Crowdfunding


I attended a talk on crowdfunding at Hub Melbourne, presented by the Australian Centre for Social Innovation (TACSI) featuring The Awesome Foundation, Pozible and Start Some Good.

Sounds like something where a crowd funds your project? Almost but not quite. Crowdfunding, or “peer funding” as Tom Dawkins from Start Some Good prefers to call it, is a way of using social media and the internet to bring together supporters of a project to pool their money to get something happening. But it is not just about putting a project up and waiting for money to come in – old style fundraising techniques and face to face communication to encourage people to contribute are also necessary.

What Start Some Good and Pozible are doing, is showcasing projects and making the fundraising a kind of time limited challenge – so that if projects don’t make their targets or tipping points, then no money comes through (and the supporters do not give any money away).

What is really interesting about these kinds of sites is that they operate outside the legal and tax framework of tax deductible gifts. The three speakers did not once mention the words “donate”, “dgr” or “philanthropist” in their chatting about how they work and what they do.

Let me go into each of them in a bit more detail so you get the gist of it.

The Awesome Foundation is based on a US model, where a bunch of people get together – in this case 10 (out of 60 who originally showed interest) and they commit to give away their own money every month! They are giving $1,000 per month – or $100 each person to a project they consider “awesome”. They are not getting a tax deduction, and they set their own parameters about what they consider they want to give their money to. The first successful project in Melbourne was about roof-top honey, and the money went towards a new machine for extraction. Ross Hill seems to be having a great time supporting things which are about developing Melbourne and the culture of Melbourne “as long as the funding will have a material impact on the project and the idea is awesome”. Here’s the proviso – the $1000 must have a material impact on the project – so you can’t approach them for $1000 if your overall goal is $100,000.

Pozible and Start Some Good are more traditional (if you can call it that in such a newish field) crowdfunding models – that is, projects are put up on a website, and supporters commit their funds. So the projects do go through an eligibility and vetting process and must meet certain criteria. For Pozible – projects must be creative. For Start Some Good, projects must have a direct social impact and can not be requests for funding for flow through projects (ie charities which pass on funds to others who carry out the on the ground implementation of a project).

Rick Chen who set up Pozible and the earlier Fundbreak wants to support projects which show creativity. All submitted projects have to have a video (for greater impact) and Pozible encourages all projects to think very carefully about how they are going to thank their supporters and what they might offer. (He mentioned one artist who sent out a jar of home-made jam to everyone who had given $25 or more). Tom agreed with this, saying that a handwritten note is much more appreciated than yet another email.

What I found interesting is that two out of the three of these seem to have been instigated by people who are very computer savvy, can talk about the “architecture” of their websites, and are web designers. It is as if people with the technical aptitude to build new things on the internet are now looking at ways to apply their skillset to social engagement.

There was some reference to social entrepreneurship and the School for Social Entrepreneurs – and I should emphasise here that participating in these kinds of crowdfunding sites is not free. From what I understood, the sites take a percentage of the money raised, when the project achieves its goals, or reaches a particular target. When you are looking at either 4% of 7% and the number of projects appearing on these sites, cycnics like myself wonder whether the social good is the main intention. (Of course one should not forget that the phrase social entrepreneur has two distinct parts).

Tom Dawkins spoke most eloquently about how crowdfunding is nothing new – when you put a donate button on your website, you are inviting a crowd which you imagine to be out there somewhere to contribute to your cause. There was an interesting juxtaposition of the hep and trendy, with old school emphasis on relationship building. Tom had a phrase about relational motivations – and spoke with great emphasis about how a tax deduction is not a key motivator for giving when at smaller levels and how people are not just lurking by their computers waiting to shower you with money.

I am kicking myself that I have left my notes somewhere and won’t be able to access them until next week (so I may have to revise some of this then when I revisit).

However, if you are tweet savvy you can see some comments from other people who were there at #crowd4good

I feel a little ambivalent about this – I think that certainly there is a place for crowdfunding, especially for projects which can’t get past the barriers of official and tax deductible sanctioned fundraising (like the Australia Cultural Fund) and it seems like a great idea for some ventures. I suppose I went along hoping I could learn how to improve crowdfunding for my own organisation, and thought there might have been more of a variety in exponents of crowdfunding practise (read Beth Kanter on crowdsourcing)

Showing you all that I don’t have a smart phone: In a relatively small room for this presentation with maybe 50 people present and very good acoustics, I found it amazement that the MC asked people to send their questions via the hash tag or text message and did not encourage real life spoken interaction. While I understand the desire to “curate” questions (and thereby avoid repetition and perhaps some of those longwinded people who make statements rather than pose queries) it struck me as odd that in a session about relationship building (for that is what crowd and peer funding fundamentally is), direct human interaction was not encouraged.

Further note on the downside: I found this article which ponders the legality of some of how crowdfunding may be working. Those pesky ASIC and ATO people – first of all you can’t offer donors benefits and now you can’t offer sponsors benefits without a prospectus?

What is your experience of crowdfunding? Have you tried it? Did it work? Did you still have to use “traditional” fundraising methods to encourage your supporters to come on board? I’d love to hear about what worked or didn’t work for you – and if you attended the session at Hub Melbourne it would be great to hear how other people responded.

note added Jan 2012. have a look here at a great example of crowfunding via pozible for the Emerging Writers Festival

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About ozphilanthropy

#Philanthropy. Posts by Sharon Nathani. Consultant, blogger, speaker & committee member/grantmaker @Impact100Melb. Sometime pianist & knitter. Learning more to share with you in philanthropy studies @acpns_qutozphilanthropy through Masters in Business in Philanthropy and Not for Profit Studies. Former Executive Officer Inner North Community Foundation.
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10 Responses to Crowdfunding

  1. Hi Sharon,
    Thanks for coming along, and more thanks for blogging the event so more people can hopefully get something useful out of it.
    Thanks for the feedback about using Twitter and SMS to send in questions. It’s something I’ve put a lot of thought into, and I’m I gave you the impression that audience questions weren’t welcome.
    I do like to exert some editorial judgement over the questions, in part to respect everyone’s valuable time – I find it helps to avoid situations like those you mentioned in your post where people ask repetitive questions or go off on off-topic rants.
    I also like giving people who aren’t at the event but are following it via the Twitter hashtag an opportunity to ask questions via Twitter. The SMS option acknowledges that not everyone uses Twitter or smartphones. 🙂
    I’d also point out that we did take questions from the crowd and in fact the last time I asked for questions from the crowd, noone had a question – so I’m pretty satisfied that everyone who had a question got a chance to ask it! And I’m told that the face to face conversations carried on at the pub down the road long after I was tucked up in bed, which was great to hear. 🙂

    • thanks for this Sarah, my comment was really more generally about the irony of relationship development being facilitated by new technology, so I won’t debate you on this. Thanks again for an interesting presentation which opened up some new avenues for support for projects and ideas.

  2. Alan Crabbe says:

    Thanks for sharing your thoughts and insight from the crowdfunding session.

    I believe that crowdfunding (or as Tom describes “peer funding”) should be part of the social marketing strategy for most creative / social projects.

    Platforms like Pozible have been developed to incorporate 5 key aspects of social media. I encourage all individuals, groups and organisations to exploit these tools to get maximum exposure for a project whilst building an audience for their work.

    The 5 key aspects of social media used by a crowdfunding platform:

    1. Social Networking
    2. Video
    3. Blogging
    4. Rich Multimedia
    5. Social Bookmarking

    With planning and consideration, a good project or idea will be able to build an audience (and fan base) with the added benefit of financial support.

    Although traditional government funding is a necessity, I do believe crowdfunding should be used in conjunction with public funding and not always labelled an alternative.

    I’m always keen to hear other peoples perspective on crowdfunding.. everyone is learning!

    • thanks very much for your thoughtful response, Alan.

      I agree with you 100% that people should not rely on one source of fundraising only for a particular project, and should always seek to broaden their income streams through peer support, government funding where possible, and sponsorship.

      Crowdfunding (peer funding) is certainly filling a gap for projects which fall between the cracks of govt funding agencies or timelines.

      Sharon

  3. I am interested in how the backend of crowdfunding sites operate. How many employees are necessary to handle the operations, how do you seek potential entrepreneurs and projects/idea makers and get them to participate on your site? what kind of start up costs did you have?
    I am a student finishing my BBA and I am working on a project that outlines a business plan for a crowdfunding site. I have had very little success in finding out how the sites themselves operate. The information out there focuses on the end user and the donation side. Any assistance you can offer would be greatly appreciated.

    Danielle

    • thanks for this excellent question Danielle, I have forwarded it through to pozible to see if they would like to respond on the technicalities and back end.

    • Hi Danielle,

      Tom Dawkins from Start Some Good has responded to your query:

      “The backend is relatively complex, but some of the most complex bits can be outsourced somewhat – most crowdfunding sites use either paypal or amazon to service the transactions for instance. Causes uses Network for Good. Pozible actually built their own payment gateway from scratch.

      The how many employees is a bit of a how long is a piece of string question. Kickstarter has 18 I believe. IndieGoGo is smaller but hiring. We have only one person full-time, my co-founder Alex, but that’s hardly a desirable state of affairs in the longer term. Startup costs can be close to nothing, just lots of effort. Suggest hey look up “lean startup methodologies”. This tends to apply most powerfully to cloud-based businesses, and crowdfunding sites fit within that category.

      They could also ask the question on Quora and see how replies.

      I hope this is somewhat helpful.

      Cheers!

      Tom”

  4. Hi Sharon,
    Great article, thanks.
    I’ve posted a project on pozible.com (please have a look: http://www.pozible.com/index.php/archive/index/4915/description/0/0 – and apologies for the gratuitous self-promotion) and I would really like to keep you updated as to my success or failure in raising the funding required. So far nothing after 10 days, but I have re-worked and updated the proposal during this weekend so it was more coherent and ‘saleable.’
    I’m very new to ‘crowdfunding’ and finding the journey quite unlike anything else I’ve done before.
    Regards

    • Hi Jonathan,
      thanks for your comment and post to your project on pozible. Don’t forget that you need to constantly remind supporters that you are fundraising. Consider anyone who has been to your previous exhibitions, bought your books or purchased any of your photographs in the past. Although the crowdfunding sites are great – they don’t work on their own but require constant maintenance. I would also perhaps say that the benefits you are offering supporters need to be more differentiated at the various levels.

      Good luck!
      Sharon

  5. Bryan Vadas says:

    Hi. Just stumbled across your article which I found a great read. As the operator of a crowd funding site (www.ipledg.com) we have addressed the issues of DGRs, etc head on as we cover the full gamit of creative, commercial, charitable and community crowd funding. Pozible is to be commended on the pioneering work they have done in this space, but we have much work to do as an industry to bring crowd funding into the mainstream and to be top of mind. Given the world trend in this space, our work is ahead of us, but it will be a labour well worth doing.

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