When companies run into trouble, it’s not uncommon for them to “pivot” to a new business plan in order to fix what isn’t working. But what DoughMain, a financial education company, did when it wasn’t making a profit was more unusual: it split off into two organizations, one of which is a nonprofit group.
“What you do in Silicon Valley is pivot, 94 percent of the time,” said Ken Damato, CEO and founder of the Research Park-based company. “We did it because strategically, it made sense.”
The mission of DoughMain when it was founded in 2011 was to promote financial literacy among children. The company had two main ways for doing this. The first was a website that offered software tools for parents, including a calendar, an allowance tracker, and a chore chart. It also had children’s games that taught financial concepts and rewarded players for good money management.
The website connected directly to a bank account controlled by the parent, and allowed them to give children “points” for completing chores that could be converted at a set rate into real money in the child’s doughmain.com account. In turn, that money can be put on a debit card that the child could use to make purchases. The site also has messaging tools for parents and children to communicate about money matters.
In this way, children could learn about saving money, and parents could stay organized.
The second main part of the company was a program that brought financial literacy education to schools. DoughMain started out with five teachers on staff, and these teachers created a curriculum for high schools to use. The idea was for school districts to bring DoughMain into their classrooms to teach money management. Around the same time the company was founded, the state created a requirement that all school districts teach financial literacy (without strictly defining what that was.)
In both cases, the DoughMain made its money partly through contracts with banks: when parents created a bank account tied to the DoughMain.com website, the company received a commission.
“How we would make money is by sending people to banks, which helps them open up accounts, which is a very big source of revenue,” Damato explained. However, the tie to the banks made the educational program a tough sell for school districts. Growth in website subscribers had lagged behind expectations as well. When the company launched, Damato told U.S. 1 he hoped to have half a million by the end of the year, but today it has about 150,000 active users. (U.S. 1, July 6, 2011.)
DoughMain’s solution was to split the company in two: DoughMain and the DoughMain Education Foundation. The latter, a nonprofit group, has taken over the classroom education component and the interactive games. The Fun Vault is a collection of web-based games for kids ages 5 to 8 that focus on arithmetic, budgeting, and saving money. Sand Dollar City, aimed at kids 8 to 12, is more advanced. It gives kids a character who must rebuild a family candy store in danger of bankruptcy. The player must spend wisely and make good use of bank accounts and loans to succeed. I Rule Money, aimed at teens, features videos of teens discussing money topics in the ad-hoc style of self-shot YouTube videos. Topics include credit cards, home buying, and credit ratings.
Currently, the DoughMain Education Foundation is teaching classes in schools in Edison, Montgomery, and Woodbridge. Nine teachers are currently working on the curriculum, and the nonprofit group hopes to be in more than 24 classrooms by next spring. The board of the foundation includes former New York governor David Patterson and many New York businesspeople. Its offices remain in the same building as the for-profit DoughMain company, but its operations are completely separate. Damato says it will move into its own offices as soon as possible.
The for-profit company is now focused on the parental tools and making money via subscriptions that it charges financial service companies to sponsor different parts of the website. Every time a DoughMain subscriber signs up for an account with a sponsor like Everbank, Ally Bank, or Capital 360, DoughMain gets anywhere from $60 to $250. Other potential clients for referrals include insurance companies or retirement products for adults. The site has about 150,000 active users, meaning accounts that log in at least once a week.
Damato said banks are eager for sources of new customers, especially young people. He said there have been drastic changes in the way parents teach their children about money, and that the move to online banking has hurt the ability of parents to pass down banking habits to their children. “Today banks do almost everything they can to make the experience touchless,” Damato said. “They don’t even want to send you a statement in the mail; they want you to do everything online. Online is the antithesis of actually engaging in parenting with a child.”
In previous generations parents would take their children to the bank at a young age, open an account for them, and help them start saving money. Damato says that in 1993, 98 percent of parents opened up bank accounts for their children by the time they turned 18, but that had dropped to 50 percent in 2015.
Damato said statistics show the younger generation has saving and spending habits that could spell trouble for themselves as well as banks. “It’s very clear that this generation accumulates episodically,” Damato says. “In the past your mom may have said if you want a new bike or a car, you have to save for it. This generation saves for a new iPad or they save for a new telephone. They think of accumulating money not for accumulating it for the future, but accumulating it for purchases, which is devastating towards someone’s financial future.”
Damato grew up in Sayreville, where his father was an executive of A&P markets. He graduated from Northeastern University with a degree in marketing and business administration. He was previously COO of Tyden Group and held management positions at American Standard, Intrepdic Capital Partners, and GE Lighting. He founded the company together with partner David Reim and raised more than $5 million in capital from investors. The site went live in 2011.
Damato said he was inspired to create a website promoting financial literacy after watching his three sons, Michael, David, and William, playing an online game. The game gave the player virtual money for completing mundane tasks like walking a dog. Damato figured it would be even more compelling if kids could get real money for walking real dogs.
The DoughMain Education Foundation is not Damato’s first foray into charity. In 2010 his son Michael died of a rare pediatric cancer, and Damato launched the Michael Robert Damato Memorial Fund with the Princeton Area Community Foundation in his honor.
One of the early investors in DoughMain is Mort Collins, who has put more than $1 million into the company. Collins, a partner at Battelle Ventures, is an old hand at investing, and was in fact one of the first tech company venture capitalists when the computer business was getting off the ground after World War II. (U.S. 1, October 2, 2013.)
Collins says he was intrigued by the social aspect of the DoughMain platform, which allowed kids to play the games together with friends, in a way similar to the Facebook game Farmville, but in an environment more controlled by parents.
Collins says that in all his years of investing, he’s never seen a company pivot quite the way DoughMain has, by turning part of its core business into a nonprofit. “I don’t think I’ve ever seen that before,” he said. “I’ve seen elements of it, but I’ve never seen it completely. And it’s a good move from the standpoint of how we perform part of our mission.”
DoughMain.com, 189 Wall Street, Suite 1, Princeton 08540. 609-356-0813. Kenneth Damato, CEO. www.doughmain.com.
DoughMain Education Foundation, 609-731-3300. Rob Church, acting executive director. www.doughmaineducationfoundation.org.