If you're looking to maximize your fundraising efforts, DonorBox's online donation platform is designed to help you reach your fundraising goals with ease. Discover the world of simplified, seamless fundraising at donorbox.org. DonorBox, helping you help others. Welcome back to the Non-Profit Hub Podcast, I'm your host Megan Speer, and along with me today is Pat Jeffy, who's the CEO and co-founder of The Giving Block. So excited to dig into this conversation on crypto, because I feel like it's a topic that we do get a lot of questions about, and you are certainly the expert in the matter, so I'm excited to dig in. Pat, welcome to the show. Yeah, thanks so much for having me. So I was telling you a little bit before we got on here that I, for me personally, this conversation is two and a half years in the making, because I ended up having to present about crypto for non-profits at a collaborative meeting for non-profit leaders two and a half years ago, and when I initially said that I was interested in the topic, I did not mean that I was going to present on it. The agenda came out, and not only was I presenting on it, but you were on the attendee list, and I thought, "Well, this is the dumbest thing I've ever seen. Why would we let me talk about something I don't know when Pat Jeffy is going to be in the room?" But I've never been so happy that you were not able to attend a conference. I was really excited to not have you there, but I feel like I still have some of the same questions about crypto for non-profits today that I did two and a half years ago. So excited to dig into this with you. Start off and introduce yourself to our audience. Give us a little background about your work in the non-profit space, as well as the giving block and what you guys are up to. Yeah, definitely. So no technical background. I started off coming out of school with a politics degree, worked with pharmaceutical companies. Perfect timing is right when the opioid crisis started. I was like a month into that, and I was like, "This is the perfect industry to be working for." So it was easy to sleep, very cool, but now I worked there for a couple of months through that, and I was like, "This doesn't feel like the coolest career trajectory." And I ended up moving over to one of the non-profits that we worked with, because we did alliance development. We were working with patient organizations to go to Capitol Hill and lobby for drugs to be listed in Medicare Part D or trying to get NIH funding, clinical pathways, the FDA, stuff like that. So I ended up at the Lupus Foundation, which was one of the volunteer health associations, and I got brought in as the integration director, which was they had a new CEO who was figuring out how to run non-profits and needed a number two, came as a pharma consultant. We got to really reconstruct how the fundraising priorities worked, and I learned pretty quickly how non-profits operated, how to build a fundraising plan, or it says all that stuff. So it was a great crash force. And right around that time, I had a friend who got me into the trade in crypto. Ultimately, if you came by my co-founder, Alex, crypto ran up a bunch, and we saw a couple high-profile donations happen in the news. Ashton Kutcher went on, "Oh, the generous was sending crypto to her charity and $55 million from Bitcoin from an anonymous donor, the Pineapple Fund went to non-profits, 50 million months of universities. We were like, "Okay, this is cool." And quickly found out there was a tax incentive to give this stuff just like stocks. We tried to set my charity up to take it and quickly figured out that it's not easy. The products weren't designed for non-profits, there were no tax receipts, no auto-sell, and that was it. We built a Wix site, started working on a product and the rest is history. I love it. So let's start this conversation at the very base 101. I was over the weekend, I was talking to my parents who do not understand anything about blockchain, do not understand crypto at all. And I was mentioning that we were going to do this podcast. And my dad was like, "Well, what do they actually give them? What are they like? Is it a certificate? What do you give them?" And I was like, "Oh, wow, we are so far off the path." So let's pretend that you're talking to my dad instead. Help us understand the basic of what crypto is and what it is not. Yeah. Definitely. I guess first and foremost, a deep technical understanding of cryptocurrency is not necessary in dough. A lot of people at conferences try to make it seem like it is. Most people, again, trading, that's right, but even owning stocks, they're not deeply familiar with the Federal Reserve and the macroeconomic dynamics of different central banks, raising and lowering interest rates, and then the company is doing stock splits and just all that stuff. So it's like, cryptocurrency is first and foremost just a mode of investing for a lot of people. The term cryptocurrency can be a bit of a misnomer. The original advent of it was it was supposed to be just a code-based monetary system when they invented Bitcoin back in 2009, they wanted the ability to send a value asset back and forth between people without the need for intermediaries. So you don't need a bank, you don't need lawyers, you don't need people to update spreadsheet or approve a transaction, you just need to know that money is going to get where it needs to go. So it's a bunch of computers that are cracking cryptographic riddles. And when you unlock those riddles, it releases a message that says, "Pat would like to send Megan one Bitcoin," or vice versa, they agree on that within a matter of seconds. The Bitcoin is in your wallet instead of mine and it shows up on the network. And if you wanted to change literally any of those transaction records, it doesn't take over more than half of the computers in the world that are operating on the Bitcoin network. So the bigger it's gotten, the more secure it gets, it's literally impossible to pretend money somewhere that it isn't, to cook the books like banks do where they pretend money went somewhere when it didn't, or to take money out of somebody's wallet. It's this really bulletproof digital financial system where things go where they're meant to go and they sit where they're meant to sit. No one can alter any of those things, so people have a lot of trust in it. When it comes to sending that to a charity, all that means for the nonprofit is there are people in the world at this point, the estimates are close to 600 million people worldwide, that's the population of North America for context, who trade this stuff or own it or use it. Sometimes these people want to send it to a nonprofit because they don't pay taxes on the crypto they donate just like a stock, and all that means is that the nonprofit needs to have ultimately some sort of wallet address, usually often an exchange account where the donor can send almost like a bank transfer. And then that cryptocurrency just needs to sell for US dollars just like if you had stock in a fidelity account, in this case it's an automatic program. So to a charity it's really giving people who use this stuff and trade it, they're interested in it, the ability to send it to them, and then just knowing that it's automatically can convert to the US dollars that the charity ultimately uses, they don't need to worry about price volatility, what to do with it, will it go up, will it go down, which ones do we take, all that good stuff. So let me ask a question as a follow up to that because we are currently, as you and I are recording this and it won't come out for a couple of weeks, but as you and I are recording this, we've got a lot of headlines about stocks that are plummeting and a lot of volatility in the markets, does that impact crypto or what does the market look like on that side? Yeah, big time. So Bitcoin that's off cryptocurrency when it was invented, it's supposed to be like a store of value, right, it's supposed to be kind of outside of that ecosystem. The reason for that is you can't make more of it, so one of the beautiful parts of this code-based system that can alter is there's a set number of units, so that scarcity is part of why it's so valuable and people are like, how come one Bitcoin is worth $50, $60, $70,000 at one point in time? It's because just like gold or real estate, there's scarcity to it that's natural and because it's a bulletproof code system that no one can alter, people can have the equivalent of gold but be able to move it anywhere in the world in a matter of seconds into exit those positions with a lot of liquidity. So it's a really powerful financial instrument. However, because there's so many people betting on the price going in one direction or the other, it doesn't always operate like a store of value, it tends to be correlated to things like the stock market and the macroeconomic environments if there is more money going into investments, cryptocurrencies like Bitcoin, Ethereum, et cetera, tend to go up and when the market is shaky in the same way people will run from stocks and try to move into things like bonds or cash to ride out that volatility, people will do the same in cryptocurrency. So it's not a one to one correlation, there's times where crypto is going up and stuff works going down and vice versa but generally speaking, a strong macro economic environment is bullish for cryptocurrencies for sure. And is that where we are right now, would you say? It's a bit of a mixed bag, what's interesting is my friends and family and folks, I only get texts from them when there's a moment like this where Bitcoin was at like 70,000 a unit and then it goes to like 50,000 and they're like, oh, you must have gotten like crushed because it's like, I don't like that type of a movement in the market of course but Bitcoin is up, I think like 95% in the last 12 months still, like it's on the long term, people who have held cryptocurrency for extended periods, it's not financial advice also, like anything can go away or get crushed but it's outperformed every other asset class over the last five years, 10 years, it's been the top performing asset class, it beats stocks real estate, everything else. If you only buy it when it's in the news, we're probably at or near all time highs and if you sell things when they're going down because you're scared, it's probably not the type of investing for you, you like to buy a little bit over a large period of time averaging into it and you hold it through periods of volatility, it's not a really good job, there's like $2 trillion or so invested in cryptocurrency today, so it's a big asset class. On the year, cryptocurrencies have done pretty good overall, of course, about doubling but yeah, recently with that carry trade in Japan and some of the stuff we're seeing in the markets, there's been kind of a softening of the sentiments and I guess we'll see with the US jobs report and then the Fed cutting interest rates and macro factors to definitely push in one direction or the other. So before we move into kind of how strategies that nonprofits need to be thinking about around that, let's ask one final question on the technical side, if you will. So the ones that you've referenced so far would be Bitcoin and Ethereum. I feel like I've seen a headline after headline popping off with Dodge and we're constantly bringing new ones to the market. What is your stance on trying new versus sticking to kind of the standard, the ones that started the game, if you will? Yeah, largely, I don't think nonprofits should be making those choices. You definitely can if you're an expert, if there are certain cryptocurrencies that aren't listed on major exchanges, but you want to set up a wall and you accept them because you're like really dialed in for some reason, you think it's a community that's worth engaging in fundraising from. That's like 0.1% of nonprofits probably who are in that boat. Generally speaking, all of these cryptocurrencies, the major ones, at least are traded on big exchanges and these exchanges have as many if not more users than traditional exchanges. So like Coinbase has more users than Fidelity, Charles Schwab, he traded like massive markets. So what we do with our solution to put this all into context is we set up an account for nonprofits that's tied to one of these exchange accounts and then within that account, there's all these different cryptos that have order books, right? Buy and sell orders. So if you were buying and selling crypto in there, you could move into and out of that investment position and we hook that up to a donation form that's on the nonprofit site and a donor would go into that donation form, pick any of the cryptocurrencies that that exchange offers. And then it would present a wallet address, the donor would hit send and what's happening then in a matter of seconds is the crypto is transferring into that account. And then the program that we have says is there a balance if so, just sell it for whatever it's worth in US dollars at this moment. That way the nonprofit not only doesn't have to figure out which cryptocurrencies it should list your dozen. These major exchanges make that choice, but they also don't have to determine do I hold this cryptocurrency, do I not hold it, how do I sell it, when do I sell it? It's a 24-hour market, so any person in the world can send you any of the cryptocurrencies that the exchange has to offer and no matter when it comes in or how it comes in, it instantaneously sells for US dollars which then push to a bank account. So as far as the nonprofit's concerned, it's a gateway for donors who want to give all the top cryptocurrencies to send through an exchange that's heavily regulated and secure and US dollars come out on the other end. Elevate your fundraising strategy effortlessly with DonorBox, the online fundraising platform that streamlines your operations, amplifies donations, and delivers a user-friendly experience for your supporters. Design captivating donation forms, accept digital wallet payments, seamlessly monitor donations, and automate receipt generation. Joining is a breeze with no setup or monthly fees. From customizable donation forms and four times faster, ultra-swift checkout to seamless in-person giving with DonorBox Live kiosk, DonorBox makes giving simple and fast for your donors. Visit donorbox.org and unlock your full fundraising potential today. From the nonprofit side then, right, somebody who is savvy enough to be dealing in crypto, who has the resources then to turn that around and donate it to a nonprofit, is not the regular donor who's on their donation page, maybe about 55 and over female category who's impacting these decisions, that's not who's in the crypto market. So when nonprofits have these strategies to deal with their traditional donors, their ideal donors, how do these folks differ and what nonprofits need to be thinking about from a strategy standpoint in engaging with donors like that? It's such a good question. So for starters, you're touching on something like who are these donors who could be giving this way and then kind of what channels would they be coming through because that really dictates whether or not you accept it and then if you do accept it, where that option is presented and how, and then strategically targeting or appealing to particular donors in your donor base, all the way to earning net new donors, like you're saying if your donor base is aging or you're trying to rebalance it in a way that's where you don't get demolished by the great wealth transfer and whatever nonprofit is focused on like where does crypto and kind of investment based fundraising fit in. 94% of crypto users, it depends on the poll you look at, but 90-ish, let's call it. There are millennials and gen Zs, like when you look at gen Zs even for instance, it's the most common mode of investing, like it's more common stocks, which is a compelling trend, right? Yeah. When you think more of the world is happening. Interesting. Very interesting. More than half of crypto wealth is held by gen X and baby boomers. So when we talk about just the wealth disparity and the fundraising and when you look at a nonprofit, why is the average donor like the one I talked to in the last webinar we just said, it was average donor 74 in that donor base. Why is that happening? It's because it makes sense for nonprofits. Right now when you're stuck in an annual cycle, an annual budget where you have to reset and fundraise with scratch every 12 months to focus on the people who have the most money and give the highest average gift size. So nonprofits are trying to break out of that, right? If you're focused on these older donors who transfer the highest amounts of money right now, while not getting left behind as that great wealth transfer intersection continues to roll out. For half of the donations we get also come from that demographic, those older donors because it's 95% of hedge funds, either half crypto diversified into it. A lot of these older high net worth individuals, they have some and it's not like most their monies in it. It's probably a small 75% diversification. But if it goes up more than their stocks, that's what they get because that gives you the best tax incentive because of crypto's volatility. That happens a lot. So when nonprofits need to figure out, I guess, first and foremost is in terms of exposure to your audience, younger donors should be seeing the crypto option a lot more just because they're more likely to have it. But older donors just automatically need to see it sometimes and just be aware that it exists. It's not like you're going to run a crypto fundraising campaign for older donors. It's just as a percentage of a diagram overlap, it's not there. But if you're a nonprofit who's mid-sized and above, you certainly have older high net worth individuals with piles of cryptocurrency and it's just a matter of market timing when it makes sense for them. They better be aware. So that's kind of the first thing that needs to get figured out. And then the second piece is the fundraising avenue all the way down to the gift acceptance pages. There were a lot of nonprofits before we started doing this who were adding a donate crypto option onto a page somewhere on their site, where even tacking it into their donate page. There are not people who are looking to send you 20 bucks a month with a credit card and then decide to give you Bitcoin instead. Yeah. That's not how this works. It's $5,000 to $15,000 depending on the calendar year. These are people who have major tax offset type gifts. It's significant. It's 30 days. It's larger. Yeah. That's beautiful. Yeah. Because it's like stocks. It's a capine's offset. So there's major tax implications and considerations. So they need to see it on your ways to give and it needs to be discoverable from the donate page, but kind of given its own channel. I would say, if I can go to your site and I'm looking for ways to give you money and I can clearly see crypto, stock, DAF, like these things are present options. And then if you're sending me things like capital campaign emails or a direct mailer, I should bump into the fact that this is an option for me slowly over time. Young donor should see it pretty often. An older donor should at the very least, I think, have it presented every so often. Interesting. That's a much larger gift than I would have expected to be kind of the base level. That's interesting. Yeah. It's the top performing asset. Yeah. Like 90% of millennial millionaires are crypto traders at this point already. So the wealth concentration is pretty wild. Like you just look at average income for a crypto user is 111,000, so it's higher than any city in America, average gift sizes, they got like five to 15,000. And then the appreciation of the asset class over time, like it's outperformed everything really significantly. So especially for the folks who've been in crypto for five years plus, like just the wealth creation that's happened for this younger donors is pretty wild. Yeah. That's interesting. So you mentioned something and kind of want to circle back. So I had Mitch Stein from Chariot over on the podcast. And one of the things that he and I were talking about was as nonprofits wrap their heads around daffes and understand how to make those work for them as well. One of the pushbacks is we don't always get to know who the donor is in a DAF. Right. So they don't have to disclose. And so it breaks the funnel of like, well, I want to move you from this to this to this. If somebody is donating in crypto, do they also have that anonymous capability? Do you always know where it came from? Or is it similar to a DAF or you do have the ability to stay completely off the nonprofits radar and just be a supporter? Yeah. So this is up to the nonprofit. So like we have an anonymous option that could be turned on our own donation form. So it's just like anything else and DAFs work this way now because of Chariot. Like I used to be pretty anti-daff based fundraising because every nonprofit set donors off their site. Yeah. It was just like, yeah, go log in somewhere else and hopefully hit a push transaction to me at some point in the future. And then also, I thought it created a bad cycle where it's like you're getting these people to park money in DAFs, they get the tax incentive and now they could wait 40 years to grant it out, especially when they're younger. But as soon as we talk to Mitch, you have the charity, we integrated them like immediately. We have them as a product feature for clients who work with us just because it's sober. If you send us your crypto, it's like, oh, I already moved it into a DAF. It's like, perfect. Just click this button and send it anyway. Yeah. But no, the anonymous option is it's a misconception in this sector because people used to use wallet addresses where you just put a Bitcoin wallet on your website and then anyone could send. There's no form or information collection. But ours is gated by a form where they have to enter their personal details. You can add an anonymous option where they can just tick a box and skip that form. A lot of nonprofits do give donors the anonymous option just because it's so much more efficient and some people like it. But that's totally up to the non-profit. I'm a huge proponent of accepting anonymous gifts, so long as the channel is safe, right? Yeah. If they weren't accepting it through an exchange that checks blacklisted wallet addresses in sanctioned countries and you know you're getting a safe donation from a safe person, then I would use the form as a backstop, but because the solution is secure and the process is secure, I like to give donors the option just because I don't want to lose 500 grand because someone wants to protect their personal information. Yeah. I think most organizations would agree with you. No one's going to say no to the 500K. So in general, I think our audience here at non-profit hub tends to be, I would say like smaller to mid-size some startup non-profits, right? A program like this and having crypto as a strategy as part of your plan likely could feel overwhelming to them. So if somebody was just starting out to try and figure out, okay, we got to get our organization set up. We got to figure out what our strategy is. We have to have a plan for accepting all of those things. Obviously the answer could just be the giving block. Great. But what are some things that they should consider? What are some things that, like, what is maybe the first step that even if somebody's in a startup or what are some first steps that you would recommend? Yeah, definitely. Like this sounds very self-serfant, like you said, the giving block. I don't mean use the giving block as your solution immediately and that's your solve. Like I believe that, obviously, that's what we built, but I would say talking to the giving blocker going on our website, like one of the biggest blockers ever is like these imaginary concerns that were very real concerns at one point, but have been solved for. And I know a lot of non-profits who have multi-year investigation processes going on because they're trying to solve a problem that's already been solved because they haven't talked to vendors or experts. Like there's people just spending four hours on a Saturday doing research on which cryptocurrencies are legit or not, and like the exchange listing credit, like, solace for that, or like what should go in the tax receipt? How do we issue it? How do we make sure it's compliant? What if it's an international versus domestic donor? Yeah. How do we sell this stuff? Right? Like what's going to be our policy for when we sell or when we don't sell or if we add it to the endowment? Like we bump into non-profits still every week through just the sales call process who are doing stuff like this. And we're like 80% of the things you're trying to figure out are already careful if these are no longer a concern, and they're now two years behind the April. You don't have to move forward with the given block or use the tool, even if you end up just setting up an account somewhere and doing your own thing, like just talking to someone from my team or just going on the website and reading blogs or how-to pages, we've spent six years aggregating that stuff. So like that's the thing, not trying to do a bunch of independent research on how these things work and what is a blockchain, and so many people get stuck in that investigation process. And then I would say the second thing is understanding the difference between your existing donors and that new. A lot of research and time and energy goes into where do I find crypto donors? Which crypto conferences do I go to? How to build a crypto following? Trying to build profiles and just like, there's tens of millions of people in the US who use this stuff. Like, again, if you're mid-sized plus, there's obviously tons of crypto overlap. If you're small, you might have to get more taxable, especially if you're small with an older donor base. Like, there are areas where it doesn't make sense to be like super in on-crypto, but really thinking about that spectrum, like, well, I could have a solution that's on my side in my ways to give menu that I then put at the bottom of capital campaign emails and major gift appeals. Like, hey, here's one of our options. And that could be like the whole thing, and the solution automates everything, and that's our whole fundraising strategy. We're not like running crypto campaigns or stegments in the audience doing stuff, like understanding that that's an option, all the way to, like I say, the children where they've built this eight-figure crypto fundraising revenue channel and run crypto campaigns and crypto-giving Tuesday and the HODL HOPE campaign knowing your fundraising side of it, and then just kind of talking to an expert to make sure that you're not trying to come up with solutioning that's already been solved for. As we kind of wrap up our time, I have one question, and I don't mean to ask you to get out your crystal ball here. Okay. You had referenced earlier in the conversation the generational wealth transfer that is coming, right? The wave that is coming here very shortly already started, but it's going to continue in your best guess, certainly not, again, not financial advice, or not into that zone. But in your best guess, or kind of what do you see in the industry as that wealth transfer continues to take place? What's the impact on crypto as a viable option? I think right now in terms of public donations that we can find, like we can find a couple billion dollars worth of crypto getting donated. I think in the short term, that number is still highly suppressed by the fact that the average user is so young that I think their philanthropic journey is pretty immature, and I think it's overlaps with this disintermediation of working with professionals, so tax professionals, financial professionals. A lot of these people are trading on Coinbase, Robinhood, they do their tax on TurboTax. I think right now from the non-profit side facing donors, though a few non-profits are asking for crypto, we have of the infinite non-profits out there. Like as direct clients in the given block, we have 2,000, and then through integrations, but in terms of crypto fundraising programs, it's still a small sliver, and even for the big ones, we have saved the children in American Cancer Society, United Way Worldwide, St. Jude, they're not doing that much crypto fundraising. I think the real number should be exponentially higher than that. If they were just telling donors, "Hey, this is an option for you occasionally," they opened up the direct mail and there was a QR code there, "How much money is really on the table?" I think it's highly suppressed, so that brings the baseline up, I think quite a bit. Then you have these people, of course, who are higher income and then more financially literate, who overlap with this demographic, which is of so many millennials and genzies who invest this way. I think they'll probably end up being larger recipients of the Great Wealth Transfer. They usually come from those backgrounds, both in terms of generating more wealth and having a head start on other folks, they come from wealthier backgrounds. The percentage of their money that they invest in crypto, proportionate to their parents and their grandparents is so overwhelmingly disproportionate, that I think the flow of funds from traditional investment assets into cryptocurrency should be fairly overwhelming, which of course boosts everything up. Over time, I think it becomes one of those things where, again, if it's the main way that genzies invest and the higher income you are, the more you invest, and then this intersection of the Great Wealth Transfer and the $73 trillion, or whatever is going to airs, it definitely feels like a perfect storm. I still think you'll end up with, even in those generations, probably more money in stocks than crypto. I could easily see them being close to parity as long as people are donating tax-optimized giving methods. There's no reason it can't be one of the largest contributors to the sector. I was tagging with somebody on a podcast earlier today about embracing change and the importance of embracing change in our thought processes, especially as nonprofit leaders. This is just one more reason why that is so important because of the way we've always done it is not going to work in this scenario or in the long run that way. If somebody wanted to find the resources that you'd mentioned on your website or they wanted to be following the Giving Block or connecting with you all to learn more, how do they do that? Yeah, number one thing I was recommending is just go to thegivingblock.com and book a product demo. You can come in as uninformed as you like and just make it about you. Just talk to a member of my team and just like, "I have 18 questions and that's what this 30 minutes is for," and it's like, "All right, I think that's the best thing you can do because there's people who get paid to have these conversations and have had them with hundreds of not thousands of nonprofits at this point. They've answered the same questions, they've troubleshopped the same things, just up the line and get those things solved for so that, I mean, that puts you six to 12 months ahead of the people who just start an online journey of slowly accumulating information. I think that's the best way to expedite it. And then from there, you can poke around on our side or just poke around online learning about it, really focusing on what crypto means for nonprofits versus what crypto is in general and say is like then the other thing, right? There's a lot of people I've met at nonprofits who are studying what is blockchain and taking like blockchain education courses, and again, it really is nothing to do. There's people out there who invest this way and if you know how to fundraise, just stick that option on and make another way that you take money, avoiding, I guess, getting bogged down and invest their education will be the number one thing, be it a givenblock.com. It's our brainchild after six years of accumulating data and information. So I would always start up there. Perfect. Well, thank you so much. I really appreciate all this insight has been super interesting conversation. So definitely check out the giving block because they do have a lot of giant wealth of information to share. So Pat, thank you so much for joining us today. We really appreciate it. Yeah. Thanks for having me. I want to hear your crypto presentation at some point, but you got to send me the debt. We'll see you about that. All right. Pat, thanks so much. We will see you next time on the nonprofit hub radio podcast. All right. now. (music) (gentle music)
