Crowdfunding: the option hidden in plain sight?

Why is crowdfunding relatively rare in the third sector and how can we better explore this option together?

At a recent digital innovation event, I heard a presentation from Amelie Deschenes from Spacehive. Spacehive (this link will take you away from our website) is a crowdfunding platform that connects project ideas to ‘the people, councils, companies and grant-makers ready and willing to fund them,’ thus mixing small donations with larger grants to help implement projects to improve a public space.

While Spacehive is not applicable to what we do, it made me wonder: why isn’t online crowdfunding more prominent in the third sector, especially in digital health and care? Often when I mention the term ‘digital health’ to my peers, the Silicon Valley archetype of a start-up working on ‘tattoo sensors’ or other similarly futuristic ideas comes to mind. ‘Rewards based crowdfunding’ (where contributors donate to a cause and receive small tokens of appreciation – or rewards – in return) has arguably been both a launching pad and lifeline for many such start-ups, democratising finance and allowing small players to enter the market. So why is something so popular in the private sector so lacking in the third sector?

One of the barriers to adopting these new practices might be that traditional fundraising is, essentially, also crowdfunding and most charities are doing it already. However, fundraising can be resource intensive and very general: donations are often in support of a charity and its cause, not of a specific project or aim. New forms of digital crowdfunding are usually linked to specific short-term campaigns or to enable prototyping an idea. While this means that you are most likely appealing to a very niche audience, their involvement and alignment with your cause might be deeper.

Another barrier could be the lack of awareness around how crowdfunding works, laws and regulations and the perceived high risks involved. While for many the term has become synonymous with platforms the like of Kickstarter, there are multiple models of crowdfunding, of varying complexity, and it can be a difficult landscape to navigate, especially when there aren’t that many examples successful third sector campaigns out there – or at least not from small charities.

Last but not least, the forms of crowdfunding that are most likely to apply to the third sector (donation crowdfunding and reward crowdfunding) usually raise around £5,000. Unfortunately, that amount of funding is unlikely to stretch very far and would most likely not be enough to finance a project beyond its exploratory phase. This raises the question then whether new models are required – perhaps one similar to that of Spacehive, where community support is equated to crowd-endorsements which then attracts larger grants from private or public bodies.

Considering the growth of crowdfunding in Scotland (and globally) over the last few years, it is perhaps time to think beyond classic financing models, become a bit less risk averse and explore the unfamiliar alternatives. Would you ever consider crowdfunding to take an innovative digital health and care solution from concept to product? What would encourage you to do so, and what are the barriers?

If you’re an inDHC member, let us know your thoughts and comments on the Padlet (this link will take you away from our website), where you will also find a list of other resources you might want to look into in relation to the topic.

If you’d like to become a member, email us at dhcscot@alliance-scotland.org.uk.

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