Daffy.org, a contemporary platform for charitable giving, has launched its groundbreaking Non-public Inventory Donation Program as a brand new method to unlock billions for charity.
This program from Los Altos, California-based Daffy will permit staff at firms like Figma to show their personal inventory right into a pressure for good, making it simpler than ever to donate shares to charitable causes.
As personal firms now outnumber public ones within the U.S., the worth of personal firm inventory has soared. Over the previous 20 years, the variety of public U.S. firms has declined by greater than 50%, whereas the variety of personal, pre-market firms has surged, with over 700 unicorns within the U.S. alone, valued at greater than $2.2 trillion.
Firms are staying personal for longer—in line with a latest research, the median age for an IPO elevated by over 65% from 2000 to 2023.
With the rise of personal firms, extra staff are receiving personal inventory as a part of their compensation, but many discover it tough to satisfy their monetary obligations whereas the inventory can’t be bought.
In response, firms are more and more conducting tender provides and secondary alternatives to assist present liquidity. In truth, in This autumn 2023 and Q1 2024, six of the highest 10 most extremely valued startups on the earth have disclosed participation in, tender choices together with ByteDance, SpaceX, OpenAI, Stripe, Databricks, and Canva.
Daffy’s Non-public Inventory Donation Program provides a novel profit, permitting staff to donate their shares both ad-hoc or after these liquidity occasions, reworking personal inventory into impactful charitable contributions and tax financial savings.
“As more private companies conduct tender offers to provide liquidity to their teams, every company should offer a private stock donation program,” stated Adam Nash, CEO of Daffy, in a press release. “This not only improves employees’ financial outcomes, but also unlocks billions for charity—meeting the demands of today’s cause-driven workforce.”
Traditionally, donating personal firm inventory has been restricted to a small variety of rich and related folks–founders, board members, and enterprise capitalists–as a consequence of excessive minimal thresholds and complicated processes. Daffy’s turn-key answer simplifies this, making it accessible to a wider vary of staff. Many individuals donate appreciated inventory to assist fund their charitable giving and reap the tax advantages, however this chance hasn’t been broadly obtainable to staff of personal firms.
“Giving Figmates more ways to support causes they care about makes an impact that extends beyond our company and community,” stated Praveer Melwani, CFO of Figma, in a press release. “Daffy’s new private stock donation program gives Figmates a simple and high-impact way to contribute to the charities and causes that matter most to them.”
Worker advantages of personal inventory donations
With Daffy’s Non-public Inventory Donation Program, staff can donate personal inventory, permitting people to contribute the complete honest market worth of the inventory to charity. That will increase the full quantity given with out having to first convert it to money.
The staff can obtain a big tax deduction. People can qualify for a right away earnings tax deduction on the present honest market worth of shares held for a couple of 12 months. And so they can keep away from capital positive aspects taxes. By donating appreciated personal inventory, people can keep away from capital positive aspects taxes on the appreciation.
And so they can entry a contemporary donor-advised fund. With a local iOS app and responsive net expertise, Daffy makes it straightforward for workers to contribute further belongings to their account, develop these funds tax-free, and provides any time they’re impressed.
The Daffy Non-public Inventory Donation Program is an extension of Daffy for Work, enabling employers to supply staff with entry to a donor-advised fund (DAF), a tax-advantaged account for charitable giving. By Daffy for Work, firms can even match donations or gift-specific quantities immediately into worker DAFs, providing a straightforward and impactful method to help charitable causes.
Daffy for Work was acknowledged as one in every of Quick Firm’s 2024 World Altering Concepts and is utilized by revolutionary firms like Acorns, Grindr, OpenAI, Titan, and XYZ.
In February 2022, Daffy Charitable Fund raised $17.1 million in Sequence A funding. The funding spherical was led by Ribbit Capital and in addition included participation from XYZ Capital, Coinbase Ventures, and greater than 50 angel buyers.
Daffy Charitable Fund is acknowledged as a tax-exempt public charity as described in Sections 501(c)(3), 509(a)(1), and 170(b)(1)(A)(vi) of the Inside Income Code.
Background
Within the wake of the crash of the Web bubble of the Nineties, the United States rolled out numerous laws and necessities to assist shield public market buyers. Within the 20 years since that point, not surprisingly, the variety of public firms has dropped greater than 50%, from simply over 8,000 in 1996 to roughly 3,700 at present.
Luckily, the venture-backed ecosystem has not stopped constructing new firms. However because of the upper prices and necessities for changing into a publicly traded firm, an increasing number of firms are staying personal longer.
Whereas this can be a phenomenal financial achievement, it additionally has some sudden and unintended penalties. A whole bunch of 1000’s of staff are actually being paid, a minimum of partially, with fairness grants of personal inventory. For the overwhelming majority, this wealth is inaccessible till the corporate experiences a liquidity occasion, and as firms keep personal longer, these occasions have gotten fewer and farther between.
Excessive-quality firms have responded to those modifications more and more by arranging tender provides and structured secondary gross sales to assist get their stakeholders entry to some liquidity to repay pupil loans or buy a house—however what about philanthropy? Donations of public inventory have grow to be an enormous supply of funding for the 1.7-plus million non-profits within the U.S., however what occurs when an increasing number of wealth is trapped in personal inventory? That’s what Daffy is addressing.
The way it works
Daffy’s Non-public Inventory Donation Program is totally different. It leverages trendy expertise to dramatically enhance the consumer expertise and decrease prices. Extra importantly, by working immediately with firms, it will increase the variety of individuals, enabling big price financial savings per donor.
Any Daffy member on the benefactor stage can donate personal inventory, with nothing owed to Daffy upfront. Daffy prices only one easy payment of 1.5% of the worth of the inventory when it’s lastly bought.
If you happen to’re an worker at a non-public firm planning a young supply, or in case you are curious about seeing this at your office, add your identify to the listing—if 20 or extra staff specific curiosity, Daffy will assist the corporate launch this system.
Daffy’s Non-public Inventory Donation Program makes the method easy for firms and staff alike. First, they set up phrases and timing with the corporate. They get hold of board approval and solicit curiosity from staff. They execute inventory transfers to Daffy, and permit staff to donate from the proceeds after inventory gross sales are accomplished.
The Daffy Non-public Inventory Donation Program extends that platform to help office giving of inventory for personal firms. Now, staff could make charitable donations of personal inventory both ad-hoc or after liquidity occasions like tender provides—making charitable giving accessible to everybody, not just some well-connected buyers and executives.
Not surprisingly, the following era of firms are main the best way democratizing entry to this chance for his or her staff.
The flexibility to donate personal inventory is a kind of little secrets and techniques that has largely been handed down, by word-of-mouth, between skilled founders, buyers, and board members for years. There are only a few donor-advised fund suppliers that help personal inventory, and even fewer charities that may immediately settle for it.
Nonetheless, even for the few who study this chance, the method is advanced, costly, and infrequently gated by excessive minimums, excessive authorized prices, and excessive charges. One supplier quoted a $1 million minimal donation, and one other a minimal payment of $10,000. Most require the donor to pay $3,000 to $5,000 in authorized charges upfront. In fact, if that wasn’t sufficient, many funds cost excessive annual charges on belongings of 0.6% or extra along with these prices.
Why? For a similar causes that charges have been excessive throughout conventional donor-advised funds for many years. Their focus has been totally on serving the ultra-wealthy, with each transaction a one-off bespoke course of that may take as much as 12 weeks.
