Lessons learned from Tyve, an effective giving startup

By Clifford @ 2022-12-18T17:37 (+113)

In 2019 I tried building a startup to promote effective giving in workplaces. It didn’t work out as a for-profit but looks somewhat promising as a non-profit and has facilitated £630k in donations (around £160k of this went to Founders Pledge recommended charities). In this post, I share the story and my lessons learned.

Since writing this draft, I’m excited that a new CEO with vastly more product experience than me has taken on Tyve as a nonprofit.

HT to Sebastien who I met at EAG 2020 and suggested I write up a post-mortem and to Lizka for encouraging me to post as Draft Amnesty Day 2 years later.

Main learnings:

1. Fall in love with the problem, not the solution
2. I’d prefer to do similar projects as nonprofits in the future
3. Probably don’t try to solve a lack of effective giving with technology
4. Fundraising at workplaces can work decently well but I’m not sure EA/tech helps
5. Don’t confuse “this should exist” with “people want this to exist”
6. Ignore all the above advice

Brief history

I started Tyve (like Tithe with a funky spelling) after working at Founders Pledge in September 2019.

The idea was to encourage employees to give a % of their income to charities and we’d encourage them to give effectively.

My startup pitch was as follows:

• millennial employees care about purpose and employers need to find better ways of delivering this
• one way they could do this would be by supporting people in giving to causes they care about
• there’s a nifty system in the UK called payroll giving where the employer can play a helpful role in enabling employees to donate pre-tax to charity through their payroll
• payroll giving appeared to be a potentially untapped market. Only 2% of people in the UK give through payroll and apparently this is 30% in the US
• the existing players all had terrible UX and we were going to fix it and create a modern experience (like challenger banks had done to high street banks)
• we were also going to use the cost-effective estimates of our recommended charities to quantify the good they were doing, making it more satisfying

I now feel pretty iffy about most of the assumptions and the argument - I’d like to think this is based on what I learnt but I also think I could have realised at the time that some of this argument is pretty weak.

• I was relatively sceptical about donation apps but I thought I might have found a problem (small startups have employees who want to feel like they’re at a “good” company but doing CSR at small startups is an effort). I thought a cheap alternative would be to provide a spruced-up version of payroll giving.
• I built an MVP with my cofounder Ben O (a great software developer who I met at EAG Oxford 2016 with the explicit intention to find cofounders - kudos to that conference).
• I got 5 companies whose founders I knew well signed up and paying for the beta. We were pretty excited as people were giving unusual high amounts (thanks to anchoring people on % and targeting fairly well-paid startup employees) and about 50% was going to charities we’d recommended (either based on GiveWell or Founders Pledge).
• I quit my job and then raised £150k SEIS from well-known angel investors in the UK.
• It was a buzz raising this money from people who are considered the best in the biz. I wangled a beautiful plant-filled office in London and were able to pay Ben O, myself and Sam (our designer) a basic salary.
• For the first few months, we made the product work properly and signed up 10 more companies (mainly from my existing network).
• Then we had to find more customers and go further outside my network.
• This was pretty brutal as we discovered what we’d built was very much a “nice to have” for these companies. At one point we spent 14 days straight copying and pasting LinkedIn messages every hour of the working day to CEOs and HR people of every UK startup under 500 employees.
• When this didn’t work, we looked to pivot and find other problems HR people had that we could somehow solve with something impactful. We had a couple of ideas but nothing where we felt we had a “right to win” and thought it made sense to dedicate ourselves to. (I think the most plausible contenders were helping startups recruit talent from lower-income countries and helping employees have more fulfilling careers.)
• We eventually returned the remaining funds to investors, transitioned the company to a nonprofit and continue to run the company on a volunteer basis.
• It currently has £15,000 amount going through each month from 150 users. About 25% goes to recommended charities.
• It’s not clear how much of this is counterfactual - I had the sense that a good number of people just chose our top climate charity which was exciting but I also noticed a few people choosing EA EA-adjacent charities (e.g. GiveDirectly) who we hadn’t recommended so they must have heard about the charities separately and may have already had direct debits set up.

What was promising?

• Asking people to donate works
• Suggesting charities works
• Anchoring people on percentages seemed to work however people wanted to give fixed donations
• Getting recurring donations

What didn’t work?

• The cost of recruiting users was pretty high because we had to sell to both the employer and then the employee to sign up.
• Couldn’t get enough workplaces to say yes (might have been better if we weren’t charging)

Lessons

Lesson 1: Fall in love with the problem, not the solution

This is a standard startup lesson we learnt the hard way. The problem we personally cared about was how to get more money to EA charities but the business problem we were solving was how to help HR teams attract and retain talent. When we found out that HR people didn’t think workplace giving was a good way to do this we were stuck. We could either try and solve the HR problem another way but not be motivated by our work or we could go hunting for another problem that Payroll giving could help with but this is ill-advised.

Another way I’ve heard this lesson described is: make sure your impact is in “lockstep” with your profit.

Example 1 - Not in lockstep

Tyve - Payroll giving company.

Make money by: helping HR people hire mission-driven talent

Have impact by: getting employees to give to effective charities

Example 2 - In lockstep

Hire.ly (just made this up) - Recruitment firm for software developers in low-income countries.

Make money by: getting people in low-income countries high-paying jobs

Have impact by: getting people in low-income countries high-paying jobs

Lesson 2: I’d prefer to do similar projects as nonprofits in the future

There are some tempting advantages to setting up as a for-profit:

1. It can be easier to raise money, especially from counterfactual sources (the money wouldn’t otherwise be spent on good things) and in later rounds, it can be easier to get very large amounts of money, even if your business is still unproven.
2. It can be easier to hire the best talent because you can reward them with upside/Equity.
3. It can feel more exciting and perhaps more legible to outsiders (perhaps starting a for-profit sounds more impressive than starting a nonprofit).

As described above, our personal goal was to move as much money as possible to the most effective charities. Our commercial goal was to make money for businesses. If we had set up as a nonprofit and raised money from EA funders with the goal of getting a multiplier on donations, then we could have focused relentlessly on the best way to achieve this goal. When we failed to solve someone from HRs business problem we could have offered the product free and just instead focused on fundraising as much as possible. Alternati,vely we could have pivoted towards, for example, some kind of donation app. However, we couldn’t do this because it wasn’t a way to make money.

Lesson 3 - Probably don’t try to solve lack of effective giving with technology

I have often made and heard the following pitch:

• Why don’t people give to effective charities?
• People all want to do good
• They also want to do more good with the same donations
• We just need to make it easier for them to give
• And we’ll gamify it so that they all donate…
• And then we’ll show them the impact of their donations which will motivate them to give more

I think this is mistaken. The reason people don’t give to charity is not due to ease. If I want to give to charity, I can go to AMFs website and get this done in minutes.

Nudges and gamification can make a difference on the margin but it’s not a core product. If it is, then you’ve just made a game with a charity extra.

I think if the problem you’re trying to solve is “I feel guilty about being rich” - there’s a good, cheap way to solve this for most people: don’t think about it.

Lesson 4 - Fundraising at workplaces can work decently well but I’m not sure EA/tech helps

I think One for the world / High Impact Professionals have shown this. I think they raised more through a couple of fundraisers than we did through all the people using Tyve over a year.

Lesson 5 - Don’t confuse “this should exist” with “people want this to exist”

I think it can be tempting to see a way you want the world to be different: “How great would it be if everyone started being more thoughtful about their donations and gave more systematically and effectively? They’d probably be more satisfied too, we just need to get them to do it…”

This isn’t a good basis for a startup idea unless it leads you to find a problem your users actually have.

Lesson 6 - Ignore all the above, maybe you can be the one to do it right

• There’s now a successful-looking version of this called Deed
• Looks like Deed just crossed 2.9M in ARR on another 10M in funding
• Maybe it’s possible and I didn’t execute well, the timing was bad or maybe this would work much better in the US.
• I’m relatively optimistic about someone doing this as a nonprofit but I suspect there could be better fundraising projects to do with your time.