After I passed, this startup grew 30x in 3 years to $10M+ ARR. Here's how he did it—& what I missed. | Francois de Kerret, Co-Founder of Zeffy

Zeffy is one of my biggest misses so far. I met Francois 3 years ago when he was raising his $3M seed round. But I passed.

They were at ~$500K in revenue at that point. In the last 3 years, they've grown 30x. Clearly, I missed out.

But it's been a long road for Francois. Before he got to the current idea, he had to make 3 pivots, including building a marketplace and selling to schools.

Finally he landed on what Zeffy is today,  a fundraising platform for nonprofits. The crazy thing is that it's absolutely free to use. They make all of their money, which is now in the tens of millions in revenue a year, from tips. Voluntary tips that are given by donors while they donate to the nonprofits who use Zeffy's platform.

It's not an easy model to wrap your head around, but it's working in a big way.

Takeaways

• How to use new revenue models as differentiators.
• When to use sales-led vs marketing-led growth. 
• Why the one and done funding model can work so well
• Why getting to profitability gives founders so much power. 

Keywords
fundraising platform, nonprofits, product market fit, startup growth, profitability, marketing strategy, trust building, talent density, donation model

Timestamps
(00:00:00) Intro
(00:02:49) The Origin of Zeffy
(00:05:56) Gaining the Trust & Cold Calling
(00:08:52) Having a Sales Team Not Trying to Get Money
(00:13:21) Zeffy's Growth Timeline & Raising
(00:15:35) Google Ads Changed the Game
(00:18:54) The Mindset After Raising the Seed
(00:21:50) Staying Conservative When Recruiting
(00:24:05) What Makes Zeffy Unique
(00:27:38) Finding True Product Market Fit
(00:28:37) One Piece of Advice

Chapters

• 2:49 The Origin of Zeffy
• 5:56 Gaining the Trust & Cold Calling
• 8:52 Having a Sales Team Not Trying to Get Money
• 13:21 Zeffy's Growth Timeline & Raising
• 15:35 Google Ads Changed the Game
• 18:54 The Mindset After Raising the Seed
• 21:50 Staying Conservative When Recruiting
• 24:05 What Makes Zeffy Unique
• 27:38 Finding True Product Market Fit
• 28:37 One Piece of Advice

Transcript

Pablo Srugo (00:00.088)

So I just spoke with François, the founder of Zeffy. It's always an interesting feeling talking to him because it's one of my biggest misses so far. I met Francois like three years ago when he was raising his seed round. He was raising about three million. I ended up passing. They were under a million ARR at that point. And in the last three years, they've grown 30x. So anyways, figured since I didn't get into his company, I might as well get him on the show. But it's been a long road for him. actually started with this marketplace for volunteering. Then he was selling to schools and then he was selling to big corporates. And then finally he landed on what Zeffy is today, which is a fundraising platform for nonprofits. The crazy thing is that it's absolutely free to use. They make all of their money, which is now in the tens of millions in revenue a year off of tipping, voluntary tipping from people who donate to Zeffy's customers, which are not for profits. It's a tough model to wrap your head around, but it's working in a big way. Welcome to the product market fit show brought to you by Mistral, a seed stage firm based in Canada. I'm Pablo. I'm a founder turned VC. My goal is to help early stage founders like you find product market fit.

François, welcome to the show, man.  

François de Kerret (1:11) 

Pablo. Thanks for having me. 

Pablo Srugo (1:14) 

You've built a business that's now well into the eight figures, it's driving tens of millions of donations, right? And we'll get to what it is that your business does. So very successful. And you did it on this kind of one and done model. Not really, right? But people these days are talking about you've got bootstrapping, which is you don't raise any money, certainly not from outside. And you just kind of do what you got to do with what you got. You've got the VC route, which is typically pre-seed seed A, B, you just keep raising every 12 to 18 months. And then you've got this middle road, which people are calling this one and done. The idea that you raise one round, and then you never raise again. And in your case, it wasn't exactly that, like you did a small pre-seed, right? 750 K. Then you raised the seed round, but three and a half million-ish, correct me if I'm wrong, but then you haven't raised since. And what was interesting was chatting with you the other day and kind of your idea right now is you actually, you're not planning on raising, at least not in the short term. So, definitely want to kind of explore what that's been like with you. But I mean, it's interesting for like you're you've been in the nonprofit world this whole time. You had a marketplace approach. Then you had like a schools approach, right? Selling to education, then to large enterprise, you know, ultimately selling software. There's this flywheel going on because you're adding, you know, you're adding nonprofits there too, but it's more of this like, you know, you go from marketplace to platform, but different problems along the way. Now you're like on version three really of the business and I'm like, man, how do you go from this to the donations part? Like there's actually, it seems like a big jump. 

François de Kerret (2:49) 

Yeah yeah. And I think what was driving us with Thibaut is at this stage, we really wanted to do something with meaningful impact. Something where it would really scale and help a thousand and hundreds of thousands of people and to have impact. So now this is September, 2018 and we have one corporate client, maybe 30 schools. what's coming up is not really exciting. Like we'll do maybe one more large contract. And so we decided to stop the corporate volunteering. And we really went to a lake house, north of Montreal. The two of us like, what do we do now? Do we stop?

We like working together. That's what we knew. We like the space, helping nonprofits have more impact. And at this time, we heard about a platform, TIP-based in Europe. 100 % free with a TIP. And we thought, okay, but if it works in Europe where people live maybe one euro for 200 euros meal here in Quebec and in America, it will work for sure. And it's exactly what nonprofits are asking for, a free platform. 

Pablo Srugo (4:08)

This was tipping, but it wasn't for non-for-profits. It was for a different…

François de Kerret (4:14)

 No, it was for non-profits, but in Europe. 

Pablo Srugo (4:17)

And so how do you get this off the ground once you decide to go after this free tipping platform? 

François de Kerret (4:23)

So now Thibaut knows how to code, which is nice. And it was early October and we said, look… It's been two years now, we want to go fast. If we want to go this way, it has to work really well until Christmas. we said, let's make sure we raise 50K before Christmas for non-profits or we stop. It was our challenge. And Thibaut coded it in three weeks. He added, he did the donation module, added Stripe. We put it on the volunteering platform. It was just another tab. had volunteering and donations. So we already have all those logins sign up modules and I sent an email and called all the thousand nonprofits we had it in Quebec saying, look, donation, a hundred percent free. I'll come to your office to do the setup with you. And actually a month later we had like, not a lot, maybe 10 nonprofits. 

Pablo Srugo (5:33) 

Really? 

François de Kerret (5:24) 

We decided to add the donation button. And it was, I think we were lucky that they trusted us already because of the impact we had helping them recruit volunteers. 

Pablo Srugo (5:35) 

But I'm shocked it wouldn't be more, to be honest. Like if you had a thousand of these, you're offering them a free way to get donations and so like 1 % of them converted?

François de Kerret (5:47)

Yeah, it's true. So maybe it was less than a thousand volunteering at the time.

Pablo Srugo (5:54)

It was still a small conversion, which is still shocking. 

François de Kerret (5:56)

Yeah, it was a small conversion, yes. They had  questions, okay, can we trust you with our donation? Because you're not a payment platform, we had to gain a bit of trust. And the reason is because we didn't have many features at the time. I remember the first donation ever on the platform. It was a monthly giving. We had the feature already, but it was broken. So after a month, we just had to call the person and say, look, could you do your monthly giving again. So that's actually Richard. 

Pablo Srugo (6:34) 

Well, that's what I was going to kind of ask. Like, what's like, this is the part that I still don't really understand about the business that I'm hoping will dive in on. What is stopping anybody else from doing this, especially in your space, especially the platforms that are already handling, let's say donations or other part of the money handling part of, you know, not for profits. Like, because it seems like it's more of a business decision. Like, it's not a technical innovation or whatever, like anybody could just be like, actually, now we're not going to charge you for whatever you raise. we just add this a tip layer on top. What's, what's, what am I missing? Like what's harder here?

François de Kerret (7:10) 

Yeah. Well, if you're starting a business, the hard part is to get the trust cause donation, they need to trust you with giving and it takes a bit of credibility. It's there, but that's something. It's possible. a lot of fundraising platforms are out there.

I think now there are two things preventing someone to do exactly the same. First is other fundraising platforms that are structured with higher costs and sales motion. They have higher margin on each non-profit. They do more money on the fundraising, but it's also, I think, an addiction because now they are structured with higher costs, more sales, more customer success, working non-profits to use their product. And so they are bit addicted to this margin. The second part is really our other obsession is making a simple platform and it's just making good product. And I think now we could even have started a fundraising platform with the same pricing as everybody, but just making it super simple, easy to use and intuitive. It really makes a difference because those are not professional fundraisers. Those are volunteers who do it at night after their work hours and they don't want to spend time learning a platform. So making it simple is now super important.

Pablo Srugo (8:37)

 How many nonprofits do you work with now?

François de Kerret (8:40)

 Now 30,000 now.

Pablo Srugo (8:41)

 Wow, that's incredible. So how do you go from 10 to like 100 to a thousand? Like when do you, when do you really feel like it starts to click?

François de Kerret (8:51) 

Yeah. First of all, in this we had like 10 and after a month maybe 20 more, I would follow up with the space and then we recruited our first sales. Miriam was still at Zeffy. It's funny because we were able to recruit her, we were not making a lot of money but we had an advisor who was really excited by this vision and this model and he said, okay, let me lend you $15,000. You recruit her and she will pay it back. Not her, but us as a company when the sales scale. And so we recruited her as the sales and we were just cold calling, cold calling, cold calling. 

Pablo Srugo (9:32) 

15k, I mean, basically you had a month, two months worth of salary. Like, didn't have a lot of time to pay back.

François de Kerret (9:38)

We didn't have a lot of time, but we knew we had some fundraising campaigns coming up. So we knew a bit it was not only, in terms of cash flow, we knew it was coming. And then at the time, the assumption was we would just hire a ton of sales people. And so we went to Ange-Québec and early stage VCs and we raised our pre-seed to recruit more sales. It was really the same.

Pablo Srugo (10:06)

 That was like the 750k that you raised in 2019?

François de Kerret (10:09)

And some product and engineers to scale the platform a bit. Really there were version two because now version one was designed for school volunteering. Then it evolved to corporate volunteering and then it was a donation platform. So we had to build it from scratch and do sales. 

Pablo Srugo (10:30)

You at this point, sold to, I mean, you do the marketplace thing. You sold to schools, you try to sell to enterprises. Now you're selling to non-profit. And I'll admit it's funny, sale is a funny word because you're not actually asking them for money. You're asking them to use the thing. And then, you know, the end user will use money. How easy. was this sale relative to the other? I mean, obviously enterprise was really hard, but relative to the schools as an example, did you feel like the uptake was even better or was it actually maybe a little harder than you'd expected to get people to say yes?

François de Kerret (11:05)

I know it was really easy for people to say yes, because we're just calling those on even raising, hey, you're paying 7%. We have the same features plus we do your tax receipt. It was a no brainer. and looking back, it was not really a sales job because we would not have contract values. They would just say how much they're going to raise and no negotiation. Commission was a mess. was, I think, seems that I most poorly managed of my career because we had sales rep coming from actual sales team of other startups and saying, this is nonsense. And they would leave sometimes after six months and I was desperate because the sales was easy, the struggle was just following up so that they actually do their setup. But it was not a problem solving and negotiation.

Pablo Srugo (12:07)

 Well, it's kind of funny. It's a funny model to run in sales-led motion. Like you would think this kind of model would be like your classic product led growth, marketing led model self-serve easy to onboard and just like, because you're going after the long tail with, effectively a free product. 

François de Kerret (12:26)

Yeah. And it took us, I think a long time to realize and today it's entirely self serve product led with you. Yeah, definitely. Maybe what we didn't realize is we were focusing on the long tail and not the largest nonprofit because we would then call the larger nonprofits and try to onboard large campaigns. But yeah, it was a better fit for small nonprofits, super simple, it's a simple decision. And also I think it came from a personal mistake that we started with schools and I was selling to them. And then we did corporate volunteering and I was selling. So it was the only motion I knew. And I think looking back, I should have explored more growth stories to realize it faster. 

Pablo Srugo (13:21) 

So how quickly, like give me a sense of numbers. you launched this, you know, like in late 2018, but let's say like 2019, 2020, ‘21, how are, how fast are revenues, donations growing?

François de Kerret (13:38)

Yeah, it's growing really fast. doing 10X each year and it's a north star to do 10 times more nonprofits, but starting from zero for just 10X is easy. And then I remember in July 2021, so now it's three years into Zeffy, we do approximately 2 million donation amounts, something like this. And our revenue I think is in, I think it's in the 30, $40,000 a month.

Pablo Srugo (14:17)

Okay. So you've gone from like 40k a year before it was like 4k a year before it was like $400 of monthly revenue, net revenue. Yeah. Okay. Okay.

François de Kerret (14:26)

 Exactly. More or less. So yeah, it was 10x from 400 a month.

Pablo Srugo (14:30)

 10x from really small, it's, but it started - at that point, I mean, you're doing like half a million run rate revenue. It's starting to become a real thing. And that's when you raise that seed round?

François de Kerret (14:39)

 Exactly. And, and that's where it was still a sales motion and It was an interesting round because the goal was to open in the US and it was a tough fundraising because growth was decreasing. So this 10X was decreasing and decreasing because the sales team, was not scaling well. As you say, was not the right motion. People would leave. terrible motion. And we're trying to open in the US and raise money to go in the US and they will tell us what's your sales plan exactly? How are you going to make it?

Our answer was, it's impossible to know. They really wanted a detailed plan. And so at some point with Thibaut, we said, look, let's just put the fundraising on hold for two weeks. Let's stop raising the seed and let's open in the US. it's easier. We just do Stripe, Atlas, blah, blah, blah. And so we opened, signed maybe two nonprofits that were friends of a friend and came back to the firm and said, look, we already have some traction in the U.S. Now we just need to deploy the effort. And it really convinced them that it was enough traction. And then we actually did the sales effort in the U.S. and it was catastrophic. Like it was a terrible result. People, I don't know, cold calling in the U.S. is very competitive. When you have a French accent like me, actually it's even worse. But so it was terrible, but someone in marketing joined Zeffy and started to run this Google Ads. And within six months, she was bringing Kami like 10 times more nonprofits.

Pablo Srugo (16:29)

 On Google Ads?

François de Kerret (16:30)

On Google Ads. 

Pablo Srugo (16:31)

What kind of terms? Like what are people searching? Like literally “fundraising platform”? These are founders or what?

François de Kerret (16:37)

Yeah, “fundraising platform for nonprofits”, even “grants for nonprofits”

Pablo Srugo (16:42)

Man. So that was like easy, I can't believe it, dude. That's like the easiest thing. You know what I mean? Like I'm not saying it's easy to run Google ads, but like, really? It took five years. I can't believe it. Holy shit. 

François de Kerret (16:53)

So simple. And so we switched our entire organization to marketing led products. And the three years, well, a lot of things happened, but if I'm summarizing, just scaled Google ad from $5,000 a month to half a million a month and it just brought traction and so it's up to a thousand non-profits.

Pablo Srugo (17:18)

 Well that's where like everything aligned right they talk about product market you know product market channels or product market sales fit or whatever you want to call it and it you know if you just sit back for a second it makes sense like long tail simple to use free product you should be trying to hit everybody and let them on board when they're truly ready to on board you know what i mean and kind of find you and do the stats versus calling them maybe at the wrong time. So when you back into it, like hindsight is 2020, it's always a year. Make the story make sense looking back. But it all seems to align now. 

François de Kerret (17:54)

Yeah, exactly. And now it's more scaling challenges where you want to go further than performance channels, being more like those brand marketing where you touch more people and create this brand love. You open new products like this non-profit starter where people will just start their non-profit with Zeffy. It's really a different story of scale. 

Pablo Srugo (18:21)

Well, so I've got two, well- a bunch of questions, but two that come to mind. The first one is on this one and done idea that we were talking about, you raised the seed round, a couple of questions around that. So first of all, at that time, did you assume.. You know, in 12 months, we're going to raise a series A. Is that what you were thinking or did you already think maybe we don't need any more money and related to that? Why, even though you've had so much growth, have you not decided to go out and raise money and maybe even grow more, build more, whatever? 

François de Kerret (18:54)

It's a really great question. First thing in our plan when we raised the seed, the idea was to become profitable after 18 months. But actually, we didn't think we would make it. And we made it because of the margin that increased radically when we had volume. We didn't know we would negotiate that well with Stripe after some point. So we really did become profitable. And so after 2022 and 2023, now we’re profitable and we have enough funds to be growing. So we are doing 200% yearly growth and money is not limiting us. Like if we had 10 million today, I'm not sure we would use it very wisely and it wouldn't be a game changer. Maybe we'd do a huge ad campaign, but you don't know if the ROI would be there. So now money is not limiting our growth. So we don't have any reason to raise. And we did hear some advice like, hey, raise money while you don't need it. Cause then you have this buffer, it's in the bank and you feel safe. But I think it has two, it's actually a very conservative strategy because you'll take this money that you don't need. So you're preventing a risk that you don't know is necessary, but you do two things first as a founder and funding team, 1. you spend a lot of time raising money and not focusing on growth. And second, you're putting someone new in the table and the board. And it's always a risk that it will not fit or slow you down. And so you're in a great position and you will prevent a risk that's not really there and put two more problems in your company. So I really don't think it's-

Pablo Srugo (20:57)

I think that makes sense. I mean, in your case, you are profitable. You're growing that fast. Like it's hard to imagine that tomorrow growth will go from 200 percent to zero percent. And even if it did, you would still be profitable. So like. You know, I think that all makes sense. I guess the question is like, what do you think it is about your company that you're able to- because normally, the trade is growth for efficiency. Normally it’s companies growing 50%, but at least it's profitable, you know, or the company's growing 200%. But it's gotta burn some money to do it. And that's like where the VC stuff comes in, you get to have both and therefore don't really need capital. What is it about your model you think that allows you to do that? Maybe you don't have the answer, but like, you know, I figured I'd ask you since you're the one closest to it. Like, cause you know, I think many founders would love to be in your shoes. 

François de Kerret (21:50)

 It's a great question.This is my only startup I founded. So I don't have many data points, but I think part of it is the industry and the trends and how much it costs to process money in ads, cetera. But I also think what's different between Zeffy and maybe other competitors or fundraising platforms is really the talent density. And I think we've been really, really conservative in when we recruit, making sure we always recruit someone better than us in each team and really take the time to add the people only when it's necessary. And if not, invest a lot in technology. And I think that allows us to go to execute fast because we're still small, we're 30, and be profitable. So I think talent density would be a key to achieve this. 

Pablo Srugo (22:49)

Do you tend to hire people that are more experienced than your peers or maybe more like better DNA or what is it that you tend to look for in these hires?

François de Kerret (22:58)

Yeah, it's a good question. Not necessarily for juniors. We like them to be just out of university. So the more junior the role, the less experience we want because we want to get them at a role where they will learn as much as they will bring. So maybe it's not really clear how I'm saying this, but if we take someone to do a job they have already done for two years, they are probably not really in a track where they are progressing. The people we want, we want them to start with this junior role and really, really quickly progress into this junior role. it has to be the hardest for them at this moment. So we try really to get people that have a lot of potential to progress. And it means often they are really, really driven and ambitious in what they want to accomplish in their career. But I think except that, so yeah, we'll often focus more on the skills than the experience. So the people themselves and their qualities rather than what they have achieved.

Pablo Srugo (24:05)

And then let me ask another question, which is back to something I was kind of alluding to earlier. If I tell somebody about your business, especially another VC, the number one thing I think they will say to me is, man, that's a really simple business. You know what I mean? Like, wow, really neat, really cool. Amazing that he's built it that far, but like, holy shit, that's a simple business. Like anybody could do that tomorrow. Right or wrong. I'm just saying that's  what people would think. and They wouldn't be wrong in the sense that there are a lot of situations where somebody finds an interesting wedge somewhere and gets pretty incredible pull because the value prop is really there but fails to build a sustainable business out of it because you know - when they do it's an interesting wedge, five years later everybody that was around it has also built that same kind of feature set or whatever and whatever edge they had is gone. How have you managed to turn this free fundraising using tip into something that is more sustainable? that's allowed you to reach well into the eight figures of revenue, 30 employees and be profitable, which just, you know, it means that nobody's kind of eating your lunch. What has your product evolved to beyond just that piece? 

François de Kerret (25:24) 

Yeah, super clear. Yeah, it's not just processing money with this business, but I think In terms of fundraising, there's many ways you can fundraise and maybe the last one we opened is interesting. It's a tap to pay app where nonprofits can accept payment in person just with an iPhone, iPhone 11 and more. You have this technology. And so it's really adding all those fundraising technologies so that they can raise more. 

Pablo Srugo (25:52)

Is there a whole backend too, besides just the front end of taking the money in the first place?

François de Kerret (25:58)

And exactly that’s the other part is the backend. they can, they have the ability to send a follow up to people that were invited but didn't come to them, to their event, to segment donors and to large donors, recurring donors, et cetera. Even capture some marketing intelligence of visitors, like donors coming back but not completing their forms. So we built this entire platform making sure It's super efficient for them to use and it's really proved well in the world of marks. And a lot of our growth is world of marks today. So we spoke about ads, but the other half of the story is world of marks. And that's by building all those products that we manage to grow and also doing the stuff they didn't ask . so our forms. I don't know if you're on Shopify, e-commerce, you have always Google Pay. a nice experience, it's mobile friendly, et cetera. But for nonprofits, even today, it's far from being the case for many software because it's not their focus. But we still built all those modern and regular tech into the fundraising space so that you have the same quality of a checkout experience, the same sign up experience, just SSO, one click, et cetera. So we also did all those things that nonprofits would not ask. But I think it was proving quality and world of marks.

Pablo Srugo (23:30)

Perfect, man. Well, we'll stop it there. I'll ask the two questions we always end on. The first one is when did you feel like you had true product market fit?

François de Kerret (27:38)

I think the first one, it was with schools. It was really funny to see this product market sheet. And I understood it was it because our product was almost, well, inexistent at first and really, really simple. And it would amaze me that they were excited by something so simple. And I think it was a sign of product market fit. So that first part, but then the market was too small. And so the second part was when we launched the donation platform and they would just be so patient with us, even when we had bugs and issues in our first week. So I think it was the other hint of product market fit, the fact that they would just wait and build the product with us and be patient. So those two moments I think we're working. 

Pablo Srugo (28:28)

And then the last question, what advice would you have for a founder who's thinking about the one and done or in your case, the two and done fundraising playbook?

François de Kerret (28:37)

I would do quite seriously the math of how do I become profitable 18 months after my run? And probably I wish we could probably even have done it after one round if we were more serious in this focus. And then maybe, a bit on what we discussed, I will spend slightly more time with early founders. So I don't know when you'll proceed, just spending time with seed or series A founders to understand how they build their motions. And I will spend more time with them and less time with, I don't know, series D advisors, Ernst and Young advisors who don't really know this.

Pablo Srugo (29:24)

I think it's a great one, like finding somebody that you trust and admire that's just one or two notches from where you are that still really remembers what it was like. i think is so important. Frank, thank you for jumping on the show, man. 

François de Kerret (39:36) 

It was a pleasure. Thanks a lot.

Pablo Srugo (29:38)

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