Charities could benefit more from crowdfunding, says report

Crowdfunding offers “significant untapped potential” for charities and other social enterprises to raise more money, increase transparency and get more people involved in campaigning and volunteering, according to a new report.

Published by Nesta in partnership with the NCVO, ‘Crowdfunding good causes: opportunities and challenges for charities, community groups and social entrepreneurs’ that less than 0.5% of all giving to good causes in the UK is via crowdfunding, and while there is high awareness of this type of funding, relatively few have actually tried using it.

A survey of more than 450 community and voluntary sector organisations found that crowdfunding can not only get projects funded, but also engage people in a cause. Those who view it as “just another fundraising campaign or as an alternative to a grant application” will fail to reap the full benefits, which include:

• turning donors into campaigners and volunteers;
• helping to drive more experimentation and innovation;
• providing the seed funding and evidence that can convince larger, more traditional funders to get behind a project and scale it up.

The report warns that crowdfunding is “not a panacea” for projects that would otherwise struggle for funding, and says there are many projects for which “the challenges in crowdfunding will outweigh the benefits”. Among those challenges are “giving up power and influence over your project to ‘the crowd’”.

The report recommends a series of measure that could help to integrate crowdfunding into existing funding schemes through match funding programmes, which “combine social investment or grants with funds raised from the crowd”.

These recommendations are being taken forward in a new pilot project being developed by Nesta, Arts Council England, Heritage Lottery Fund and the DCMS. The project will fund organisations to experiment with different ways of crowdfunding projects in the culture and heritage sector. It seeks to gain an insight into how best arts organisation can engage with crowdfunding platforms and to improve understanding of the profile and motivations of donors.

The project follows an announcement in the recent Culture White Paper of a new crowdfunding scheme to deliver a match fund for the arts and heritage sector.