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Nine facts charities need to know about crowdfunding

posted Nov 11, 2014, 11:55 PM by J Shaw   [ updated Nov 11, 2014, 11:56 PM ]
Alternative finance is on the rise. A report by Nesta and the University of Cambridge, Understanding Alternative Finance, found that the total market (made up of new models like crowdfunding) is set to grow to £1.74bn by the end of 2014 – and to more than double to £4.4bn in 2015.

While a lot of the focus on alternative finance has been around consumer lending and business finance, we’ve discovered that it is also proving a significant source of funding for projects with a social aim.

1. Backers will give time as well as money

34% of fundraisers have seen an increase in volunteering after they fundraised through donation–based crowdfunding.

38% of investors in community shares attended local shareholder meetings of the project they supported and 32% have offered to volunteer directly with the project as did 27% of those backing a donation-based crowdfunding campaign.

Donation-based crowdfunding is where individuals donate small amounts to meet the larger funding aim of a specific charitable project while receiving no financial or material return in exchange.

2. Once they back your social project, people become your biggest promoters

70% of backers in rewards-based crowdfunding also gave non–financial support, usually by promoting the crowdfunding campaign to their networks.

Rewards-based crowdfunding is where individuals donate towards a specific project with the expectation of receiving a tangible (but non–financial) reward or product at a later date in exchange for their contribution.

3. Some even donate space and physical goods to campaigns as well

7% of funders using donation-based crowdfunding have supported campaigns by allowing the fundraisers to use their space, while 5% gave physical goods and non-financial resources to the campaign.

4. People often used donation-based crowdfunding to support projects others could benefit from

46% of people who have funded projects through donation-based crowdfunding have supported projects that others in or outside their local area could use, and only 22% have funded projects they could use themselves.
5. It provides funds to those who would struggle to find them elsewhere

64% of those who raised funds via donation-based crowdfunding said they were unlikely or very unlikely to have received finance elsewhere.

6. Fundraisers are likely to turn to alternative finance again in the future

47% of fundraisers who have used donation-based crowdfunding would be very likely to approach a platform again if they need finance in the future. The same goes for 81% of fundraisers who had used reward-based crowdfunding.

7. Social media is one of the most effective ways of finding backers for projects with a social purpose

Over two thirds (68%) of people who used donation-based crowdfunding found out about the first campaign they supported through social media, the same goes for a third (33%) of people who used reward-based crowdfunding to back a project.

8. Donations tend to be small

Three quarters of those donating through donation-based crowdfunding had contributed less than £50 in total. A third had donated no more than £10.

9. Social tax reliefs would make more people use these models

Half of those contributing funds through donation and rewards based crowdfunding said they would be more likely to invest in social projects if a specific tax relief were available. For community shares, 67% of investors would be likely or very likely to invest more if they could get a 30% social investment tax relief on their investment.

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