I was recently sent an interesting report on crowdfunding by a participant on the National Arts Fundraising School – and specifically a scheme that’s been successfully run in Plymouth. At first the results look really impressive – and the follow up up report reinforces this. But after an interesting debate at the school I decided to do a slightly more detailed analysis of these results. This seems important since I’m worried that crowdfunding is being ‘sold’ pretty heavily by a number of platforms as the answer to all our fundraising problems. And I think it’s being oversold.
So, below is my critique of the Plymouth project. My warning to explore equine orthodontology carefully…
First you need to quickly read the two documents/website links I was sent.
Here’s the first: Plymouth Crowdfunder, and a more formal review of the model here.
So if you’ve done that, here’s my critique of the report, and some follow-up work that I did online with Companies House and the crowdfunding site themselves. It’s mostly critical since the report is unremittingly positive – making it less of a report and analysis and more of a sales job.
- There is no indication of the percentage of projects which actually succeeded – so although it says 100+ were funded it doesn’t say how many projects applied to gain support. So my question is how many projects failed? And in the update link from Crowdfunding UK the great majority of the projects currently listed are nowhere near their target. My own data suggests as few as 40% of projects achieve a successful result. I think the latest figures here look like maybe 10% of projects are succeeding. (Partly, of course, that’s because the new crop of projects aren’t benefiting from the significant matched funding which drove the early successes. For me if the approach is to be sustainable it probably has to succeed in its own terms.) Crowdfunding is risky and has low success rates. The risk should be made more explicit.
- The figures are also quite interesting in terms of what else they don’t The report says there are a hundred plus projects which succeeded, and the total raised is £400,000+. But it doesn’t anywhere indicate the average value of a successful project. Simple mathematics would suggest the average project must’ve raised £4,000. Of course, if you dig a little, clearly that’s not true. Three of the five projects mentioned in the report are for around £10K – with one for about £20K. So my guess is there is there are a small number of big projects here using the same approach as sole of discretion. And therefore an enormous number of very small projects. It’s also is a bit disingenuous to suggest that the crowdfunding actually delivered the bulk of the money. The headline ‘economic impact’ figure really means is if you add up all the money that’s vaguely associated with these projects this is what it adds up to…
- So, for example, sole of discretion raised, they say, £12,055 from 70 supporters… though they only list 63 on their website. (Yes I did add them all up…). That’s either bad maths or a just bit puzzling. Still £12K is a fair sum for a small project. Until you realise that they aren’t really a small project. They borrowed £130K from the Royal Bank of Scotland. And that loan is included in the £434,539 ‘raised’ by crowdfunding. Of course it’s not. It’s a bank loan. Overall if you then take out the one-off additional grant support from Plutus Gen, GTO20, and the Council – also adding up to £130K – then the maximum amount actually raised by crowdfunding is £170,000. And I’m willing to bet there were some more capital investments like the bank one included which would reduce that figure. (But it’s impossible to find out, sadly.)
- My other big concern about sole of discretion is that it suggests quite subtly it’s a small fishermen’s collective. In fact, one of its directors Caroline Bennet is actually the owner of a reasonably big business http://www.moshimoshi.co.uk with restaurants in London, Brighton etc. She also hired an advertising agency to design the whole ‘unartful’ fundraising website http://www.kingdomandsparrow.co.uk/portfolio/sole-of-discretion-branding-label-design-campaign-materials/ And she owns 75% of the shares in the fishing company. It’s not a collective it’s simply a business funded by people who like the ‘this is cool and a little bit socially concerned’ vibe generated by professional advertising agency. Details on ownership of this ‘collective’ run by small fishermen are here: https://beta.companieshouse.gov.uk/company/09901722/officers and https://beta.companieshouse.gov.uk/company/09901722/persons-with-significant-control. BTW I’m not suggesting Caroline is a bad person or that anything illegal is happening here. I’m simply saying this is actually a biggish business setting up a small subsidiary albeit to do something ethical. I’m puzzled why Caroline didn’t just fund this herself since she owns most of the shares.
- Another case study in the promo is Ernesettle Discover Shack. So they got £9,863 in total. But only £1,313 from the crowdfunding and another £8,750 from the City Council and Plutus Powergen. Clearly this wasn’t matching money added as a result of the crowdfunding. This was really just two grants. And this the fact the scheme raised a little bit from the crowd may have looked good from a PR point of view with the Council and Plutus. But it’s a tiny percentage of the actual money raised – only 10%. So I reckon this is a project that the council wanted to give money to… and they gave them the money. The crowdfunding was marginal.
- Finally, it is interesting to me that the great majority of the actual crowdfunded money seems to have come from the poorest parts of the city. That says a lot about the generosity of the poorest people. That’s a great thing. But I reckon a relatively small percentage of the actual money came from these poor people. Candidly they just don’t have the money. So if you divide £434,593 (the total raised) by 4550 (total number of donors) that would mean the average person was giving £95 over the 4 weeks of a normal campaign. But that would be astonishing… it’s twice what the most generous cluster give monthly according to the latest CAF research. Again this confirms to me there’s a lot of money been bundled in here that’s not really crowdfunding.
Anyway I could go on… I think my point is that this report is designed to make a case for crowdfunding from a company who make their profits through crowdfunding rather than being an objective review of how successful the project actually was. (Which is what I’m interested in as a fundraiser.)
Just to be clear.
I think crowdfunding is a good thing. And it can be really successful in certain circumstances. But the big money in crowdfunding is for commercial projects where people gain a benefit that relates to the amount of money put in – a sample of the device, a chance to take part in the event etc. Crowdfunding sites very often bundle this money to create a figure which says ’crowdfunding produces £1B a year or something. ‘Sorry this is just ‘puff’ to help them make money.
But we are mostly interested in social causes, and specific artistic causes, where the track record of crowdfunding is much weaker. Here it tends to work where:
- you have an agency with an enormous social media spread – or a big audience that you can engage
- you have a cause that is very emotional – especially, for example, post-emergency appeals
- you are able to provide benefits or payoffs rather like the commercial ones – free seats etc – in which case you need to look at the net income (=cost to fulfil)
Happy to hear your views. And let me know if you think I’m way off. Or if you have some great counter examples.
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