Does online fundraising have to mean restricted funding?

For the last few years, the buzz about ‘crowdfunding’ has been steadily growing and a increasing number of crowdfunding sites for charities have been appearing, and continue to appear at an astonishing rate – to the point where I increasingly finding myself questioning how necessary and valuable some of them are (do we really need specific sites for charities in particular regions or sectors when there are sites that allow all regions and all sectors, and are searchable?).

But, a while ago, I started to wonder whether these sites were changing something they hadn’t actually set out to change – that they were responsible for a trend towards restricted giving online.  I found myself pondering how big a trend it would become, and what impact it might end up having on the sector.

The launch of CRUK’s MyProjects sticks in my memory as a pivotal moment that made me stop and wonder whether I had been witnessing a trend emerging.  I observed, with interest, the restricted nature of the projects that donors could choose to find through the site and was surprised that the charity had taken that tack.  Surprised because, during the 15 years I’ve been a professional fundraiser, I can only think of a handful of times that I’ve worked on an appeal that wasn’t unrestricted – because most individual giving is, for reasons I won’t insult anyone by explaining.

Some time after that, I was talking to someone in a digital role in a charity who told me, very confidently, that it is necessary to restrict funds in order to secure donations through digital media – because ‘it doesn’t work in the same way as traditional media’.  I raised an eyebrow at this because I know it’s not that simple and because fundraising using traditional and digital media really isn’t that different, apart from the mechanics.  They both require some basic fundamentals to work, and one of those is a clear, strong fundraising proposition.  Granted that a fundraising proposition is stronger the more tangible it is, but it does not need to be any more or less clear and tangible to be effective for print or digital.  Fact.

However, I’ve lost count of the number of times I’ve wondered about how much more income charities might be able to generate if they invested some time apportioning ‘core costs’ across different project areas in order to allow fundraisers to use more specific, restricted fundraising asks.  In most cases, this would generate a better response, and possibly larger donations, too, from almost every appeal.  But it would certainly be more involved and make charities’ finances more challenging to manage, as well as potentially leaving organisations with less flexibility, when they may really need to use funds ‘where they are needed most’.

Virtual gift sites succeed by leveraging an exceptionally high degree of tangibility in order to secure donations, but the majority of them are, in reality, unrestricted.  However, Oxfam Unwrapped has developed a clever way of giving their offering greater veracity and transparency by categorising its gifts within defined areas of its work, such as Agriculture or Education.  Donors are advised that their donation will either be spent on their ‘chosen gift or on something else in the same category’, and the charity also states clearly that it has added ‘associated costs’ to cover ‘things like transport and training, plus up to ten percent to cover local running costs’.  It’s restricted enough to satisfy donors that want to be reassured about how their donation will be spent – who are interested enough to want to read the small print or cynical enough about charities to feel they need to – but it has enough wriggle room to mean that the charity isn’t committed to sending thousands of goats to people in more need of something less cute, yet more vital for their situation.

Back to crowdfunding for a moment – it’s always struck me that it isn’t really anything new.  It’s just become web 2.0 vernacular to describe the way charities have been raising money for years – lots of people giving small donations to fund specific items, buildings, projects or services delivered by charities.  The bit that is relatively new is that this version is facilitated by digital media, allowing the message to be spread quickly through connections powered by social media, with donations able to be made instantly and targets to be met visibly, and in real time, with online payment processing and instant gratification.

Our use of the web, and its evolution, has changed behaviours and attitudes and created more of an appetite and need for immediacy and transparency.  Perhaps that puts more pressure on charities to reconsider restricting appeals in order to persuade donors to support them, rather than support another organisation with a ‘sexier’ fundraising proposition that’s just a couple of clicks away?  We should recognise that this does not only impact on our online behaviours and decisions, but those that are made when (or, increasingly, if) we are offline too.

I’m still musing on where all of this might end up and I’m not sure anyone knows the answer.  I can’t see charities moving to a fully restricted funding model, because of the administrative burden and because, for many, it could be difficult to sustain satisfactorily and hamper their work.  After all, so much of the funding that charities receive is restricted already that individual giving represents a valuable opportunity to diversify income streams and ensure greater sustainability, rather than just cover the costs of single, specific areas of work – particularly when so many other types of funders are just as reluctant to cover ‘core costs’.

However, that said, there are plenty of smaller charities around that do manage to keep going on restricted funding alone – albeit in a somewhat hand to mouth fashion.  There are also plenty of new charities who don’t have the legacy of how things were done previously to shackle them, who are doing things instinctively and logically and for whom that means fundraising based on specific needs, and for specific projects, and spending the funds specifically on precisely what they have stated they would, rather than spending them as and where needed.  The distinction is a murky one, but an important one from the perspective of most donors so, since the question ‘which type of charity has more impact?’ is just as murky, the one that appears to be having the most direct impact might well be the one that seems like the best use of their hard-earned cash.

When you add the plethora of crowdfunding sites into the mix, where donors can choose a project in their locale – that they can see for themselves – or base their choice on any number of factors that personalise the causes they give to to their own experiences and preferences, it is certainly a more challenging landscape than the one the majority of charities have become used to operating in, and that calls for a re-evaluation of tactics – including, perhaps, whether there is a place for restricted fundraising in individual giving, even if just alongside your core programme of unrestricted activity.  Will this force charities into greater accountability?  Will the additional administrative burden be worth it for the income they generate?  Only time will tell.