28 February 2017 13:59:05 IST

A management and technology professional with 17 years of experience at Big-4 business consulting firms, and seven years of experience in high-technology manufacturing, Rajkamal Rao is a results-driven strategy expert. A US citizen with OCI (Overseas Citizen of India) privileges that allow him to live and work in India, he divides his time between the two countries. Rao heads Rao Advisors, a firm that counsels students aspiring to study in the United States on ways to maximise their return on investment. He lives with his wife and son in Texas. Rao has been a columnist for from the year the website was launched, in 2015, and writes regularly for BusinessLine as well. Twitter: @rajkamalrao

GoFundMe is a boon for people in distress

Crowfunding platforms bring the worlds of social media and charitable giving together

If there’s one thing certain about life, it is that things in life are uncertain. As I recently noted in these columns, this is why the insurance sector has been so successful. In an uncertain world, the industry sells protection against a future risk event by collecting premiums. If the risk occurs, the industry pays out the claim.

But even the insurance industry does not cover every eventuality. For example, when people travel abroad, their travel insurance always contains an exclusion for so-called pre-existing conditions. Even in life-threatening cases, most insurance plans refuse to pay claims related to a medical emergency originating from a pre-existing issue, such as hypertension or kidney disease.

This is where crowdfunding applications come in and often make the difference between life and death. In most cases, the recipients’ misery is eased to the extent that financial considerations are no longer relevant. The underlying misery, of course, stays because money can’t erase misery.

Kuchibhotla murder

Take the recent horrific and dastardly case of the murder of an innocent Indian engineer, Srinivas Kuchibhotla, in Kansas City. This young man was senselessly killed by a 51-year-old white man who yelled “get out of my country” before opening fire. The misery of his young wife, Sunayana, and family back in Hyderabad can never be erased, and will haunt them for as long as they live.

But very soon after the incident, a friend, Kavipriya Muthuramalingam, who said he had worked with Srinivas at the same company, turned to GoFundMe, a crowdfunding site, to start a campaign. Within a few hours, the New York Times reported that the site had received “$261,651 in donations surpassing the campaign’s $150,000 goal.” It quoted Muthuramalingam as saying that “100 per cent of the proceeds would go to the family of Srinivas Kuchibhotla, and would cover the cost of sending his remains back to India.”

This is the power of the internet and social media extended to the world of charitable giving. While major organisations such as the Red Cross and the Salvation Army also operate sites to seek donations to address the world’s problems, crowdfunding charity sites are immensely popular with both givers and recipients because the cause is more personal, more targeted and more immediate.

Strength in numbers

A child in the second grade undergoing cancer treatment; a man missing after going skiing in the mountains of Japan; a young adult injured in a motorcycle accident — these are all tragedies that happen every day around the world to what we call life. GoFundMe hosts campaigns for all of these events, and many more. People from all over the world donate what they can — sometimes as little as $5. But there’s strength in numbers, as evidenced by how quickly funds were collected in the case of the campaign for Srinivas Kuchibhotla.

GoFundMe uses people’s existing social media contacts to rapidly multiply the campaign’s reach. Suppose the person who initially sets up the campaign has 200 friends on Facebook, if each person in the first circle has the same number of friends, the campaign would have spread to 200 x 200 = 40,000 people. This is exceedingly powerful. And we have not even considered additional circles and distributions through other channels such as Twitter and email.

The site keeps a 5 per cent fee for operating costs and works with Paypal, which charges an additional 2.9 per cent to manage incoming and outgoing cash. Still, at under 8 per cent, the site’s administrative costs are far lower than brick and mortar charity organisations such as the Red Cross and Salvation Army. Keeping overheads low in the world of charitable giving is essential so that the lion’s share of collected proceeds go to the needy.

Such crowdfunding sites bring out the very best in people. Strangers are moved when they see personal stories of need from across the world. They relate them to difficulties in their own lives and are grateful to the kind people who lent a hand or an empathetic ear to help overcome their cycles of misery. They understand that the tenet of charitable giving is rooted not in repaying debts but helping someone else in need so that they too can recover.

Bad side

Unfortunately, crowdfunding sites cannot weed out the undeserving from the deserving. That is, GoFundMe has no mechanism to detect fraudulent campaigns any more than the rest of us can separate the professional street mendicant who stakes out a prime place at a train station from the real widow seeking alms to raise three young children.

But some tools do help. GoFundMe can quickly detect if a single individual repeatedly turns to it for help. Because all money transfers are cashless, recipients have to provide bank information which, in most countries, requires that they are registered with tax authorities. It is for this reason that GoFundMe is available only in a few countries which have strong rules for transparency and authentication, such as the US, the UK, Canada, Australia and a few EU countries.

In a sense, and purely from a fundraising perspective, it helped that Srinivas Kuchibhotla was in the US at the time of his untimely passing. Then again, his family wouldn’t probably have needed GoFundMe at all had he been in India where senseless, hate-filled crimes propagated by sick men with guns is so rare.