Whether you are a charity, a social enterprise or any other not-for-profit organisation, you are probably looking for new ways of raising financial capital. While grant funding is still a common solution amongst not-for-profits, online crowdfunding has also become increasingly popular within the voluntary sector.
Crowdfunding is by definition “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the internet.” Crowdfunding was originally used by entrepreneurs as a means to attract small investments to for-profit ventures, primarily via the internet. Now, the global crowdfunding market is projected to reach between $90 billion and $96 billion by 2025 according to a 2013 study commissioned by the World Bank – roughly 1.8 times the size of the global venture capital industry today- and is being advertised as a valuable tool for fundraising for not-for-profits.
The Financial Conduct Authority (FCA) has identified five main types of crowdfunding:
- donation-based,
- reward-based,
- loan-based,
- investment-based, and
- exempt.
Donation-based, reward-based and exempt crowdfunding are the most suitable for not-for-profit organisations. Donation-based and reward-based crowdfunding may be attractive fundraising options for a new project, new campaign or a new organisation, especially one at an early stage of development that needs to raise money to meet pre-start costs. All three forms of crowdfunding are unregulated activities and do not need FCA authorisation.
Community shares are a form of crowdfunding exempt from regulation. Community shares are defined by the Community Shares Unit (CSU) as “non-transferable, withdrawable shares in a society with a voluntary or statutory asset lock. Shareholders have the right to withdraw their share capital, subject to the terms and conditions stated in the society’s rules and share offer document. But they cannot sell or transfer their shares, or liquidate the business in order to achieve a capital gain”.
If you want to give crowdfunding a go for your own organisation, here are a few web platforms that you’ll want to check out:
Crowdfunder offers two different funding methods: All or Nothing (you only receive your pledges if you hit your target) and Keep What You Raise (you get to keep all your pledges, whether your projects hits target or not). The latter is best suited for causes or charitable projects.
Cost: 5% plus VAT (plus potentially some other fees depending on the type of payment chosen). The fee is payable only if the project reaches or exceeds the funding target.
Crowfunder also offers the possibility of fundraising for community shares in the UK, thus facilitating the raising of capital for community organisations.
FundIt.Buzz is a UK based crowdfunding platform aimed at social enterprises and charities. With FundIt.Buzz you can also collect Gift Aid. You need to reach the first milestone (or whole amount if that was your first milestone) to get the money raised, otherwise all funds go back to the donors.
Cost: 5% plus fees related to card payment.
Bloom VC is the only rewards based crowdfunding platform in the UK to allow pretty much any project regardless of whether it’s a commercial or social idea. They only allow ‘All or nothing’ type of funding, which means that if you don’t raise all the money set as target, it goes back to the donors.
Cost: 5% fee from project funding total + PayPal fee, on successful projects.
Kickstarter is a widely known crowdfunding platform aimed at creative projects. Project creators choose a deadline and minimum funding goal and if the goal isn’t met by the deadline, no funds are collected. Those who back Kickstarter projects are offered rewards for their pledges.
Individuals starting a project on Kickstarter must be 18 years of age or older and be a permanent resident in one of the following countries: US, UK, Canada, Australia, New Zealand, the Netherlands, Denmark, Ireland, Norway, Sweden, Germany, France, Spain, Italy, Austria, Belgium, Switzerland, Luxembourg, Hong Kong, Singapore, and Mexico
Cost: 5% of the funds raised. Additional fees apply to PayPal payments.
Generosity is Indiegogo’s charity crowdfunding platform, which was specifically designed for the needs of socially minded not-for-profits and individuals looking to solve both personal and community challenges.
The platform does not take any fee out of the money raised, however payment processor fees may apply.
Not only is Generosity a socially conscious fundraising platform, but whether or not you meet your funding goal, you will still receive all the funds that you raised.
GoFundMe is a crowdfunding platform that enables people to raise money for different life events. Supported countries and currencies include: United States of America ($USD), United Kingdom (£GBP), Canada ($CAD), Australia ($AUD), and some European Union countries that use the Euro as their official currency (€EUR). With GoFundMe, you keep each and every donation you receive; reaching your goal is not required.
Cost: 5% of the funds raised. Additional fees apply to processing payments.
Ethex allows people to invest positively – that is to put their money directly into businesses whose mission and impacts they support, and that also offer a financial return. Thus social businesses are able to raise finance from sympathetic investors through community shares.
If the minimum target is not reached within the offer period, sometimes the offer may be extended. If it is still not reached within a viable time frame, then Ethex will return any funds received to investors.
Conclusion
These are just a few examples of crowdfunding platforms that are suitable to not-for-profits. As noted above, most of these websites keep about 5% of the funds that your organisation raises, and there are fees collected by credit card processors, so be sure to read the FAQs on each website carefully.