, GA in the early ’90s. As CTO and part of the leadership team for Optio, we took it to a NASDAQ IPO in December 1999. In that year, according to Business Week, we were the 78th fastest growing small business in the US and one of the hottest IPOs of the year.
Post-Y2K, the company struggled as our customers slowed their investments in upgrading their ERP systems. We dug in deeply, pulled the company back from the brink, and reinforced our value proposition by reinventing the product line. This enabled us to sell at a decent multiple to our largest competitor in 2008.
After the transition, I decided to take the opportunity to leave. At the time, Facebook and other social networks were emerging as disrupters of the way we communicate. I was coaching my son’s lacrosse team and was struggling to get my players to attend practice. I emailed them and no-one would show up. I was also experimenting with social media and decided to test inviting them to practice using Facebook. To my surprise, most of them showed up.
My “aha moment” was to wonder if I could use Facebook to get them to pay their registration fees. The core idea for FundRazr was born. It quickly grew into the concept of using social media to help causes, corporations, and consumers work together to fund projects that are important to them.
I invested about a quarter of a million dollars from the proceeds I’d acquired from selling Optio and started ConnectionPoint. I was able to “borrow” the fully formed development team from one of the startups I was advising at the time to run experiments on how we could deliver the functionality needed within a social media environment. The experiments showed it could be done.
The company that employed the development team folded in late 2008 and I took them on immediately. The core of that team is still with us 11 years later and the longevity and depth of their experience in not just participating but creating a new market are outstanding.
Take us through the process of designing, prototyping, and manufacturing your first product.
In the beginning, as the inspiration for the project was to collect fees (and thereby scratch my own itch), the product design focused on creating a billing system that used social media for communication. Processing donations was just a “nice to have” addition to the functionality. We launched in September of 2009 with the help of PayPal who were excited to showcase customers like us who were using their newly released Adaptive Payments APIs.
Sadly, over the next few months, Facebook and social gaming company Zinga ended up in a fight for control of the Facebook newsfeed and user experience. To clean up the situation, over the course of eight weeks, Facebook clamped down and cut-off all third-party developer access to some of their APIs. We needed these APIs for our app functionality. By New Year’s Eve 2009, it was clear that our entire value proposition had been destroyed and I had to flush the first version of our product down the drain. A good stiff drink of scotch helped me find the courage…
A key takeaway: Be careful when you base your product completely on single supplier platforms outside of your control. Have a plan for what you’ll do if they no longer want to help you.
Be careful when you base your product completely on single supplier platforms outside of your control. Have a plan for what you’ll do if they no longer want to help you.
Fortunately for us, PayPal was in the same situation and was struggling to keep their social media payments app working within the highly volatile Facebook environment. They recognized our development skills, fundraising, and social media expertise and offered to help us design and market a new and improved FundRazr but focused on personal or group fundraising. With this incredible support backing us, we got to work on the new version and haven’t looked back.
Describe the process of launching the business.
Given my track record with previous companies, I was able to raise some additional “love money” from friends and family to help me deal with the financial impact of scrubbing the first version of the product. I had already gone a year without a salary in getting the company off the ground and was facing another year or more before revenue would enable me to pay for my whole team and hopefully myself. I financed many of our activities using personal credit cards and loans. I’ve joked for years that if you look closely at the finances of the company, you can see the outline of my house.
Fortunately, with everything we learned from building the first version of FundRazr, we were in a much better position to create the new version. We launched what we internally called “FundRazr Lite” in July of 2010 and, with PayPal’s marketing help, had customers within the first hours of turning it on.
At the time, we only had a vague idea of why customers would want to use the system. There was an obvious, logical reason but we truly didn’t understand the much-more-important emotional reasons. For the next few weeks, we printed out screenshots of the more interesting campaigns that customers were starting and papered the walls of our boardroom with them. We studied them trying to not only understand the patterns but also to try to figure out how we could target new prospective customers.
It was only after receiving a letter from a customer thanking us for helping save her daughter’s life by enabling them to raise the money they needed to get her emergency medical treatment that it became clear: we helped customers solve critical funding issues by _quickly _ tapping into their social networks for financial support. It is obvious in retrospect but eluded us for a long time.
Since launch, what has worked to attract and retain customers?
Our product was truly innovative when we launched in that it enabled a fully functional crowdfunding campaign to live within the Facebook newsfeed. This attracted lots of interest from the industry press. We worked this press cycle and also punched well above our weight (we only had eight people) in our ability to participate in key partnerships with PayPal and Facebook.
For example, we were part of Facebook’s closed beta program for the launch of the Facebook timeline feature. In the next photo, you can see our logo alongside many great companies on stage behind Mark Zuckerberg at the launch of their new feature. The media attention contributed significantly to our inbound SEO traffic and early customer acquisition.
Unfortunately, in the press cycle, when you’re hot, you’re hot. And then, you’re not.
We were slow to transition our press visibility from ourselves (which was fading as crowdfunding became more common) to our customers’ stories. Our competitor GoFundMe did a masterful job of this transition and started to pull ahead in search rankings. We were never able to make up the lost ground and they achieved a dominant market position with brand name recognition driving much of their customer acquisition success.
Unfortunately, in the press cycle, when you’re hot, you’re hot. And then, you’re not.
With customer acquisition now entirely based on brand, which is a game we hadn’t played well so far, we had to look hard at our value proposition and who could be our best customers. We also needed a way to cost-effectively reach customers who were searching for what we offered. It is difficult to put an ad in front of a person who is about to discover that they have cancer and needs help funding their treatment. It is much easier to create messaging and put an ad in front of a nonprofit that has a recurring need for funding.
Nonprofits were coming to us and signing up as individuals to raise money for their projects. We paid attention to their needs and pivoted our development efforts to focus on solving their fundraising problems. With their help, we’ve now built one of the most advanced digital fundraising platforms in the world. It is much simpler to market to them because we have a clear, differentiated value proposition and are well-positioned to tap into the industry trend of the shift from offline to digital donors. We still allow individuals who are looking for more effective social fundraising tools to use our platform. They generate significant and valuable revenue. But with FundRazr our focus is to grow our nonprofit business.
Your product plans are a dream. Customer needs are the reality.
A key takeaway from this: Be relentless in your pursuit of differentiated value and be willing to pivot the business and change your customer focus based on what you learn from your customers. Your product plans are a dream. Customer needs are the reality.
How are you doing today and what does the future look like?
The COVID19 pandemic is both a headwind and tailwind for our business. We don’t have a traditional SaaS business model in that we don’t charge setup or monthly fees to use our system. We only make money when our customers raise money with us. Many of our nonprofit customers raise money using in-person events. These were almost universally canceled due to the lockdowns so we suffered from significant lost revenue.
However, the loss of this event revenue to the nonprofits catalyzed their plans to diversify their revenue with other forms of digital fundraising. This is a sweet spot for us. The pandemic has accelerated the systemic change in our market by as much as five years. As a result, we ended the year with revenue up over 30% and anticipate much bigger growth in 2021.
Now that FundRazr is growing so well, it is time to turn our attention to leveraging the value of our platform across more markets. We are doing that directly with our Sponsifi, CoCoPay, and later this year, Communitty brands, where we deliver similar functionality tailored to the needs of new markets.
We have also opened up our platform using a white label strategy and are working with a carefully selected group of companies as integration and distribution partners into other new markets with new value propositions. Each of these companies strengthens the value of the entire ecosystem and allows us to grow at much faster rates than we could achieve ourselves.
Through starting the business, have you learned anything particularly helpful or advantageous?
One of the more important things we’ve learned (the hard way) is that, in the beginning, it really helps to focus intensely on a subset of the market to help you get a foothold. When creating a platform, it is very alluring to try to make the value proposition as broad as possible. This can help with attracting funding from VC players who want to make a big bet on a massive market. However, if you can’t or don’t want to play the VC game, the tighter focus can help you achieve profitable revenue faster and grow without outside investment.
We made the mistake early on of trying to be too broad in our approach. Our motto was “Fund Anything. Fund Everything.” After our first year “stumble”, I found it impossible to attract bigger investor interest so had to bootstrap the rest of our growth. We only really started to be scalable and successful when we restricted our focus to the nonprofit portion of the crowdfunding market. The joy of profitability is that it enables you to grow without chasing further investment. That allows you to take in investment when it best suits you and not be forced to do it just to stay alive.
When creating a platform, it is very alluring to try to make the value proposition as broad as possible. If you can’t or don’t want to play the VC game, the tighter focus can help you achieve profitable revenue faster and grow without outside investment.
That didn’t mean that we gave up on the big vision. As you’ve seen, it has been part of our story almost from day one. It just means that we have focused on building out one pillar of the overall vision and didn’t try to invest in all of the components at once. Now that we have succeeded in that first pillar, we can self-fund the expansion of the vision and the product footprint. Given that our underlying value is in a multi-sided marketplace ecosystem of causes, corporations, and consumers working together to fund projects, this technique has allowed us to build our system for a fraction of the cost of competing, investor-backed approaches.
What platform/tools do you use for your business?
Our platform runs on Amazon Web Services. As a former CTO, I absolutely love the scalability and cost-effectiveness of delivering our service this way. I never worry about our infrastructure and that is a huge benefit in planning for growth.
We use Jira and Confluence for our product management. It has taken a while to establish the discipline that supports the rapid evolution of the product depth and breadth we’ve been aiming for but the efforts are paying off in more consistency in the app and a better understanding in the team of our value propositions and design guidelines.
What have been the most influential books, podcasts, or other resources?
I like the thought process of the startup companies associated with First Round Capital so I follow their First Round Review.
I also challenge myself to keep up with some of the software industry thought leaders. For example, Version One VC has a great Guide To Marketplaces. Even though some of what they do is not directly relevant to my business, I find that following their analysis of their portfolio companies and models makes me look at problems differently and helpfully.
Finally, I get a ton of value out of TED.com. As entrepreneurs, it is really important to try to be more well-rounded as individuals. Paying attention from time to time to some of the really impressive new ideas on art, science, nature, humanity, and society helps me keep my business in perspective and hopefully stay humble.
Advice for other entrepreneurs who want to get started or are just starting?
- Always be generous, transparent, and helpful to your customers, suppliers, investors, and especially your team. It builds trust and trust is the bedrock of great relationships that generate outstanding results.
- Surround yourself with people who genuinely want you to win. Return the favor.
- Make as many decisions as you can be based on achieving the best long-term, not short-term, result. Starting a company always takes longer than you want so a long-term focus makes a big difference.
- In everything you do, make sure you find the win for others as well as the win for you. Many of the biggest breakthroughs in our business started with asking the question, “How can we help?” without knowing what was in it for us.
- As a leader, your job is to bring out the best in your team. You aren’t in competition with them so the more you help them win, the more you win.
Are you looking to hire for certain positions right now?
We are hiring Customer Success Managers and Senior Developers at the moment. Later this year I expect we’ll add more capacity to our Marketing and Sales teams.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
Discover the best strategies of successful business owners
Join our newsletter and receive our handcrafted recap with the best insights shared by founders in Starter Story each week.
Useful, convenient, and free:
Are you ready to boost your revenue?
Using Klaviyo will open up a massive, untapped sales channel and bring you closer to your customers!
Level up your email marketing with Klaviyo!