In September we announced a Series A funding round from Payroc that allows our company to accelerate the growth of both RunSignup and GiveSignup. In our typical openness, we wanted to share why GiveSignup is a key and complementary initiative to drive that growth. Allison Bickel, GiveSignup’s Lead, wrote this as an assignment for one of her Wharton Executive MBA classes.
RunSignup was founded in 2010 to create technology for endurance events. Today, RunSignup is the largest technology provider to races in the US, a market valued at $1 billion annual revenue. More than 21,000 races, supporting over 8,500 nonprofits and 6 million participants, use RunSignup’s free and integrated solution to save time, grow their events, and raise more.
GiveSignup is a new strategic initiative that leverages RunSignup’s highly scalable architecture, vertical SaaS technology stack, low overhead and high volume business model, and brand equity with 8,500 current nonprofit customers to introduce new features that help nonprofits raise more money, including a new ticketing platform, donation websites, virtual challenges, and standalone fundraising campaigns.
While RunSignup is the dominant company in the small endurance market, GiveSignup is a new entrant to the much larger nonprofit software space that serves a $50+ billion US market of annual online giving. The nonprofit software industry is fragmented and characterized by high rivalry that drives down profitability, high barriers to entry, weak substitutes, weak suppliers, moderate buyers, and significant complementors.
- Intensity of Rivalry: High
Blackbaud is the legacy giant in the market and offers a full CRM with a suite of integrated features. Several PE-backed firms such as Classy and Funraise have entered the market with similar solutions and business models, along with dozens of smaller players. These platforms are broad and their features aren’t deep. They charge high subscription fees to cover support costs due to the platforms’ complexity, as well as high processing fees to generate more revenue. Intense rivalry drives down profits because these companies compete over customer acquisition and overly broad technology stacks. There are also many consultant solutions that offer custom-built platforms and consulting services; however, this business model is neither scalable nor profitable. Horizontal SaaS platforms like Eventbrite serve a much broader market and are used by nonprofits for specific needs like ticketing but aren’t purpose-built for nonprofits.
- Threat of Substitutes: Low
While partial substitutes exist, such as offline donations, offline registration, and PayPal donations, these substitutes do not provide a full solution for nonprofits to raise money.
- Barriers to Entry: High
Platforms have become very comprehensive and it takes tens of years to develop a technology stack that is robust enough to be competitive. There are significant R&D costs to develop a platform, along with regulatory overhead like PCI compliance. Establishing a brand identity takes time, and with a crowded market it is difficult for nonprofits to learn about new solutions without significant customer acquisition spend.
- Supplier Power – Low
Payment processors are the key supplier for nonprofit software companies. Their bargaining power is low because many options exist; for example, GiveSignup is contracting with two payment processors to leverage one against the other for lower fees. Similarly, there are many cloud service providers that keep prices low.
- Buyer Power – Moderate
Buyers have many choices and nonprofit software platforms have custom pricing, giving buyers power to leverage competitors to negotiate lower prices and rates. Additionally, a large nonprofit may represent a significant percent of a vendor’s book of business, giving the buyer significant power to dictate product priorities and service levels. Buyer power is mitigated by long and binding contracts, the expense of data migration to another platform, and learning costs associated with a new technology.
- Complementors – Significant
Complementors are solutions that easily integrate via API with nonprofit software. Standalone CRM products like Salesforce, Kindful, and Bloomerang increase industry rivalry by decreasing the product differentiation of all-in-one platforms. Other API integrations like the Facebook Fundraiser API are complementary because they give nonprofits more tools and a broader reach to seamlessly raise money across many platforms.
GiveSignup can profitably enter the nonprofit technology market at scale because RunSignup’s existing customer base of 8,500 nonprofits reduces rivalry threat, RunSignup’s mature platform lets GiveSignup leapfrog high barriers to entry, and a unique business model minimizes buyer power while exploiting complementors. First and foremost, GiveSignup enters the market with a customer base of 8,500 nonprofits that trust the brand and already have a payment account on the platform, making it easy to cross-sell new features as well as collect feedback from established customer relationships to inform product development. This leads to low customer acquisition costs and a strong product offering, reducing high rivalry and optimizing profitability. In addition, GiveSignup leverages RunSignup’s mature platform, payments system, and architecture, which significantly lowers R&D costs and leapfrogs the tens of years it takes to build a competitive product offering. Furthermore, GiveSignup’s business model is high-volume transactions with a very long tail so that no single customer represents a meaningful percentage of the business, resulting in low buyer power. This is reinforced by an open contract that lets customers leave at any time and prioritization of product development based on aggregate needs rather than the desires of a single customer. Finally, one of the most important philosophies as well as technologies of GiveSignup is an open platform and specifically an open API, which leverages complementary products like CRMs as a competitive advantage rather than a rival.
GiveSignup has a significant advantage in generating willingness to pay (WTP) because of consistent new feature releases that help nonprofits generate revenue. When COVID hit, GiveSignup quickly developed and released a new virtual challenge platform that enabled nonprofits to raise money despite canceled in-person events. This led to a 50% increase in donation volume and a 30% increase in new nonprofit payment accounts set up on the platform in April-September 2020 compared to 2019. In addition to confidence in GiveSignup’s ability to innovate and create purpose-built features, nonprofits’ trust in RunSignup’s secure platform, on-time payments, and customer service is a significant driver of WTP for new GiveSignup features. Furthermore, the only cost to use GiveSignup is transaction-based processing fees that can be passed to the donor/participant. This pricing model lowers nonprofits’ costs and increases WTP.
While GiveSignup has its own team of developers, salespeople, and support, the company has a connected and highly efficient delivery model for development, marketing and sales, and customer service that lowers overall costs. Complementarities are ingrained in the overall activity system, with a single SaaS platform that makes it easy for developers to release new features and for nonprofits to use the technology with no costly human interaction. GiveSignup is a recurring revenue SaaS business that depends on a low CAC to high LTV ratio. The platform’s ease of use and purpose-built features combined with no onboarding or subscription costs drive a high transaction volume. Cross-selling new GiveSignup features to 8,500 RunSignup nonprofit customers lowers CAC with warm leads and low sales overhead, and increases LTV as nonprofits process more transactions through ticketed events, donations, and campaigns. This drives GiveSignup’s costs down as they are spread across a higher volume of revenue.
GiveSignup increases RunSignup’s interactions with nonprofit customers from one or several endurance fundraisers per year to many events, donations, and campaigns, which generates more revenue while fixed costs remain constant and sales, marketing, and development costs become more efficient, resulting in more profit. Ultimately, RunSignup needs a strategy that lets the company grow beyond the small endurance market while maintaining its competitive advantage, and GiveSignup needs RunSignup’s mature platform and unique business model to enter a competitive industry. Built on a technology stack that’s not only highly scalable and efficient but also unique and complex from solving thousands of customers’ issues, GiveSignup has an inimitable platform and a long-term sustainable competitive advantage in a competitive market with high barriers to entry.