November 2022 marks my five year tenure as co-founder of Ko-fi. Here’s some of the key commercial events, decisions and lessons learned so far!

It’s late 2017, I’m in the Borneo rainforest. My friend Nigel messages me and says he’s got someone interested in buying Ko-fi, the project he’d worked on for over five years.

Fast forward a month and I’m back in the UK. Nigel rejects their tiny offer and within a few weeks up pops a complete clone of Ko-fi. The project he’d spent more than five years of his life had been copied.

They copied everything. The concept of buying a virtual ‘cup of coffee’ for your favourite creator. The design and messaging. They even called their company the exact text that was on all the original buttons that indie bloggers, illustrators and cosplayers were embedding on their site. There were already a ton of creators on social posting “Hey I just launched my Ko-fi” and sharing a link to the clone site.

Ko-fi wasn’t a ‘business’, there were no enforceable terms, no real protection. Ko-fi’s future was looking sketchy!

About a year earlier I’d realised I’d lost the love for my own startup “Brand Unify”.

I’d built and sold my MVP to a handful of customers, but I’d lost my mojo.

The company was too similar to the place I’d just exited. I was actually more excited about new tech/marketing/sales consulting projects than I was about the grind of my own business. I had a new girlfriend (now wife) and the consulting was earning me £8-10k per month so I was content just doing projects for a while.

However, once a builder, always a builder. I started a clothing company at 14, a large format printing business at 16, and a SaaS ‘business within a business’ at 20, building something valuable is in my DNA and I was ready to lean into something new.

Nigel and I had already been working together for a while. Once at my previous company and then since leaving we’d taken on around a dozen custom development projects where I would get the clients and manage the projects and he would do the dev.

Worried his passion project was going to be totally wiped out by an aggressive clone, we skyped, Nigel asked for some help and I gave three options:

1. I’ll be you soundboard, just helping you make decisions.

2. I’ll work for you at ‘mates rates’ as a freelancer.

3. I’ll put some money in, take some equity, and really get behind building this into something.

Nigel said option 3 was the only viable route and within a couple of weeks we had a shareholders agreement, a bank account which I put in £5k operating capital and we were on our way.

Neither of us needed a salary for a while. I was keeping some consulting going and Nigel had savings he could use for a while.

I didn’t have an instagram or twitter account. I had no idea what an online ‘creator’ was.

My background is B2B Marketing and MarTech. I was so far behind Nigel in understanding the dynamics of online creators it took a while to catch up to a point I could be any help at all.

It turns out there were loads of online creators in niches I had no idea about. Everyone from pixel artist creating incredible animated gifs and emotes, cosplayers creating costumes of their favourite characters to fanatical kpop fans relentlessly publishing content about their favourite group.

Ko-fi was providing a low-pressure way for their fans to support their passions. Instead of jarring google ads or having to create products to sell to fans, creators could just add a little button to their site which invited fans to ‘buy me a coffee’. It was cute, simple and growing every month.

Ko-fi had already been around for a long while when I joined Nigel to ‘found’ the business.

Naturally before I got involved Nigel was doing everything, but what was clear to both of us was his time was best spent on product. It’s the most important thing for a platform like Ko-fi. One product improvement can outweigh ten improvements in other areas.

I think we had one conversation about roles where it was clear he would major on product and I would minor (as sounding board, tester etc). I would major on everything else. Marketing, support, legal and compliance, accounting and financing etc. Nigel would minor on those areas weighing in more significantly in the areas aligned to product e.g. marketing and support.

This simple definition allowed us to move fast and independently given the 6-7 hour time difference and non-existent in person working.

We also opted to not think too much about general tools we would for operations. Slack for comms, Xero for accounting, Zendesk for support and help centre. There are probably better tools out there, but don’t waste your efforts agonising over them.

Without money, startups die. It’s pretty simple.

The more people that used Ko-fi > the more the concept and brand got shared > the more new creators joined. Q1 2018 creators were earning around $200k per month, but Ko-fi was totally free to use with no source of revenue at all.

Nigel had operated Ko-fi as a for over five years at his own cost. Dedicating pretty much all of his time in 2016 to work on the site for free.

My only stipulation for putting my time and money into Ko-fi was that we pursued a revenue model.

So a big topic for the first few months was how are we going to make money.

We deliberated about different types of ads, pivoting a version of the service for large charities, negotiating a revenue share with the payment providers and the most obvious option taking a percentage fee on each transaction.

Nothing was off the table, but taking a cut of donations made the most sense.

If we took 5% of payments that would have netted us an instant $10k per month and then all we had to do was grow. However…

Payment providers take a massive percentage of small amounts of money. $0.30 + 2.9% of $3 is already a 13% cut. If we add 5% to that then the creator only sees less than $2.50 of that $3. It felt like a stretch.

We also didn’t feel comfortable introducing a fee on something that was once free (and was at this point a very minimal product).

While we were deliberating this model, Patreon made it’s first major misstep. They tried to introduce a new payments model which increased costs for patrons significantly. We saw the backlash, it was the nail in the coffin for taking a cut of transactions.

For the entirety of Q1 2018 we stalled.

We spent hours deliberating about business model direction. I re-read books, did business model canvases, brainstormed with other founders, until I realised a simple truth. There were really only three core business models to pick from and we’ve already ruled out two of them!

Nigel had tried simple google advertising and it barely covered the hosting bill. Transaction fees were now off the table too, so it really only left subscriptions. I started obsessing about what we could do to improve the value of the service to the point that some creators would pay a subscription fee to the platform.

Ko-fi’s feature request google form had over 1000 responses.

I read all of them multiple times.

How easy would it be to let someone change the unit price for a ‘coffee’? What about changing coffee to something else? Could we let them have shorter names?

We came up with six or seven regularly requested features. We picked things people were already asking for and would be quick to implement.

Reddit had just introduced Reddit Gold and we really liked the idea of ‘Gold’ so Ko-fi Gold so that became the name quite early on. I booked a flight to Thailand to go work on the project with Nigel in person.

We skyped every day and it took about 10 days from the point of committing to the paid plan to launching it on 7th May 2018.

We added a pop-up on the dashboard promoting Gold, wrote a blog post and flicked the switch to launch it before I could even get out to Thailand.

Ping, Ping, Ping. We’d both set up our phones to ping whenever we got a new subscriber. I think in May we got about 100 new subscribers paying $6 per month. In June we had over 250. The model was working.

To raise money or bootstrap?

The money we were making from Ko-fi Gold showed promise, by the end of July we were up to around $8k per month, adding a few hundred net-new subscribers each month and growing pretty fast.

We figured investors would be more interested to talk to us now and if we wanted to scale faster we should try and raise.

I worked hard on our pitch deck, I know it was compelling, but VC sentiment was not good.

The creator economy was not yet a ‘thing’ and UK based investors didn’t seem to ‘get it’ The ones we spoke to understood B2B SaaS, they didn’t understand us.

We got a lot of praise for our traction, the fact that we were already global, the amount we’d achieved in a short period of time etc, but they seemed to be analysing us in B2B terms and it was just too high risk for even the very early stage funds who regularly invest in proof of concept, no or low traction startups.

The one offer we got was for £150k, of which we would have to pay the investors back nearly £10k in fees immediately, offer a board seat and various other stipulations. Our lawyer actually called me and said I’ve seen enough of these term sheets to know a bad deal when I see one and this one is bad, don’t do it.

As a small, unfunded startup all the advice would say stick to doing one thing well. Become the best donation platform you can be.

But early on we realised just how limiting that would be. As a value exchange, donations are the biggest ask of all. ‘Please give me some money for nothing in return’. Our creators were linking to all kinds of other tools for to sell things, build memberships and offer commissions.

What if a creator could do all of that from one place instead of asking their supporters to jump around all these different platforms.

We decided we had to take on the harder task of becoming the only monetisation service a creator would ever need.

New Email: You can no longer use PayPal anymore.

August 2018, I get an email I thought was an error. PayPal, our main payment provider, had permanently banned our account. No appeal process, no number to call, just an automated ‘you’re done’ email. This could have been the end of Ko-fi.

Thankfully I had been hassling PayPal and had someone to call. They were on leave, but took my call and escalated our case up the chain. We found out we were too high risk and had to take immediate action in order to get back in business.

Nigel and I worked tirelessly building new tools and bots, writing policies and reviewing content.

PayPal were shocked by how quickly and thoroughly we reacted and switched us back on within a week.

Our first two hires have been an incredible fit for Ko-fi.

The first was a great all round designer, creating amazing quality UI/UX work, web, illustration and graphic design. The second was an excellent full-stack developer who’s previous startup was winding down. Not only is he a great coder, he’s also maintained his founder grade level of commitment to this cause. Without these two hires, Ko-fi would not have been able to iterate, grow and execute on the all-in-one vision.

We’ve not lost many team members along the way, but we have made hiring mistakes. These are the three biggest mistakes we’ve made:

The team is now 14 people and we’ve been lucky enough to attract and retain some great people. I personally take hiring incredibly seriously now. For our first hire in the US, I spoke to over 50 candidates. We make all hires do a paid work project, we speak to their previous managers, we conduct a paid trial day where they work with other team members before we make a final decision.

March 2020, the world goes into lockdown. It’s is an unknown for everyone.

We thought ‘this will either make us or break us!’.

That question only lingered until we got the March creator earnings number. February was $1.27M and March was $1.94M, we’d grown 53% in one month. Today creators on Ko-fi earn almost $7M per month, but back then it was a huge milestone.

One of our biggest creators in 2020 was Avi Schiffman who created a Covid tracking dashboard and earned over $300k in donations on Ko-fi.

VC’s started to talk up the Creator Economy and all of a sudden we were getting approached by loads of the top silicon valley funders eager to get a slice of an industry so clearly benefiting from this strange new normal. We took a few meetings, but the reality was money was never the inhibitor to growth, so we just kept building.

Patreon raises money at a $1.2B valuation and then within a year they raise again at a $4.2B valuation. Things are getting a bit nuts.

Every day it seemed there was a new competitor launching on product hunt.

Clubhouse is the next big thing with everyone flocking to live audio (with tipping). Twitter adds tipping features, all the link-in-bio tools add tipping and the big discovery platforms wake up and realise the era of paying creators nothing for their content is over. Even our payment partners PayPal and Stripe were building out competitive features to Ko-fi. Competition was everywhere.

As it turned out the rising tide did lift all boats. When Twitter (one of our biggest sources of traffic) added tipping, Ko-fi creator earnings went up. When the main link in bio tools added tipping, Ko-fi creator earnings went up, when Gumroad and Discord and all of the other platforms added competing features, creator earnings on Ko-fi went up.

The competition just fuelled our fire and pushed us to execute on our all-in-one vision much faster than we otherwise would have.

Almost immediately after lockdown things changed. VCs have stopped funding speculative bets in the creator economy and most of the direct competitors switched to link in bio or website builder products. Competition is still there of course, but nothing like the ferver of 2021.

During Covid we launched Ko-fi Shop and Membership tiers. Two hugely flexible and valuable ways for creators to earn money.

More and more creators told us they were migrating from Etsy, Patreon and other much larger platforms to just use Ko-fi.

The combination of 0-5% platform fees (lowest in the industry) and our breadth and depth of features seems to still resonate.

We had to build 50+ other features to support our diverse creator needs.

We built a mini CRM to help creators manage their supporters, we built a publishing platform, we rebuilt our Commissions and requests feature, we integrated with Discord, Twitch and YouTube to help gamers and communities thrive on Ko-fi. Over the past few years we’ve added countless features to keep our creators moving forward.

We’ve picked out a handful of creator segments to serve even better this year, but I’m more convinced than ever that a broad, easy to use set of monetisation tools is the right approach for sustained growth.

In 2022 most creator platforms basically flatlined, we grew 62%.

The thing about having a small team with a broad, global product is you have to ruthlessly prioritise. If you don’t you’ll just burn out.

Nigel has become an absolute master of saying no. We get a feed of feature requests directly in slack. There must be upwards of 20 every day. On top of the feature requests there are bugs to squash, compliance issues to wrangle and our own ideas to implement.

While I can sometimes sit on the side of the impatient co-founder wanting to push the business on further and faster, when you look at the achievements we’ve made in five years with such a tiny amount of resource, I couldn’t be prouder of what the team has accomplished.

As the old SEAL team saying goes ‘slow is smooth, smooth is fast’.

By keeping our creators and supporters at the core of everything we do. By hiring and inspiring great talent to do their best work. And by thinking carefully about what earns its place on the roadmap I think we can continue to deliver an incredibly valuable service for everyone.

If you want to hear more about the Ko-fi story, please get in touch.