KITCHENER
When it came to careers, they didn’t come any better than teaching, as far as Dave Beaton was concerned.
Beaton, who had spent 18 years demystifying math and physics for high school students, loved his job and had no plans of leaving it when, one day, everything changed.
It happened in Room 108C at Saint David Catholic Secondary School in Waterloo, as Beaton chatted with his colleague, Lucky Sharma. It was late October, 2007.
“He was talking to me about an idea he had, about being able to create ‘virtual change’ in some way, and allow that money to be given to charity,” Beaton said. “And a light bulb went off in my head about building a business around this idea, and that was the genesis of it.”
Four years, countless late nights and one career change later, “It” is now called ChangeIt, a program that allows people to round up their debit or credit-card purchases and direct the extra money – or Virtual Change, a term Beaton has trademarked - to the charities of their choice.
The program makes it easy for donors to support several causes at once, and to self-direct their giving free from the pressure and guilt that can accompany direct appeals for donations.
Charitable sector officials are thrilled by the prospect of a new channel through which donors can support their favourite causes.
“ChangeIt would be a great addition to our toolbox, given our history of making it as easy as possible for people to give,” said Jan Varner, CEO of United Way Kitchener-Waterloo and Area, which supports more than 90 charitable programs locally. “We’re looking forward to the day it becomes available in Waterloo Region.”
Beaton described ChangeIt as “a win-win for all stakeholders,” as recipient charities save on fundraising costs, and participating financial institutions burnish their brands by promoting philanthropy.
It’s been a long four years of development for Beaton and his team, but ChangeIt is now up and running as a pilot at a Canadian credit union. If all goes according to plan, he expects to start rolling the program out to American and Canadian financial institutions in early 2012.
Beaton, along with Sharma and a small team of private shareholders, have reason to be optimistic. Response to ChangeIt has been universally positive, as evidenced by a recent invitation to pitch at the prestigious Sibos conference, a global gathering of the world’s most influential figures in the financial services industry.
“There’s never been a naysayer,” he said of the innumerable financial institutions, charities and potential investors he has met since Sharma’s idea wormed its way into his head and stayed there.
“It was one of those ideas that seemed so simple, and the simplest ideas are often the ones that are widely adopted and become really successful,” Beaton said. “I couldn’t shake it; I thought about it all the time.”
With his friend’s blessing, Beaton looked into getting a patent for the idea, but discovered someone else had beaten him to it.
“It was exactly the same concept, written by a Stanford professor, and it had been donated to the American Cancer Society,” he recalled, but the cancer society had shelved the patent rather than commercialize it.
Thus began a process of relationship-building between Beaton, who was still teaching, and the American Cancer Society, as well as the Stanford professor, whom he cold-called at home to discuss the ChangeIt business concept.
“He loved my commercialization model, and then provided us the key contacts at the American Cancer Society at the top level,” he said. “That got us in to speak to the right people.”
A handshake deal to licence the patent for Beaton’s nascent venture soon followed, “but that wasn’t the end of the story”; it was merely the beginning of a more-arduous phase: building the concept into a workable program on which a formal agreement could be based.
The cancer society had envisoned commercializing the program strictly for their own fundraising, but Beaton proposed a model that allowed all charities to participate, while the cancer society owned the patent and collected a licensing fee – a model that Beaton had calculated would pay the society nine times what it would have earned from its original plan.
Needless to say, cancer society officials loved the idea, but others within the huge agency wanted time to assess it against other proposals, a months-long process that would require Beaton to take a leave of absence from teaching in the fall of 2008.
“The outcome of that was that our model was deemed to be light years ahead of the second-best model,” said Beaton, who anticipated a quick agreement now that licensing negotiations could resume. It was Christmas of 2008.
“Well, it took until November of ’09 to actually get the licensing agreement together,” he said, adding that, as such a large organization, the American Cancer Society “is driven by process”, unlike his nimble startup. Beaton, meanwhile, took another year of leave from the classroom.
Long as it took to obtain, the deal freed Beaton to take the next step and approach financial institutions. It had been agreed he would first launch ChangeIt in Canada, “an isolated, mature, healthy economy” with a strong banking system, then refine the concept for the American market.
At the banks, he encountered a challenge with which he was now familiar: “Our initial discussions in Canada were with organizations that were very large, and although those discussions went well, they were slow.”
Eager to prove his concept without further delay, Beaton needed to find a financial institution that could act quickly. “That was when I started learning about the credit union system,” he said. “I was amazed to learn of how innovative the credit unions had been, bringing new products to market,” including many that traditional banks went on to adopt.
Another advantage of credit unions, he said, is that they operate regionally, similar to banks in the U.S. – ChangeIt’s ultimate target market.
Talks began less than a year ago, not long after Beaton formally left teaching and moved his company, called Formulating Change Inc., into the brand new Communitech Hub in the former Lang Tannery in Kitchener. This week, ChangeIt launched as a pilot at the Ukrainian Credit Union in Toronto, with additional credit unions in the queue and ready to adopt the program in the next few months.
“It’s very exciting,” he said. “We can now see how quickly this could potentially grow.”
For donors, enrolment is a straightforward process. Once they open a profile online or at their financial branch, they can set caps on how much rounding-up they want to do, apportion specific amounts to whichever charities they choose, and make adjustments at will.
The transactions happen automatically and invisibly at the time of purchase, via a secure “black box” at the financial institution, which Beaton described as a “filter” that runs externally to the bank’s systems.
The donations are forwarded to the charities in full, who issue receipts to donors and then pay back a small administration fee to Formulating Change. Financial institutions, meanwhile, will enjoy enhanced brand equity for enabling philanthropy.
Looking back, Beaton can hardly believe four years have passed since his fateful conversation with Lucky Sharma. He credited his wife and children for supporting his decision to leave the security of the teaching position – the summers off, a schedule that got him home in time to make dinner and work that he loved – to pursue the uncertain path of a startup entrepreneur.
“It was a very big decision, and with the support of my family, they encouraged me to do what I wanted to do,” he said, describing how the sense of urgency at ChangeIt picked up once he severed ties with his old career. “I no longer had that safety net.”
Once ChangeIt rolls out in earnest, Beaton expects fast and steady growth, but said he’s not about to take his eye off the ball after all the sweat equity he and his team have invested.
If he sounds confident, it’s with good reason - everyone he’s met, including investors large and small, has seen no downside to the concept – but Beaton has one extra reason to smile.
“It’s always good to have somebody named Lucky on your side,” he said, adding that his friend, still teaching, is actually named Raj.
Links:
www.changeitcanada.com
http://www.united-way-kw.org/
https://www.ukrainiancu.com/UCU/
