About Crowd Funding

Posting #2 in a series on Resource Development
See # 1, Five Elements of Strategic Resource Development

First, a definition from the Oxford Dictionary: Crowdfunding (a form of crowdsourcing) is the practice of funding a project or venture by raising monetary contributions from a large number of people, today often performed via Internet-mediated registries, but the concept can also be executed through mail-order subscriptions, benefit events, and other methods. i

Wikipedia adds this: Crowdfunding is a form of alternative finance, which has emerged outside of the traditional financial system. ii

This latter definition is sometimes called “Equity Crowd Funding” and investors receive equity in the business or venture they are contributing to. This posting is not about this type of Crowd Funding. Rather I am writing about the most common type of Crowd Funding today which allows anyone to donate their money to anything that gets posted on an Internet-based Crowd Funding website. Recipients of funding can be individuals in need, informal groups, performance artists, individual schools, clubs, inventors, product developers, techno- projects, as well as conventional charities and businesses.

Donors to such initiatives do not, as a general rule, get anything in return. Some may get a charitable receipt, but equity is not particularly part of the arrangement. Actually for many, if not most, of the asks being made on sites like Kickstarter or Go Fund Me, there is no equity to be had. Witness two of the appeals below from Go Fund Me, Canada’s largest Crowd Funding website.

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The first one is about saving a single mother and her four children from losing their place and becoming homeless as of September 3, 2016. I am writing this on September 4th, perhaps too soon to see if the money raised stopped her eviction. I sure hope so. The other one is about Pebbles, a dog with liver problems and other illnesses who needs interventions that Darlene cannot afford.

I am not saying these are not causes to donate to. I use these two examples only to highlight that Crowd Funding is changing the how fundraising is done, about why it is needed, and who does it. There are the more standard types of appeals on these sites from charities and relief funds. For them Crowd Funding may very well be but one more way to generate support.

Unlike Go Fund Me, Kickstarter does provide some accountability on its site by reporting on fundraising results in a variety of ways, although neither site offers any accountability reports or information on impact, other than showcasing “success stories.”

Kickstarter tells us the following about its funding activity iii:

  • Since its inception in 2006, Kickstarter as generated pledges of $2.58 billion and successfully funded 111,500 projects.
  • Kickstarter is an “all or nothing” venture. If you do not raise all of the goal, you get zero. Unsuccessful initiatives were greater than successful; there are 200,000 of them reported by Kickstarter.
  • Most successful fundraising appeals were small ones, just shy of 75% of them. Just over 14 raised between $10,000 and $19,999. The dollar range categories are much wider than the smaller ones. Those raising $20,000 to $99,999 make up about 13.2% of the total successes. Less than 3% generate funds in the $100,000 and up category. If you are wondering if anyone has raised $1 million or more, the answer is yes. Of the 111,500 projects, 189 of them hit the million dollar mark (.0017%).
  • Those appeals that have the highest success rate are by category: Dance, Theatre, Comics, Music, and Art. Of the 15 categories listed, Food is in the bottom five. There is no category listed for Social Service, Human Services, Community Work, and so on.

In the United States there is another site that caught my attention: DonorsChoose.org, which exists solely to raise money from citizens for class room projects in schools around the country. Most of these requests appear to come from teachers looking for money to support something in their classroom that the public school system doesn’t fund. Most requests seem to be in the hundreds of dollars. Of three I dug into, the highest request was for $296.75 to support teaching 15 kids about cosmetic surgery. Other requests seem to be about getting money for things that one could argue should be paid for by the school system. I will stay silent on that topic, at least for this posting.

Whether or not Crowd Funding is a good thing for the market place has no right answer. It depends on how it impacts the community and community systems. In other words, its value is contextual. For the mother and children saved from eviction, the impact is substantive for her family. But as a business – Kick Starter is a business – its implications include diluting overall giving patterns of donors which may – and perhaps are – hurting other more traditional appeals from organizations who are trying to help thousands of single mothers and their children. Perhaps more importantly, sites like Kickstarter and GoFundMe are redefining what help and impact look like; they speak to those who are disillusioned with formal charities or with banks and so on.

For your organization or group, the questions you likely face if you are thinking of including Crowd Funding in your fundraising program include the follow:

  • Will raising money this way impact other revenue sources, whether support from your donors or from more traditional funders, who might see success as Crowd Funding as an indication of your lack of need for their support?
  • Given that, by far, the majority of projects that meet their fundraising goal receive $10,000 or less in funding, will entering this market place suit your needs and will the effort and the exposure be worth it, especially if you are not successful? Remember, at Kickstarter and other similar sites, it’s all or nothing.
  • Ten thousand dollars is a good amount of money and for some small groups it is big money. The key will be putting an ask out there for something that is compelling and likely to motivate a large number of small gifts that more likely or not speak to each donor’s emotions. While I could find no evidence to support this next point, my sense is that these types of appeals must be of a kind that generate impulse giving.

I will leave it to you to form your own judgements on Crowd Funding and to decide if and when it has a role to play in your resource development activities. My intent here is to provide information that may be of help.

Stay tuned for the next blog posting, About Social Impact Bonds.

i Retrieved from http://www.oxforddictionaries.com/us/definition/american_english/crowdfunding, September 4, 2016

ii Retrieved from https://en.wikipedia.org/wiki/Crowdfunding#cite_note-1, September 4, 2016

iii See https://www.kickstarter.com/help/stats?ref=about_subnav

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Five Elements of Strategic Resource Development

Posting #1 in a series on Resource Development

It’s tough out there for non-profits and social causes when it comes to raising money, especially money for core operations and services. All of the seed grants, innovation grants, or target specific project grants are fine and dandy, but the growth in sustainable funding is not growing, is it? Impact Investing, Social Enterprise, and Crowd Funding are among the more recent methods of financing social good, though the extent of their reach and utility by the sector overall are emerging, not yet clearly understood.

I have read a fair amount over the years on fundraising and other resource development opportunities and one thing I found irritating in most of them was the thesis they presented, which generally was, “if you all do this or that, or follow this methodology, you all will raise more money.” The reality is, as you  know, every organization will not increase their revenues in a given year. Many struggle just to maintain current levels of funding.

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Relationships Matter

A colleague of mine recently suggested I write a piece like this, given my “success” in significantly growing two non-profits. For one, I doubled staff and financial resources in about three years; for another agency the growth in revenues was about 70% over 5 years. At both agencies there were significant additions in services, but also large gains in securing sustainable funding and improving operational infrastructure (which is all about capacity). This leads me to my first point about generating resources: Raising revenues significantly takes  a significant amount of time.  Patience is definitely a virtue in this instance. Continue reading

Why Speak Ill of Charity?

It’s sad. There are too many people who speak ill of charities.

Some making sweeping accusations or conclusions without any real evidence or understanding.

Some prefer to focus on the mistakes charities make (and of course they make some) rather than the good they deliver,

There are some who think the continuation of social problems means charities have failed because not everyone is housed, or healthy, or free of violence. Imagine saying to a heart surgeon she is a failure because for every life she saves, others die from heart disease – as if that is her fault. I trust you understand my point.

Some analyze charitable activity by the numbers alone, especially the the most common one, administration costs.

And for some reason some folks just aren’t charitable.  And more times than not, they are not shy about expressing their derision.

Truth be told I think leaders of charities should listen to all of those voices and all the others that arise and see what truths might exist even in those comments found to be disdainful.

To my colleagues, especially to the leaders of our charities, please rethink the current narrative about how the charity model has failed and how we need to move away from it.  Don’t replace the word charity with new words that likely won’t stand the test of time. Charity is good. Being charitable is good for all involved. Being charitable is about being human.

It’s not about moving away.

It’s not about moving on.

It’s about changing how we do charity when change is needed, when new ways are necessary.

It’s about getting better.

And it’s not about admitting defeat and then changing the conversation.

Mega-Charities: the 100 Largest Charities in Canada

I am working on a major paper currently entitled, Mega-Charities and All the Rest: Money, Power, Folk Lore, and Transformation. It will include research and data about the revenue sources of charities in Canada and, drawing upon CRA data will provide a comprehensive look at all the ways charities fund raise.

The paper will include revenue information from all levels of government (as displayed in this posting), from foundations across Canada, as well as revenues generated from many other sources including from United Ways from across Canada to the human services sector. There will also be research and commentary on administration and fundraising costs and how the benchmarks used by funders of the sector for “allowable” costs are one of the major challenges facing charities. The paper will also provide more commentary on duplication (I have written about this before but my research was limited to Alberta – click here), and culminate with commentary about transformation ideas and directions that I suggest require our attention.

It will be published within a couple of weeks, most likely and offered free as a PDF.  Meanwhile here is some of the data and trends that will be in the paper.

Note: Some of the charts and tables may be difficult to read. They are clickable for larger versions.

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Heretical Propositions: Toward Democratic Philanthropy (Part Two)

(CONTINUED…  If you missed Part One in this series, you can find it here.)

It is well documented that those countries where the Income Gap between the wealthiest and poorest citizens tend to have a higher degree of crime, incarceration, mental illness, and health problems. Both the United States and Canada have wide gaps between the wealthy and the poor and both have higher incidents of social, economic, and health problems than other nations with smaller more realistic gaps

The growing chasm between rich and poor contributes to isolation, insensitivity, and intolerance. Systems and public institutions are designed and operated by those with power and the large majority of those in charge have higher incomes. Frequently the policies and systems they put into place appear to benefit those with means far more than those without.

quote4In the Province of Alberta and in its capital city, Edmonton, where I live, the economy is quite strong. Many large scale capital development projects are underway. I heard Edmonton alone has about $20 billion in major development lined up over the next several years. That’s $20,000,000,000! At the same time there is a two to three year wait for Edmonton’s public housing. Much, if not most, of that $20 billion in development won’t benefit the poor, the homeless, or the mentally ill and I have a feeling that the hundreds of thousands living pay cheque to pay cheque in Edmonton won’t either.

Despite the various indicators economists and business leaders use to gauge economic progress, our economies locally, provincially, and nationally are not working for the majority of citizens. Celebrations about how many jobs have been created are ipso facto celebrations of reductions in good paying, full time jobs and increases in part-time, low paying jobs (and too often insecure jobs).  Trust me. Those working those jobs are not popping champagne bottles to sip while they dine on macaroni and cheese.

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