GoFundMe Founders to Reap a Fortune in Buyout

The two founders of crowdfunding site GoFundMe are relinquishing control and reaping a fortune by selling a majority stake in their startup to venture investors.

Brad Damphousse said he and Andy Ballester have agreed to sell the controlling position to an investor group led by Accel Partners and Technology Crossover Ventures.

The deal, which is expected to close within two weeks, will value the San Diego company at around $600 million, according to a person familiar with the matter.

Other investors include Greylock Partners, Iconiq Capital, Meritech Capital Partners and Stripes Group. The syndicate is installing a group of Internet veterans to run GoFundMe.

The transaction will be a windfall for Damphousse, 33, and Ballester, 34, who started GoFundMe in 2010 as a way to help individuals and small charities raise money for good causes.

The pair had resisted seeking capital on their own. Instead, they funded the company with GoFundMe's revenue, which comes from charging 5% in fees per transaction.

GoFundMe is profitable and has made roughly $60 million in total revenue over the five years since the site launched. Its members now raise about $100 million in donations per month.

Following the deal, the founders will step down from the day-to-day oversight of the company but retain board seats, Damphousse said.

In their place, former Yahoo and Groupon executive Rob Solomon is heading a new leadership team at GoFundMe and plans to establish an office in Silicon Valley. Solomon, who was chief operating officer at Groupon for its fastest period of growth, will leave his current role as venture partner at Accel to become GoFundMe's chief executive when the deal closes.

In an interview, Solomon said the service has an opportunity to make donations and charity fundraising more efficient by tapping into more social networking and mobile applications.

"I think we can become the giving layer of the Internet," Solomon said. "In North America alone, nonprofits are a $300 billion-a-year industry. There's a lot of fat in there. If we do our jobs well, we can remove friction as it relates to giving."

Recently on GoFundMe, a firefighter in Huntsville, Texas, raised $121,000 to help pay for the medical treatment of his wife and son, who were the victims of a fire. A nine-year-old girl in Bremerton, Wash., used the site to raise $38,700 to help provide shelter to the homeless people in her community.

Helping Solomon will be David Hahn, a former LinkedIn executive, who is joining as GoFundMe's new president and chief product officer. Hoang Vuong, a former chief financial officer at DemandForce and other tech startups, will become CFO and COO at GoFundMe.

Accel's John Locke, TCV's Woody Marshall and Greylock's James Slavet will also join the board.

Solomon said he plans to recruit dozens of new employees to work at the new Silicon Valley office, the exact location for which has not been decided. He expects to keep the founding team of about 50 employees in San Diego intact. He also plans to recruit a new chief technical officer.

An investor buyout of a fast-growing tech startup is unusual but not unprecedented. In 2009, a consortium of investors led by Spectrum Equity bought out SurveyMonkey, an online questionnaire business. The investors brought in another Yahoo alum, Dave Goldberg, to run the company, which he grew to a $2 billion valuation. Goldberg passed away in an accident earlier this year.

GoFundMe last week announced it had raised funding from Accel, TCV but didn't mention the majority stake sale or new leadership. TechCrunch earlier reported a deal would value the company at $600 million to $650 million.

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