Daffy.org, a modern platform for charitable giving, has launched its groundbreaking Private Stock Donation Program as a new way to unlock billions for charity.
This program from Los Altos, California-based Daffy will allow employees at companies like Figma to turn their private stock into a force for good, making it easier than ever to donate shares to charitable causes.
As private companies now outnumber public ones in the U.S., the value of private company stock has soared. Over the past 20 years, the number of public U.S. companies has declined by more than 50%, while the number of private, pre-market companies has surged, with over 700 unicorns in the U.S. alone, valued at more than $2.2 trillion.
Companies are staying private for longer—according to a recent study, the median age for an IPO increased by over 65% from 2000 to 2023.
With the rise of private companies, more employees are receiving private stock as part of their compensation, yet many find it difficult to meet their financial obligations while the stock cannot be sold.
In response, companies are increasingly conducting tender offers and secondary opportunities to help provide liquidity. In fact, in Q4 2023 and Q1 2024, six of the top 10 most highly valued startups in the world have disclosed participation in, tender offerings including ByteDance, SpaceX, OpenAI, Stripe, Databricks, and Canva.
Daffy’s Private Stock Donation Program offers a unique benefit, allowing employees to donate their shares either ad-hoc or after these liquidity events, transforming private stock into impactful charitable contributions and tax savings.
“As more private companies conduct tender offers to provide liquidity to their teams, every company should offer a private stock donation program,” said Adam Nash, CEO of Daffy, in a statement. “This not only improves employees’ financial outcomes, but also unlocks billions for charity—meeting the demands of today’s cause-driven workforce.”
Historically, donating private company stock has been limited to a small number of wealthy and connected people–founders, board members, and venture capitalists–due to high minimum thresholds and complex processes. Daffy’s turn-key solution simplifies this, making it accessible to a much broader range of employees. Many people donate appreciated stock to help fund their charitable giving and reap the tax benefits, but this opportunity hasn’t been broadly available to employees of private companies.
“Giving Figmates more ways to support causes they care about makes an impact that extends beyond our company and community,” said Praveer Melwani, CFO of Figma, in a statement. “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.”
Employee benefits of private stock donations
With Daffy’s Private Stock Donation Program, employees can donate private stock, allowing individuals to contribute the full fair market value of the stock to charity. That increases the total amount given without having to first convert it to cash.
The employees can receive a significant tax deduction. Individuals can qualify for an immediate income tax deduction at the current fair market value of shares held for more than one year. And they can avoid capital gains taxes. By donating appreciated private stock, individuals can avoid capital gains taxes on the appreciation.
And they can access a modern donor-advised fund. With a native iOS app and responsive web experience, Daffy makes it easy for employees to contribute additional assets to their account, grow those funds tax-free, and give any time they’re inspired.
The Daffy Private Stock Donation Program is an extension of Daffy for Work, enabling employers to provide employees with access to a donor-advised fund (DAF), a tax-advantaged account for charitable giving. Through Daffy for Work, companies can also match donations or gift-specific amounts directly into employee DAFs, offering an easy and impactful way to support charitable causes.
Daffy for Work was recognized as one of Fast Company’s 2024 World Changing Ideas and is used by innovative companies like Acorns, Grindr, OpenAI, Titan, and XYZ.
In February 2022, Daffy Charitable Fund raised $17.1 million in Series A funding. The funding round was led by Ribbit Capital and also included participation from XYZ Capital, Coinbase Ventures, and more than 50 angel investors.
Daffy Charitable Fund is recognized as a tax-exempt public charity as described in Sections 501(c)(3), 509(a)(1), and 170(b)(1)(A)(vi) of the Internal Revenue Code.
Background
In the wake of the crash of the Internet bubble of the 1990s, the United States rolled out a large number of regulations and requirements to help protect public market investors. In the two decades since that time, not surprisingly, the number of public companies has dropped more than 50%, from just over 8,000 in 1996 to approximately 3,700 today.
Fortunately, the venture-backed ecosystem has not stopped building new companies. But as a result of the higher costs and requirements for becoming a publicly traded company, more and more companies are staying private longer.
While this is a phenomenal economic achievement, it also has some unexpected and unintended consequences. Hundreds of thousands of employees are now being paid, at least partially, with equity grants of private stock. For the vast majority, this wealth is inaccessible until the company experiences a liquidity event, and as companies stay private longer, those events are becoming fewer and farther between.
High-quality companies have responded to these changes increasingly by arranging tender offers and structured secondary sales to help get their stakeholders access to some liquidity to pay off student loans or purchase a home—but what about philanthropy? Donations of public stock have become a huge source of funding for the 1.7-plus million non-profits in the U.S., but what happens when more and more wealth is trapped in private stock? That’s what Daffy is addressing.
How it works
Daffy’s Private Stock Donation Program is different. It leverages modern technology to dramatically improve the user experience and lower costs. More importantly, by working directly with companies, it increases the number of participants, enabling huge cost savings per donor.
Any Daffy member at the benefactor level can donate private stock, with nothing owed to Daffy upfront. Daffy charges just one simple fee of 1.5% of the value of the stock when it is finally sold.
If you’re an employee at a private company planning a tender offer, or if you are interested in seeing this at your workplace, add your name to the list—if 20 or more employees express interest, Daffy will help the company launch the program.
Daffy’s Private Stock Donation Program makes the process simple for companies and employees alike. First, they establish terms and timing with the company. They obtain board approval and solicit interest from employees. They execute stock transfers to Daffy, and allow employees to donate from the proceeds after stock sales are completed.
The Daffy Private Stock Donation Program extends that platform to support workplace giving of stock for private companies. Now, employees can make charitable donations of private stock either ad-hoc or after liquidity events like tender offers—making charitable giving accessible to everyone, not just a few well-connected investors and executives.
Not surprisingly, the next generation of companies are leading the way democratizing access to this opportunity for their employees.
The ability to donate private stock is one of those little secrets that has largely been passed down, by word-of-mouth, between experienced founders, investors, and board members for years. There are very few donor-advised fund providers that support private stock, and even fewer charities that can directly accept it.
However, even for the few who learn about this opportunity, the process is complex, expensive, and often gated by high minimums, high legal costs, and high fees. One provider quoted a $1 million minimum donation, and another a minimum fee of $10,000. Most require the donor to pay $3,000 to $5,000 in legal fees upfront. Of course, if that wasn’t enough, many funds charge high annual fees on assets of 0.6% or more in addition to these costs.
Why? For the same reasons that fees have been high across traditional donor-advised funds for decades. Their focus has been primarily on serving the ultra-wealthy, with every transaction a one-off bespoke process that can take up to 12 weeks.
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