Anedot makes it easy to accept donations on the web, social and mobile, to organize donor and campaign information, and to simplify your fundraising. I looked at the Anedot website and really liked the fact that they have a very targeted solution that is easy to enroll to and use.
Generic offering VS Fundraising Specific
I can imagine that they could attract many users from smaller non-profit organizations that can benefit from an easy to use donation tool and don’t need complex back-end administration.
Obviously because they are donation centered they can take a higher transaction fee than all-purpose platforms because they come “pre-configured” for a specific task – fundraising.
Charging only per transaction means adoption by new customers is fast and easy. The down side is that this really appeals to smaller fundraisers. I did not see an option for larger fundraisers that want to pay less per transaction as they can easily afford to use other more generic systems and save costs. Generic payment platforms have more competition so it is logical that prices could be lower as all these providers compete for customers especially for larger ones.
Monthly plan VS Transaction based percentage fee
Many comparable solutions offer monthly packages and not just transaction based costing to more efficiently address different niches and to reduce risk.
Risk comes where Anedot signs people up and spend time and money supporting them and only makes money on a percentage of the donations made. This is risky as by not having a back-to-back payment system (for example each user pays monthly for more than the cost of maintaining their account) Anedot is effectively becoming an insurer that needs a certain conversion of donations per users to make money. Many users are not likely to secure many donations and some are expected to require a lot of support attention. For a small business this can be a huge risk.
Paypal can offer such a plan as they are big enough to operate like an insurer and reduce size due to their size and statistical distribution of risks. Also larger companies have a lower cost per user as their IT is optimized for large bulks. Larger companies can also offer more products and services making the life time value of each customer larger so it makes sense to invest more in each lead or customer. For a small company one customer that abuses their services can have devastating effect on the business.
Anedot is offering a transaction based fee to convert more visitors for users and if they switch to monthly programs they might reduce risk but also visitor to user conversion. One solution is to find a larger company and have them act as an insurer for example a larger IT company that would handle the support and IT costs and would get a percentage of donations. A larger company can assume the risk for a higher rate. This will enable Anedot to both make money as a percentage of donations as well as pay their IT vendor with a smaller percentage. As Anedot grows they can assume more risk and pay out less to various insurers. There are various ways smaller vendors can reduce risk and it is worth to explore these options once the business moves from a startup that is searching around and can assume risk to an early stage company that starts to improve margins and reduce risks from improving operations.
Simple VS Comprehensive Solution
Product feature wise, as they add features they can better address the needs of their users but they also risk making their solution complex and hurt their new user conversion rate.
They might have at least two kinds of users. New users that need simplicity over capabilities and more experienced users that are willing to tolerate greater complexity in exchange for features that make the use of the solution more efficient when it is used often.
Any company needs to manage these two stages at least for each main user type. If they make the product more complex they will retain users for longer time but it will hurt the new user adoption. If they keep the solution very simple people will join fast (many of which are not going to be profitable) and as they become profitable they will leave to find a more comprehensive solution.
Maintaining two versions is very expensive for a small software company. I would suggest for them to explore optionally to join forces with a larger provider that may not be able to efficiently convert small nonprofit users because of their more complex solution and allow Anedot to offer a premium product jointly backed up by the larger organization as a sales / OEM partner.
Local VS International
I could not see support for other languages / donation policies to support international bodies who might have a need to operate in more than one policy zones and languages.
They might want to offer a way for business partners to sell their solution under a different label in another country or language. I would probably not advise them to start doing this on their own at this stage.
General VS Targeted Donations
Many people today wish to make sure that their donations are specific to a certain aspect of the fundraising body operations. Being able to set categories or topics can help both when getting the donations as well as later on to set the strategy of using the funds as well as reporting to the people making the donations. I saw that there are options to set campaigns but not sure if it covers this need as well.
Summary
There are many strategic considerations and options. There is no right and wrong simply paths that the company can take. I think it is a very interesting company and that they managed to create a simple and useful solution and for most tech savvy companies it is a very hard thing to do. This brief account of their strategy was based on my own quick review of their site so I might be very wrong but it still serve as a useful example of business strategy questions that companies are facing.