Disruptive Business Models, Building in Stealth, and Simplifying Generosity, with Adam Nash of Daffy

Adam, welcome to the show.

Thanks for having me. Great to be here.

I'm excited to chat all about your company. There's so much to it with what you're doing and your background, your history for people who are not familiar. What are you doing with this company today, Adam?

Oh, Daffy.

That's the one.

Daffy is, you know, founding stories are always a little bit different, and they come from different directions. Daffy reflects a little bit of reflection on my part, So I started in fintech more than a decade ago, actually before I think fintech was even a word, let alone an investment area, because I always believed that computers can help people with their problems and helping people with financial problems seemed like one of the more important things we could do to help people in general. And it's why I've been passionate about the area for so long. But it occurred to me that we spend a lot of time helping people, helping people with their spending, helping people with saving, helping people with investing. But we hadn't applied that same logic, that same passion, that same energy to helping people give. And maybe it's because of the pandemic got us all thinking about our local communities and the differences between people who are doing well and not doing well. I'm a parent of 4. Teaching your children to give and watching how you go through that yourself and remembering how you were taught all came together with this idea of like, what if we used all of that energy all that technology, all that design influence to build an app that just helped people be more generous more often. And that's really where Daffy came from.

So for that, you mentioned your background in product and a number of different companies. This company, why start another company? I understand that the draw for this, this company, but when people have so many options in their career, they've done a lot of different things. I'm always curious, you could have like, you know, done anything at that time. Why another company? Why start another company?

Yeah, I think that's a great question. And I would love to give you a simple universal answer, but I think these things are very personal. I have been successful enough in my career that I could have done a number of things. And a lot of my good friends have moved on into investing or teaching or coaching or a number of different pursuits. But for me, I've always felt like one way you can really influence the world is with products. You know, when you build features, when you build capabilities, you're doing something that not everyone can do and not everyone has the advantages to do. But once people see a product, it's there. They have to think about it. They can decide they love it. They can decide they hate it, but it changes the conversation. And unfortunately, you can't really build great products, in my opinion, without building organizations and companies around them. I mean, this is one of the reasons I love entrepreneurship so much. Because it's not just building the machine, right? It's building the machine that builds the machine. You build organizations that innovate in an area. And so when I was thinking about different things I could do, I did consider a lot of different options, but I got really excited about this idea of building a company in this space, building a company whose mission from the get-go was to help people give, to help them be more generous, and realizing if we could build an organization that could go the distance, We might permanently change and hopefully amplify how generous people are and how they give the same way that back in the day, we had this crazy idea about building a site to help people own their reputation and relationships and own their careers in this crazy labor market. That's where LinkedIn really came from. The idea behind Wealthfront always resonated with me, this idea that software could help you invest your money for the long term in a way that avoided a lot of the problems we have when we try to do it ourselves, right? You know, software could help build in all those best practices that the wealthy get because they have financial advisors, et cetera, but most of us don't. And so I think Daffy came from the same place for me. I think as a founder, as an entrepreneur, it's not enough for you to think of it as a job or as a career. I think you really have to think about the impact you want to have and make sure that building a company is the way you want to have that impact? And for me, the answer was yes. I think that this space will benefit tremendously from having a successful organization with this mission and this focus.

With Daffy as well, in the early days, you mentioned on another show, you were in stealth initially with Daffy and building this out. What did that consist of in those early days? What were you doing to try to figure out what this model was going to be, what you're going to launch with? I'm curious about that too. Yeah.

Well, I think there's a couple of reasons for that. I mean, I have been around for a while, and so, you know, building in stealth is one of the ways to actually avoid too much input too early, right? To give the team time to really figure things out, to make mistakes, to iterate, to change ideas. I mean, originally with Daffy, when we raised the seed round, it was really just me and Alejandro, right? Alejandro, I had worked with at LinkedIn. He was one of my favorite engineers to work with. We had always wanted to do a company together. And so when we decided in 2020 to do it, We also decided that we were going to build it in stealth, build the team, et cetera. I mean, it's hard. The truth is stealth is not always a gift, right? From a recruiting standpoint, when it's hard to talk about what you're building publicly, you can't draw as many people to it. When people are looking online for evidence that you're a real company doing something real, they can't find it. One of the things I always loved about Silicon Valley, I grew up in Silicon Valley, is that In Silicon Valley, it was a little bit more acceptable to be in stealth. There's actually certain times when being in stealth makes you sound even better than you are. Stealth company, you're like, shh, it's a secret. Yeah, exactly. But for us, in fintech in particular, fintech has been so hot. One of the reasons we built in stealth was also just to avoid a lot of copycats and a lot of imitators coming in early. We wanted to launch a product we were proud of, and we're excited to compete, but we wanted to make sure that we had a product that we were ready to get behind before we revealed it to the world.

To that point, you mentioned on our show as well, talking about business models and just how important they are and worth spending the time on figuring out what that would be for companies. With this model, take me through the model behind Daffy, how this works. I'm curious about that as well, the business model side of things.

Yeah, it's a great question. Actually, I'm happy. It's true. As an angel investor, I've been investing in founders for over 10 years. Talking about business models is one of the more formative things, one of the more important things I like to talk to founders about because I learned through my career that business models have a lot of influence over the company you end up building, right? No matter what your ideals are, no matter what your principles are, no matter what you think, business models tend to shape organizations over time because what's going to happen if you're successful is your company is going to go from dozens of people to hundreds of people to thousands of people. They'll be smart people. They'll— some of them will have technical degrees, some of them have MBAs, some of them will come from different backgrounds, etc. But whatever you set as the goal, most companies orient around the customer, and they measure that relationship very often on how much money they make from customers, who their best customers are. And so I think business models are amazingly important, um, for founders, and I've argued that founders should be very selective and intentional about the business models they choose. For Daffy, it's actually very, very important because one of the most disruptive things about Daffy is the business model. Pretty much every player of significance in this space, these incumbents who provide donor-advised funds, are based on investment as the business model. And so just like most investment managers, they charge based on a percentage of assets under management. And so as a result, they've ended up over the decades really optimizing their organizations for the super wealthy. When you charge as a percentage of assets, there's just this uncomfortable truth that a $10 million account is really worth 1,000 times more to you than a $10,000 account, let alone a $100 account or something smaller. And so when I looked at this space, I was really shocked. I mean, we are in an industry where everyone's been thinking about subscriptions, everyone's been thinking about membership, everyone's been thinking about SaaS, And yet no one had really thought about how would you reinvent a donor-advised fund around the idea that it was people that mattered, not dollars. And so that was actually where we got the business model. Now, I have to admit to you, I wouldn't be as confident that we could do this if I hadn't been on the board of Acorns for the last 5 years and seen how they were able to build a simple application that helped people save more money by rounding up their spare change and turning that into a financial platform that now has almost 5 million paying subscribers. Unbelievable.

Wow.

And so I think watching Acorns develop, watching Wealthfront develop, watching the entire space go gave Alejandra and myself the confidence to believe that just maybe we could build a different type of platform here, a community dedicated for giving. where everyone was a member, the way that people are members of community centers or other nonprofits that they support. And so that's really how we thought about the business model for Daffy.

With that, and anytime you're innovating, inherently, you know, raising capital is interesting, regardless of any industry you're in. If it's something people understand, it's a little bit simpler in terms of you can kind of share that story. You have your experience and your history and your background and your career to build off of, but for doing a new model like this and kind of pushing the boundaries a bit more. What was that like getting people on board in terms of investors for this and what that was going to look like? I'm curious about that side of things too.

Well, it turns out in some ways, the more disruptive you are, the more unusual you are, the more contrarian you are, the harder it is, of course, to find investors who align. Investors are just people. This is not a purely automated process. And so as a result, there's a lot about selecting which investors, will even be willing to invest. One of the pieces of advice I have to give founders very often is just to remember that most investors won't want to go on the journey with you.

Yeah.

It doesn't fit their model. It's not an idea they're behind. The risks they don't understand. And by the way, that doesn't make the investors bad people. They're just not a fit for your company and what you're trying to build. I think when I raised money at Wealthfront, for example, several of the rounds, many of those rounds, I went through lists of hundreds of potential investors.

Yep.

And I'm fortunate enough in my career, I've been long enough that I actually know hundreds of investors. And yet in the end, I pitched very, very few of them, right? Maybe a half dozen or a dozen, trying to find the ones who are the best fit for this idea. The same thing applied for Daffy, right? I knew that I had to find investors who are willing to take a gamble on a new model, on a new sector. It's not like philanthropy is the hot fintech vertical that everyone's talking about in 2020, right? Right? You know, like, we all know the sectors where everyone's excited about, right? Like, oh, B2B debit cards, or, you know, oh, we're gonna get, you know, into alternative assets. And by the way, as an angel investor, I love this.

Yeah.

But for this, I needed a firm and I needed investors who were willing to take the leap. I needed mission-driven investors who realized that this wasn't gonna be an overnight success where you were just gonna look month over month. This was gonna be a platform that would take time to build. Um, and I needed someone who had that operational background to understand that. And so, I was fortunate, you know, I had worked with Ribbit Capital in the past. Um, Ribbit is one of these firms, first very early, made bets on fintech and crypto well before that was fashionable.

Yeah.

Um, Mickey and team have a lot of operational experience. They know how hard it is to build big platform businesses, and they're patient. And so, I was very lucky to have them kind of come in to lead the round. But if you look at our investor page, you'll see that there's a lot of individual investors who backed us. I think they were less financially motivated, to be honest, and more just excited to have a team actually try to tackle this problem. There's a lot of people who've done well in this industry, in technology, in fintech, who realize that there's a lot of problems that we haven't yet solved, that we haven't spent as much time on. And so the idea of focusing our efforts, a team like this, a high-quality team, on giving was something that a lot of individual angels were excited to, to take the leap on.

Yeah, that point is interesting with the angel side, because we see that with our angel community. We have like a 350-person angel community. And I've talked to many of them. It's not always financial motivation. It very much so is like, how are these companies impacting the world? How are they changing things? You know, how can my capital really influence this in some capacity? So you do see that with angels, oftentimes versus funds who have to stick to their thesis, and they have LPs. So limitations in that way. But getting some angels on board as well is really helpful because they can buy into the mission and vision for what you're doing. And one thing I'm curious about too, with what you've done already, how much has the research you've seen around giving influenced what you've done with Daffy, how you've built Daffy? I'm curious about that too.

Well, it's very interesting because Daffy is partially built on research around giving, but it's also partially based on research around just personal finance in general. And so I actually talked about this earlier this year when we talked about the generosity gap, this difference between how much money people want to give to charity versus what they actually give. I mean, the great thing about philanthropy is it's a huge sector. It's a huge sector in the US. It's a huge sector globally. In the US, as of 2020, for example, I think it was over $471 billion. given in the US just in that one year alone. It's 2.3% of GDP. It's actually quite a bit bigger than a number of sectors we think of as huge. I mean, all of agriculture, I think, is less than 1% of GDP in the US. And so it's a big market. So there's a lot there. The most fundamental research, though, actually came from the personal finance realm, which had to do with setting goals and automating the process to hit those goals. I think you and I both know that retirement savings, wouldn't work fundamentally if everyone just had to write a check or put money manually into an account whenever it occurred to them. That's not what you want. You want some money coming out of each and every paycheck, dollar-cost average into a diversified portfolio, low cost ideally, that's going to grow over time and be there for you when you need it when you retire. And so we applied a lot of that same research to giving, and we actually did find some research specifically from Stockholm focused on giving that people give 32% more when they pre-commit to the amount they want to give. And so, that's really what's designed into the Daffy product, right? If you download Daffy right now from the App Store, the first question we ask you is a very simple one. How much do you want to give every year?

Yeah.

And then, you can put some money aside every week, every month, every quarter. You pick one of 9 portfolios to have the money invested in, everything from Plain vanilla index funds all the way to crypto and everything in between. And then, of course, anytime you do want to give to a charity, you have this app in your pocket where you can easily kind of enter the number, enter the organization, and know that that money is going to get there. And so we try to make it as easy as possible for people to put money aside for giving because we believe that if you have the money put aside, it'll make it easier to give.

Yeah.

When, when it occurs to you.

Yeah. And I've used, by the way, Wealthfront for a rather long time period. And it is so easy. Then you just have it automated, just comes out, you just do it every day, you're already committed to it. And even the giving point, I think the organizations I've given to, Against Malaria Foundation, I'll call them out because they're amazing. Just the automated every month, same thing with like Charity Water, like just automate every month. So I don't think about it, just, it's taken out, you then you just donate because you're doing every month, you don't think about it, which is so easy with that. And With a company inherently like Daffy, how are you growing Daffy? What's worked on that front? Because obviously this is something that the impact is so tangible and so real as you get more people on board that I'm just curious as to how you've gone about growing it so far to this point in the last couple years.

Yeah. Well, I mean, we just launched a few months ago. We're not quite at a few years. We've been building for 2 years. Well, some things are always the same and some things change. I mean, the truth is some things about how you grow, The fact that word of mouth and people actually really loving your product is the most durable way to grow is a big deal. When we see those tweets, when we see those early customers of Daffy saying, I don't understand why no one else had built this before.

Yeah.

Like, this is all I wanted, right? We have customers who are excited just about this idea. They have half a dozen or so organizations they support and they worry, they forget, they get busy. And all they really want is to make sure that they're putting the money aside, that the money goes to the organizations they support. Because those organizations depend on that continuity. So we love those posts, et cetera. We do invest quite a bit in content, right? Where we try and write, this is an area that not everyone's given a lot of thought for. It reminds me of the early days for other types of saving. Even you mentioned Wealthfront, the early days of why, why put money into a system like this? Why not just pick individual stocks and hope the next one is the next Apple or Google, et cetera? And so we We invested a lot in Wealthfront in education, and we're doing that same thing here at Daffy. I will say the big difference with Daffy is that we're noticing is that people are advocates for the organizations they support, and they're more willing to share. So one of the features, of course, on Daffy is that when you make a donation to a charity, you have a chance to leave a public comment about why you give to it. And I read these notes. We share them on the pages for the organizations that we have. in the app and on the site, it's really amazing to see. I mean, the truth is we don't share enough of this with each other, right? These real human reasons that we give, the real reasons that causes speak to us. You find people talking about a loved one who passed away or maybe made it through an illness and the organizations that supported them and their family. You see people get behind causes that they think are systemic. where they want to reach in food insecurity, housing, a number of different efforts. One of the nonprofits we ran a campaign for last fall is focused on helping paying off the student loans for underrepresented minorities who are the first in their families to go to college. There are over a million charities in the US, and most of them speak to different people in different ways. And so that's a lot of what we're focused on, Daffy. It's not really us. We really want to connect people with each other. That's why we talk about it as a community. Our biggest bet for growth is that when people give, if they're given the opportunity to share that with each other, they'll motivate each other to be their better selves, their best selves.

And to that point too, with what you mentioned around the education piece and how that's, you know, creating content around this as well, I think you've said before, you know, there's really not enough personal finance education in the US. Like, I guess I'm curious about 2 things. One, as to why do you think that is? And I guess 2, what do you think there needs to be in terms of the education around personal finance and even education around giving? What's needed to kind of help people in that regard?

Yeah, those are, those are related topics, but a little bit different. I think personal finance education is something I've been passionate about for a very long time. You may know I now teach a class at Stanford University, last 5 years, Personal Finance for Engineers, which is a little bit of wish fulfillment on my part. That's the class I wish existed when I went to school but wasn't there.

Yeah.

And my hope, I basically open-sourced the material because my hope was if I can teach a personal finance class at Stanford and produce that content, that content will have enough credibility where other schools and organizations would borrow it. And my personal opinion, of course, is that college is actually very late to be teaching about personal finance. I would rather see it in middle schools across the country. I think the reasons that we don't invest in personal finance education is really twofold. One is it's not really considered an academic subject. And so based on how teachers set up their curriculum, et cetera, it's always a little bit of an uphill battle to push practical classes and practical training.

Yeah.

Probably to the detriment of our kids growing up, because there actually are a lot of practical skills that are worth learning when you're young to give you confidence when you go out in the world. But I also think as Americans in general, we're too uncomfortable talking about money. And there's a whole bunch of reasons for that, but that's not true everywhere. There are countries and cultures where people openly talk about how much they make, how hard they work, what the trade-offs of the career are. And in the US, because people are uncomfortable talking about money, most people end up learning things anecdotally. What we used to call at LinkedIn, the friends of your parents and the parents of your friends end up being this informal network of how you learn a lot of these things that aren't academic.

Yeah.

But let's be honest, that's not a great set of people for most of us.

Yeah.

And it leads to a lot of information that really isn't well-researched. I try and do what I can to push that. Around giving, I think the problem with giving is different. I think most of us actually grow up with authority figures in our life, parents, religious figures, teachers. Somewhere along the way, most of us learn that no matter what's going on in your life, that there are people less fortunate than yourself and that getting out of your own circumstances to help others is not just something you do for others, it's also you do it for yourself. It's a better way to live. And so I think that the idea of giving is taught, but somehow when we go out into the world and start working, et cetera, we treat giving as if it's only the playground of the super rich. I understand why I see tweets every day about who Jeff Bezos gave money to or what billionaire did this or endowed that. It's fine. I like reading that stuff as much as the next person. But it makes it seem like that's where most of the giving happens. And that's not true, right? Like every study that goes into this shows that actually most people give and believe in giving, and that actually people with less money proportionally give more, right? And they make that sacrifice. So I think there's a misperception. I think that affects the way we talk about it. And what that leaves most people with is without an idea of what they should be doing. I mean, one of the features we put into Daffy is we have a little calculator for people to help them think about how much should they give in a year. And there's no right answer to this, but we give people the usual things you would expect— percentage calculators so people can enter their income, you can put in an absolute amount. But we also license data to show people what the average household in their city gives to charity every year. Ooh, I like that. And you know what's so interesting about this is that When most people see that data, they realize that they've never seen that before. Like, we don't know.

I have no idea.

We don't know how much our friends give. We don't know how much our colleagues give. We probably don't even know how much our parents give. It falls in that same bucket where we don't talk about money enough, except at this point, it's really harmful because I think it's actually very hard to convince people to save for the future. It's actually an amazing personal finance win that we've gotten so many people to put money aside for retirement or put money aside for their kids' college education. But giving is important too, right? And we haven't done enough. So a lot of the work we've done at Daffy is trying to convince people that it really isn't that different, right? There's an account that you put money aside for retirement. It's a 401 at work or an IRA. There's an account for college savings, a 529 plan. Turns out there's an account for charity. It's a donor advised fund. We like to think that we've built, hopefully, the best one for most people to use and get started saving so that they can give.

I know we only have a few minutes left. You've been around, you said like 2 years of building in stealth initially, more recently launched a product, but what's next for Daffy then, Adam?

Oh, you're going to see us. Actually, this week, it's actually very fortuitous. This week, we ship new releases in the App Store every 2 weeks. The website updates every day, as it turns out. This week we're very excited. We finally— our big feature from a couple months ago, the Giving Goal, has been so popular we actually redesigned our home screen around it. So actually, if you download the app today, what you'll end up seeing is a much more forward interface that, yes, shows you you can add money, you can donate money. It shows you where you are with contributions, etc. But we now have that giving goal up front, almost like Apple Health, almost like a meter where, you know, like, hey, if I said I was going to give $1,000 to charity this year, hey, it's mid-May, where am I? With a little delight, I have to say, around what happens when you hit the goal, which I really enjoy. I mean, if we can make it fun to buy stocks and fun to buy things on Shopify, we can make it fun to give. The other feature is actually a small one, but it means a lot to me. We're rolling out this week is a prepared receipt for people so that if you are fortunate enough to work for a company that does employer matching, we've tried to make that super easy for you to take advantage of. You know, most employees don't take advantage of that company match for donations. It's actually something that HR departments at most companies worry about, that it's underutilized. And so we thought we could help with that with Daffy. Part of Daffy's proposition is that All your givings in one place, really useful at tax time. We said, what if we made it so that every single donation you have there, you don't have to worry about the nonprofit sending you a receipt or a letter in snail mail, etc.? Right there, every single donation, there's a little button you can press. You turn that in, you can know that the organization you support is now going to get twice as much money. And so that's a new feature this week that we're excited about. Long term, You'll just keep us innovate— see us innovating in this area. We think there's a lot to be done here, especially around this idea of inspiring others to give to the charities and causes you support. So you can look to us this year to build more functionality to let people share the causes they're excited about, share the organizations they're involved with, and explain why. Hopefully to help get a little bit more of that communication going between our friends and our colleagues. About who we give to.

Yeah. And also I just think of even like some of my friends, when you leave a tip and you try to leave a bigger tip than your friend, if they split the checks and you're like the competition, I saw my friend glancing over like a little bit more. Even that with giving is like great. Like people who are type A and like driven, like competitive people, like they want to give more than their friends. Like I guarantee like that same psychology stuff I feel like is great. So I love what you guys are doing with Daffy. I know we're out of time, but where's the best place for people to learn more about Daffy and connect with you as well, Adam?

Yeah, easiest place, just go to daffy.org. Right there, you can sign up right there. If you go to the App Store, just search for Daffy. The formal name for Daffy, of course, is the Daffy Charitable Fund. We are a 501 nonprofit. And but that's the best place to learn more. For me, you can of course reach me. It's just adamnash@daffy.org. So anyone who wants to give more or learn more about the product, feel free to contact me.

Adam, thank you so much for the time today. Really appreciate it.

Yeah, thank you.