Crowdfunding> An Idea becomes Reality
An Idea becomes Reality
Internet-based forms of crowdfounding stand in stark contrast to the features of traditional funding for international development aid channelled through large government institutions or private-sector NGOs, which are leaner but also have their own overheads. Michael Cecil, Associate Director of Communications for Social Media at the US-based organisation.
Young Professionals in Foreign Policy, has published an article on his blog called “Crowdfunding International Development”, in which he outlined the following:
“That said, I wanted to take the time to write about an idea I had in regards to how technology can be utilized to improve international development. It’s always been my thinking, that although bureaucracy and having a strong internal infrastructure in the non-profit sector can be effective, other times it can be counterproductive by limiting streamlined action and the ability to react quickly to the current task at hand.”
He further continues:
“But what if we could utilize technology and the global village theory to give people a voice to promote ideas and projects that can improve the quality of life where they live? What if we gave the world’s unheard entrepreneurs and thought leaders a chance to lend their voices on issues they see on a local level? Once these
projects were fully thought out from a logistical and methodological perspective, the idea of crowd-donating (much like what Kickstarter does) could give people a legitimate platform to promote their creativity for some of the world’s most pressing issues.”
"What if we gave the world’s unheard entrepreneurs and thought leaders a chance to lend their voices on issues they see on a local level?"
What Michael Cecil called an idea is slowly turning into reality. International development work uses crowdfunding as a tool to raise funds for its causes and to communicate with potential donors and supporters.
For example, reward-based CFPs like Indiegogo offer private campaigners as well as NGO’s special categories for projects related to causes like “health”, “education” or “community”. Over the years, more than 430 education-related projects were successfully financed on Indiegogo, in the “health”-category the tally stands at more than 540 projects. Interestingly, according to Indiegogo’s insights for 2012, “33% of dollars contributed were altruistic dollars (dollars given in excess of perk amount or contributed with no perk)”, according to Indiegogo’s blog.
When Australian actor Katherine Wallace raised $2,735 from 50 funders to finance a volunteer trip through Indiegogo to bring literacy to displaced children from Angola, Rwanda and Congo in the UNCHR’s Meheba Refugee Camp she promised personalised letters, “USA for UNHCR” Blue Key pins or handcrafted souvenirs from Zambia as rewards. Although her highest perk was $100 worth, at least 5 people gave more then the proposed amount of money, not counting supporters who donated anonymously.
Non-profit organisations get a 25 percent reduction on the platform fees on Indiegogo. The platforms also offers all US-based contributors to deduct their contributions to crowdfunding campaigns from ther tax bill. Other platforms such as Startnext or Sponsume have similar offers.
Some reward-based platforms also enable donors to show sponsor and partner details in well exposed boxes. As part of her fundraising campaign for the short film “Schneeglöckchen” - telling the story of a group of refugees trying to cross the EU border - Austrian filmmaker Jenny Gand added various logos of partnering
organisations such as CARE, Caritas or UNHCR to the campaign’s pitching page. In that way, supporting organisations can gain publicity, even when they do not support a project financially but merely promote it and spread its word.
Beyond that, many CFPs offer so-called “curated” pages for companies and organisations to show all supported or self-initiated projects. For example, the Kiva Fellows, associated with the microfinance non-profit organisation Kiva, list
supported projects on Indiegogo.
Kiva itself can be classified as a lending-based CFP, which enables individuals to help entrepreneurs in developing countries by giving them micro loans. In this way, more than 500,000 loans were made through Kiva, with a repayment rate of 99.00%. In a recent blog post, Kiva presents three borrowers, one of them is
Luisa, a cloth maker and member of the San Rafael Group from Peru who used her loan to buy materials for her sewing business, boosting her income and helping her to better support her family. In total, $4,100 were borrowed to the group, with a monthly repayment schedule for seven months.
Until now there are almost no CFPs in the area of equity-based crowdfunding, except for a few that are just starting to operate. Such as Crowd-Mission, which claims to be “the world’s first equity-based crowdfunding platform for socially-
driven businesses.”
One of the most important CFPs in the donation-based segment is GlobalGiving that hasraised just over $78 million since 2002. Projects range from categories like disaster recovery, economic development, human rights to sport, education and even arts and culture. Another platform is Germany’s Betterplace, also offering
above mentioned “pages” for institutions and organisations such as the German Red Cross, UNICEF or CARE, but also smaller organisations like Tareto Maa.
This feature replicates one of the most important mechanism of social media. In social networks, some users have the status of opinion leaders – users that these super-users follow gain more attention. Users read what these social sign-posts are reading. Large and reputable organisations can have the same impact, as
projects that have been endorsed by them on these pages get more attention than others. This allows individual projects to gain traction in their fundraising campaign, but on the flip-side those many small projects that are not endorsed
may struggle to breach the Internet’s attention threshold.
"In social networks, some users have the status of opinion leaders – users that these super-users follow gain more attention."
The UK subsidiary of the humanitarian organisation CARE International is hosting a
D.I.Y-platform called lendwithcare.org. The organisation says that in 2012 it helped more than seven million people improve their household income, including through village savings and loan associations. It says it has supported 131
microfinance projects in 39 countries. Falling under the lending-based model, the online service of CARE uses the organisation’s expertise in microfinancing to build a more direct link between social entrepreneurs, microfinance institutions and private lenders.
Especially when speaking of lending-based and equity-based crowdfunding, the term “social entrepreneurship” is often used to describe the funding focus of these platforms. “Social entrepreneurs are society’s change agents, creators of innovations that disrupt the status quo and transform our world”, according to the Skoll Foundation, founded by Jeff Skoll, the first President of eBay. In that context, there’s a variety of niche-platforms, such as lending-based CFP Energy in Common for supporting those social entrepreneurs who focus on energy projects. The platform Kopernik on the other hand calls itself an “online marketplace of innovative, life-changing technologies designed for the developing world” and showcases the latest technologies to local groups (NGOs) that can choose which technology is most needed in their area and then apply online for funding.
And last but not least Samahope lets you change a person’s life by financing corrective surgery for people in developing countries.
In an interview with ikosom, a publication by the German “Institut für Kommunikation in Sozialen Medien”, Austrian social entrepreneur Dave Balzer stated that crowdfunding
“is an excellent tool to draw attention to issues in developing and emerging countries, because - when being well prepared - it can spread all over the Internet without having large advertising budgets. Thus laying the foundation stone
for two absolutely critical things to solve the problem: 1) raising public awareness and 2) raising funds to solve those problem or at least to simplify them.”
Together with his family he founded a company called KhadiBag, which is an ecologically and socially sustainable company that supports the biggest social project in India: Khadi! They aim to produce bags made of eco-friendly Khadi-
cotton, designed by themselves and produced at a village factory in Goa. The Khadi project dates back to the independence struggle of Mahatma Gandhi who founded the project in 1920 as a peaceful means. Its main goal is to help rural
people.
"They thought it would be too difficult to get access to public funding or a bank loan for such a social project."
Balzer’s family needed financing to produce their first KhadiBags, which they tried to raise through the crowdfunding platform Indiegogo. They thought it would be too difficult to get access to public funding or a bank loan for such a social project. Within a few weeks they raised €5,000, which were doubled by Google and a
separate entrepreneurship foundation.
There are several reasons why Balzer turned to crowdfunding, but “besides the aspect of funding, it was important for us to do a proof-ofconcept for our project at an international level.”, he said. “We wanted to use crowdfunding to test the concept and see if there’s a market for it and if people are open to our project. Furthermore, we received a lot of feedback which we already were able to use for our first product line,” he told ikosom.
This can be compared to the product-testing of some small open source software companies that constantly publish their new code, to which a user community then can react and make or suggest improvements.
In retrospect Balzer states “that crowdfunding is a relatively simple but time-consuming process. (...) All in all crowdfunding is no guarantee of a successful funding! It is hard work and not easy money! However, we can speak from personal experience: you should try it by all means!
Apart from an extremely fast and high learning factor you get honest feedback directly from the audience, which can help the project to become
better.”
About the Authors
Wolfgang Gumpelmaier is an independent digital media consultant and one of the leading crowdfunding experts in Austria. He runs several blogs, e.g. on gumpelmaier.net he writes about Social Media in general.
Karsten Wenzlaff is co-founder and CEO of ikosom, the leading research institute on Crowdfunding and Crowdsourcing. He is also the co-author of the first
Crowdsourcing-Report in Germany.
Jörg Eisfeld-Reschke has conducted the first crowdfunding study in Germany in 2011 and written many articles since. He runs www.sozialmarketing.de – a blog about fundraising and digital communication for Non-Governmental-Organisations.
