The crowd are on the pitch

| No responses | Posted by: David Floyd | Theme: Social Innovation & Investment

There’s never been a better time to start a social venture in the UK. UnLtd and the School for Social Entrepreneurs are just two of the organisations offering small amounts of cash and significant amounts of support to help us get up and running.

If you run one of the 7 or 8 existing social ventures in the country who have succeeded in delivering a positive social impact while also finding a sustainable, profitable business model, the situation’s even better – with hoards of social investors, capitalised by Big Society Capital, desperate to loan you cash to help you scale up, grow and justify their continued existence.

With that in mind, it might initially seem strange that so many social ventures are at least considering trying to raise cash through crowdfunding.

Unlike support organisations or investors, who (in theory) take a professional decision to support you or invest based on some combination of your personal abilities and the viability of your idea in the market you’re hoping to enter – potential crowdfunders take an emotional decision to give you a relative small amount of their own cash based on liking what you’re trying to do.

That’s one of the key advantages of crowdfunding for social ventures. It’s also one of the key disadvantages. If it works, crowdfunding offers social ventures that sell products , with mass market potential, a cost effective way to raise money whilst also generating lots of publicity and ending up with lots of new customers with both a financial and emotional stake in their business.

One of the most successful recent campaigns on Buzzbnk was ‘Bonk of Pants’, which saw social enterprise underwear brand, Pants to Poverty, raise £58,365 worth of investment (almost double their £30,000 target) by offering an investment opportunity providing a return of some cash and some pants.

Equally, if you’re just looking for donations to do a social project in your area (such as this “Fund a Money Mentor” project), crowdfunding can be a good way of getting buy in so that, in the process of raising some or all of the cash to do a project you also manage to prove there’s some demand for it.

What crowd-funding is not is (a) easy-money or (b) a like-for-like replacement for funding from other sources that is no longer available. One of the biggest mistakes that most of us who run social ventures have made at least once is to assume that if we build it – whether ‘it’ is an event, a regular activity, product or service – that they (the people we’ve built it for) will come.

The crowd-funding equivalent is ‘put in on a website and they will give you money.’ The fact that crowd-funding website are often described as ‘platforms’ provides a useful clue as to what they’re for. They’re a platform for you to do loads of work to get lots of people to give you money.

If you haven’t got the time, energy and desire (and, ideally, small existing group of supporters) to be able promote your project to lots of people who might be interested in it, then crowd-funding probably isn’t the funding the option for you.

Unfortunately, even if you do put in the time and effort, crowd-funding may just be the wrong way to find the funding you need. If, for example, you run a mental health service user group previously funded by the local council, your potential ‘crowd’ of funders is likely to divide between people who think the council should continue to pay for the service, and people who aren’t interested.

While, as with conventional charity donations, millions of people are prepared to crowdfund projects that don’t benefit them personally, they’re more likely to do so when there’s a clear connection between their contribution and something new and better happening. ‘Your money will help us keep doing the good work we already do’ is not a good tag line for a crowdfunding campaign.

Crowdfunding is not magic, but if there are good reasons why a reasonable number of private individuals might want to support your social venture, it’s a potentially useful tool to help you get started.

Comments

  • (will not be published)