Is crowdfunding the new new?

Crowdfunding is quickly becoming the new shiny object in the world of social change. 
(This blog is by Nell Edgington one of my favorite thinkers and writers on financing nonprofits and reproduced with her permission)


From Giving Days, to new giving platforms, to lots of articles and studies (here and here to start), it seems that crowdfunding is everywhere lately.

I’m all for innovations in the funding of social change, but I’m not convinced that crowdfunding is really creating anything fundamentally new.

Under “crowdfunding” I include efforts like Kickstarter [or Pozible in Australia] where a creative effort (a film, art exhibit, library) can garner small investments from a large number of people. And I’m also including Giving Days, at the city and national level, where nonprofits try to raise as much money as possible in a 24-hour online “event”. What these efforts all have in common is they raise money, from a large group of people, over a short period of time.

I earned my fundraising chops working public television pledge drives, one of the earliest “crowdfunding” efforts. The technology was different (TV screens and telephones, instead of CRM systems and social media), but I’m not sure much else is.

So I would like to see us separate what is potentially exciting about crowdfunding from what is just hype. To help in that effort, I offer some questions:

How much is truly new money?
It’s unclear to me how much new money crowdfunding brings to social change organizations. For example, nonprofits participating in Giving Days encourage their annual donors to give on that specific day so that Giving Day dollars are higher. But that’s not new money. True innovation in social change funding comes from efforts to grow the 2% pie  [giving as a share of America’s GDP has stayed at 2% for the last 40+ years]. I’m not convinced that crowdfunding uncovers money that would not have otherwise ended up somewhere in the nonprofit sector.

How many new donors are being retained? 
The point of crowdfunding is that it’s a one time deal. There is a message of urgency that encourages donors to give NOW. So the numbers on a specific Giving Day or with a crowdfunding campaign may be good, but is the funding sustainable? Are nonprofits or social change organizations actually growing their donor base? Are they able to go back to these investors later and encourage them to give again? And if the funding isn’t sustainable, is it really worth the effort it took to get it?

Is crowdfunding reinforcing the “Overhead Myth”?
The destructive idea that donors shouldn’t support nonprofit “overhead“, or administrative costs, is slowly dying, but crowdfunding might just be bringing it back to life. Nonprofit crowdfunding darling charity:water has been taken to task for reinforcing the idea that 100% of the dollars they raise go “directly to the field”. And crowdfunding projects are often specific and “sexy,” which means that the money is not being raised for boring things like the staffing, technology, and infrastructure that most organizations desperately need. Are we perpetuating the overhead myth by encouraging donors to give to specific projects, instead of to overall issues, organizations or teams?

What’s the return on investment?
A lot of time and effort can go into crowdfunding campaigns. If the benefits are shortlived, donors aren’t retained, and the majority of the funding is not new dollars, while the costs (staff and board time, technology investments) are high, then what is the true return on investment? I’m not arguing that it can’t be positive, but I would like to see more critical analysis about it, both at the aggregate and the individual organization levels.

I hate to be a Debbie Downer, but I’d like us to dig a bit deeper to understand what the real effects of crowdfunding are so far and what it’s true promise is. If there is already research out there that can answer some of these questions, please let me know in the comments below.

About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.

Philanthropy repackaged for bankers

I have just attended the Asia Venture Philanthropy Network 2014 Conference (AVPN2014).  AVPN began in 2012 as an extension to the European Venture Philanthropy Association.  I blogged on the inaugural conference last year and pronounced myself an enthusiast.


What has happened since then and how is my enthusiasm faring? Without wanting to seem a Pollyanna-ish, I confess my enthusiasm remains. Who could not fail to be enthused by a forum where speakers made comments such as these:

• "The word can't means we haven't thought hard enough"
• "Can't means opportunity"
• "Philanthropy is about good people who won't take no for an answer"

The energy and commitment of 380+ attendees from 30 countries (the official count said 29 but I had been counted as from Australia which I'm not! I attended from New Zealand) was palpable.

Last year, I reported a comment that venture philanthropy has been around for aeons. I reckon that still is an accurate statement. A friend who was also attending made the apt comment that "venture philanthropy is philanthropy repackaged for bankers". I don't want to suggest that's a negative. Far from it. But I think that it is a reminder that philanthropy has existed for millennium and in all cultures of the world. The keynote speaker, an Indian banker, spoke of the influence on his personal philanthropy of America, of Islam, of Buddhist meditation. Through these influences he reached a final conclusion, "the only thing enduring we can do in the world of business is the impact that we make on society". Another banker there noted wryly, "I never read a book called "The Great Businessmen of the 18th Century". He added that "the only way to leave a mark is through things that create social change".

My guess is that around two thirds of the delegates present had come from the world of banking and finance. So therefore, yes – it does seem as though venture philanthropy is philanthropy repackaged for bankers. Now is that a bad thing? No, far from it. First of all,  the world of bankers is a world of money and finance. What is its that nonprofits and charities around the world most are mostly seeking?

It is precisely that money and finance which bankers are trained and skilled at accessing. The skills that they bring to philanthropy include assessing, analyzing and measuring risk and impact. The world from which they come requires them to ask questions and draw conclusions which inform hard decisions. Are these not people whom you would want on your team? So what if they re-frame the language of gift and good as investment and impact. Any good fundraiser (or banker) will tell you that the way to successfully negotiate a deal is to see through the eyes, to walk in the shoes, to talk in the language of the other party. So learning the language of finance - or learning the language of venture philanthropy - is important for nonprofits who plan to tap into this new opportunity.

But for those of you that are nervous of a language that seems to be based on numbers, ratios and percentages I can pass on other heartening news. A meme of the conference was that, at the end of the day, most investment (read 'donation') decisions are judgements made on the basis of people. People give to people, the old saying goes among fundraisers, and people invest in people.

Another heartening meme was that stories, especially stories told by video or film  are as - if not more - effective and valuable as statistics, percentages and ratios to demonstrate convincing success and impact.

You will hear more of Asian Venture Philanthropy and I would encourage you to embrace it. On the basis of the energy and commitment that I again experienced at AVPN2014 I am convinced it has the potential to achieve significant social change. Even if it is philanthropy repackaged for bankers it is your job to open the package.

Telling the greatest story

On Easter Sunday I had the privilege of hearing my brother giving a sermon at the Cathedral* where he is Dean. He told us all a story (in this case, a story from the Chronicles of Narnia).

In fact, he began his sermon provocatively with a statement that he could not prove the resurrection of Christ. 

He could however point to the stories told by disciples and believers. No scientific evidence exists. However, the story has been told many times and by many voices over the centuries. The story has inspired hundreds of millions of believers. It has shaped history and civilisations. It inspires passion and belief.

As it happens, my brother chose not to retell that story. Instead, he made a powerful point by telling another story written by a master storyteller, CS Lewis. The point he was making is that our beliefs and our values are shaped by stories more often and more profoundly than by facts and figures. The Bible and  the scriptures of all the world's major religions are collections of stories. Rich, colourful moving spicy stories which tell us more than the recitation of dates and facts ever could.

That is why, I believe that our role as fundraisers is to tell stories. When you make a case for support you will make it far more effectively when you can tell the story of what you and your donors will do to make a difference. If you engage with people's imagination, if you can enable them to see, hear and feel the world of difference they can be a part of then you will inspire them to join you.

Some of you will argue the importance of metrics in philanthropy. Some of you will say that it is important to set goals and important to track and measure the achievement of those goals. However, I firmly believe that telling stories about the misery and devastation caused to people's lives by, say, malaria is more compelling than reciting statistics about the disease's incidence.

Which is more compelling? Telling stories and painting pictures about the changes achieved with the elimination of malaria - or percentages? Stories about children able to enjoy education, about local economies beginning to thrive, about eco-systems and indigenous cultures being revitalised - or the dollars and cents generated?

Let me know your thoughts.

*Cathedral of St John the Evangelist, Napier, New Zealand.  And St John's gospel begins, "In the beginning was the word..." You can see this inscribed in the stained glass above.

Misunderstanding corporate partnerships

The furore leading to the withdrawal of corporate partner, Transfield Holdings from the  Sydney Biennale was unfortunate to say the least. However a better understanding of the range and nature of corporate partnerships could have made a difference.

A big part of the misunderstanding related to the nature of the partnership. The second part related to the nature of the partner, Transfield Holdings. The two are interrelated and one can often be a predictor of the other. Fundraisers generally understand this. However non-fundraisers often don't.

Firstly, you should look at the nature of the partnership between a business and  a nonprofit.  To confuse matters there is a whole plethora of different descriptions of business partnerships with acronyms like CP, CSR, CSI, CI and CRM*. Most widely used of all and usually misused as a catchall phrase is "sponsorship". In my view this misuse seems to have also been perpetrated by the Australian Minister for the Arts.

When I'm training fundraisers, I usually talk of a spectrum of types of business partnership ranging from the soft and subtle to the hard and highly visible. At the soft and subtle end of the spectrum are partnerships that are purely philanthropic. This is where the partner is supporting the organisation without expectation of any tangible benefit. This is usually because of some type of shared value or belief. This is what I would argue was in fact the case in respect of Transfield Holdings and the Biennale.  The owners of Transfield Holdings, the Belgiorno-Nettis family,  have been closely associated with the art show since its inception.  Franco Belgiorno-Nettis was the Biennale's first major donor and he until his death, then his son  have been on the board of the organisation ever since.

In the middle of  the spectrum from soft to hard are partnerships with companies wanting to put something back into the community. Usually they want this for business reasons such as wanting good relations with government, a particular community, or the public generally. This is very often the reason why banks, mining companies and oil explorers form partnerships with nonprofits.

At the hard and highly visible end are  partnerships that are marketing driven. These usually involve businesses that have something to sell to the public.  They hope that their association with a non-profit will enhance their brand and  directly increase their sales. Often there are some direct promotional activities associated. For example, a competition or product sampling at the sponsored event. It is this hard and highly visible type of partnership that can accurately be described as a 'sponsorship'. The obvious sign that it is 'sponsorship' are highly visible company, brand or product logos.

This is where the nature of the partner can be a predictor. A FMCG (fast moving consumer goods) company such as a soft drink or an ice cream manufacturer is most likely to be interested in the type of partnership that will have a direct effect on sales and market share.

A company, that doesn't sell direct to the public but is dependent on public or government goodwill for its business is likely to want to be seen 'doing good'.  These companies will talk about 'putting something back into the community'. Sometimes these may be a parent company which owns a large number of brands and products.  For example, Unilever has a strategy quite separate from its brands, such as Dove Soap or Ben & Jerry's Icecream. Whilst the brands and products may be involved in marketing driven sponsorships, the parent company is likely to be involved in a less commercially driven, - a longer term partnership with a community activity. Often that activity is located in a community to which it is geographically linked in some way. For example, where its HQ or biggest factories are, or  its raw materials come from, or from where it hires its workers.

Would the stoush that affected the Biennale have happened if all those involved had a better grasp of corporate partnerships? There are many types and there are many reasons that a nonprofit might be attractive to a corporate partner. This is, of course, the beauty of corporate partnerships for nonprofit organisations.

* Corporate Philanthropy, Corporate Social Responsibility, Corporate Social Investment, Community Investment and Cause Related Marketing. I call the acronyms the 'alphabet soup'!

What does size matter?

Have you ever thought what would your ideal size fundraising office would be? I have been reading a couple of reports recently that appear to suggest that the ideal number of staff is around seven. 

That made me wonder what exactly an ideal fundraising team would look, sound and feel like.

The most recent of the reports came from the Association for Health Care Philanthropy. The report Characteristics for Sustaining High Performance applied statistical analysis to benchmarking data drawn from North American hospitals, health foundations and University medical schools. The results identify a group of 12 organisations raised almost  four and a half times as much funding as the rest. It then discovered that the most significant difference between this group and the others was the size and resourcing of its fundraising teams. Further drilling down in the data revealed these highest performing organisations put their main focus on major gifts.

The second report I have been looking at is the Ross-CASE survey of UK higher education fundraising – Giving to Excellence.  It looks at funds raised and money spent on fundraising. It breaks this data into clusters based on the age of the universities' fundraising activities. Again, the results showed a significant increase in total funds raised correlated to the size of fundraising team and the team budget. The institutions, described in the report as having 'moderate fundraising programs' have 10 fundraising staff compared to only 3 staff in 'emerging fundraising programs'. The former spend slightly more than three times as much on fundraising. But they raised almost 15 times as much funding. Again, the report remarks that "very large gifts" were the source of much of this funding. increased engagement with alumni is a another feature of those organisations with more resources and staff.

So what might be ideal fundraising team be? Being prescriptive is a little foolish, given I don't know your particular circumstances. However I would suggest an effective team would comprise a full-time operations/database manager, a dedicated researcher, a data entry officer, a direct marketing manager (responsible for telephone/digital/mail campaigns), two major gift fundraisers and a director. Here is why think each of these positions are so necessary.

The database is the engine room of the fundraising ship. To keep her sailing requires a dedicated Chief engineer. The last thing anyone wants the middle of a major event, or a mailing from telephone campaign are glitches or data crashes. The operations manager will keep on top of all that is needed to ensure that this doesn't happen or that speedy recovery is possible.

Prospect research is absolutely essential for effective major gift fundraising. That person with the right instinct and interest, who enjoys discovering piecing together the interests and connections of your potential donors will make connecting with them, then developing your relationship with them significantly easier.

The data entry officer is that orderly person to make sure everything is recorded accurately and on time. Addresses, thank yous, reminders etc will go out to the right people at the right time.

The lifeblood of fundraising is the steady, frequent flow of regular donations. Your direct marketing manager is the person ensuring that stream continues to flow. That stream, incidentally, is from where your researcher fishes your major gift prospects(if I'm not mixing metaphors too much).

Then the two major gift specialists. Why two? Because, as both these studies have shown it is from major gifts that most funding will come. Managing the major gift process and, especially, managing relationships with major gift prospects is a demanding (although very exciting and enjoyable) role. A good major gifts manager will probably be capable of managing between 50 and hundred major gift prospects. As they manage these prospects through the major gift cycle they will need to get to know them better and spent more more time on them. The Pareto principle will apply and 80% of a major gift manager's time may need to be spent on only 20 prospects as the ask gets nearer. Of course, this time is not spent face-to-face with the prospect. It involves juggling diaries, preparing briefings, planning and logistics to ensure that the right people make the right ask at the right time.

And then there is the director. The metaphor I prefer to use for the director is that he or she is the film or stage  director,  or orchestra conductor managing all the forces. Backstage, onstage, singers, stars or support artists. He or she is seldom the star but always there ensuring optimum performance and making sure the audience and the players alike get exactly what they want to achieve from their respective involvement in the great fundraising and philanthropy performance.

Anyway, those are my thoughts.  What are yours?  There's a couple of other positions you might want to throw in. An events manager? Social media manager? What if you are too small an organisation ever to aspire to this many positions - what roles could you double up?

I'd love to see and hear your thoughts.

What is a charity regulator for?

What's a charity regulator for? And should we have one? Is a charity regulator the same as a charity evaluator? And if not what is a charity evaluator for?  Some thoughts have been rattling around my head and I am curious about what others think.
Australia and New Zealand are relatively newcomers to charity regulation. Canada and USA don't have any.  The grandfather of them all is the Charity Commission of England and Wales founded in 1853. It has been a lot in the press these days. It seems almost nothing it can do will keep everybody happy. Is it a policeman? It is a champion for charity? Should ask questions, be provocative, or simply, quietly and effectively 'regulate' the sector?

Meantime what are charity evaluators such as Guide Star, Charity Navigator and Give Well supposed to do? How do you in fact evaluate a charity? Do you look at its overheads? The proportion of donations that reach beneficiaries? Should its reserves be under the microscope? The Chief Executive's salary?

There are a handful of academic papers on charity regulation that are worth a read. One such has the nice title 'Light-handed charity regulation'. Wouldn't that be a nice idea some of you might say. However, for me it was useful in obtaining an overview to answer my opening question.

Regulation, in essence, is required to provide transparency and confidence in the charity sector to the public. The obvious analogy is a corporate regulator which ensures that investors in publicly listed companies can make appropriate decisions before risking their money. However, in a sense everyone's money is at risk with charities. Charities enjoy a privileged position with regard to not paying some taxes. Likewise donations to charities are privileged by the tax system. So it is in the public interest to ensure that charity is bona fide and the public's trust and money is not misplaced.

However the question of proportionality and the burden of regulation frequently arises in discussions. My bias on this question is reflected in my liking for the title of the academic paper above. That is because I believe that 90+ percent of those who devote part of their life to volunteering or working for charities nonprofits do so with noble intentions. Yes of course there are aberrations and rip-offs. But I wonder if we put these against the aberrations and rip-offs in the private sector which would be the more numerous and the greater in the value gouged?

Let's turn to charity evaluators. My understanding is that they are for enabling potential donors to get a look at certain key criteria regarding the charity's performance in order to help them make choices. The challenge here is what criteria and how to evaluate them?

It was with some relief that the sector recently read that three largest US evaluators now recognise that overhead is a poor measurement of a charities performance.

But what is a good measurement of a charities performance? And can you apply that measurement to each and every charity? Such is the diversity of the charity world, I struggle to think of a single measurement which could have universal application. Then there's the wider argument of whether quantitative measures provided effective evaluation? Or whether quantitative stories from beneficiaries and others on the ground are best?

I'd be delighted to hear and read what you feel because I think this is too important an issue to be left without debate.

Charity vs philanthropy

This month you will have been in a world where people in the Phillipines are crying out for basic necessities while million dollar gifts are on the rise to universities. Is this a dilemma for you as a fundraiser?

I believe not. But the dichotomy is illustrative of a wider principal – the distinction between charity and philanthropy.  The distinction is practical not semantic.  The roots of both words (one Greek one Latin) are comparable.  “Love” is in the etymology of both.  Both have been used interchangeably in the English and other languages for centuries.  Yet in practice there is I believe a distinction.

I have friends in the Philippines who are volunteering to help provide the essentials of life to their fellow citizens in some of the more remote regions of Cebu.  They point out that 150 pesos (about $3.50) = 3 packets of noodles, 2 canned goods, 1.25liter of drinking water , 2kilos of rice.  A modest contribution can make a big difference to one or more person’s individual condition.

Contrast this with gifts to Australia universities by Andrew and Nicola Forrest  or Graeme and Louise Tuckwell.  These multi million dollar gifts will fund research and scholarship.  What will be done through enhanced research and scholarship?  Or rather, a better question is what has been achieved throughout history by researchers and scholars?  We may not live in a perfect world but the achievements and progress we enjoy has to a large degree been the fruit of  education and inquiry.

The analogy, it seems to me is with curing symptoms and finding causes.  Both are essential. Charity and philanthropy are both essential.  We need to develop expertise at both.

Another paradox was in the philanthropy news this month.  Bill Gates - channelling Peter Singer - asked “why anyone would donate money to build a new wing for a museum rather than spend it on preventing illnesses that can lead to blindness?”

The essence of that dilemma was encapsulated by this remark in the Wall  Street Journal.  “Somerset Maugham said in his novel Cakes and Ale: ‘Beauty is an ecstasy; it is as simple as hunger’." Philanthropy has a role in contributing to both.

What do you think?