Crowdfunding: choose your route well

Crowdfunding can be an excellent alternative route to increased income for schools – but there are pitfalls to be aware of

For schools, which are consistently having their budgets stretched and are making sacrifices at every turn, alternative finance is an option that it (literally) pays to explore. In fact, all manner of businesses and public sector entities are doing this to get projects off the ground and give them a financial boost.

In 2020, organisations “Will continue to use crowdfunding for specific goals and growth stages, harnessing the publicity, and swathes of loyal advocates, which crowdfunding can attract from an ever-growing pool of engaged investors,” according to John Auckland, founder of TribeFirst. However, having said that, he continues, “There will, undoubtedly, be a tipping point. When the majority of companies allow customers to invest in them, and give them more power, those that keep their doors closed will become completely irrelevant.”

Of course, schools won’t close down simply because the public doesn’t invest in them, but those remaining reluctant over the possibility of crowdfunding might suffer where others thrive. It doesn’t only bring in additional money for necessities – remember the various stories hitting headlines in 2018 and 2019 about schools not being able to afford toilet paper? These are extreme examples, but every little helps. It also funds expansions, events and trips, and it highlights the presence of your school within the local community. According to Scott Haughton, COO at Envestors, a recent survey of organisations utilising fundraising showed that 52% of respondents said they actually got involved in fundraising for exposure, which they considered more important than – or as important as – the actual monetary reward.

Beware the cost

Schools diving into alternative finance have the option of inviting donations via special events such as fairs, special in-school meals and parties and fun runs, as they have access to investors already – however, some may want to take this further and set up an actual campaign through a website. Beware, though; this will incur significant costs. Additionally, despite the perception of crowdfunding, it doesn’t all get done for you.

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“The perception that you can approach a crowdfunding website and just sit back and watch the investment pour in, still persists,” Scott explains. “Naturally crowdfunding sites offer many advantages, and there are some great success stories; however, the survey data shows that organisations are still not aware of just how much planning and legwork, including networking, that they have to do themselves.

“Despite the challenges of the process, 71% of those who’d successfully raised funds indicated they would use the method again and 44% of those who didn’t meet with success say that they would give it another try,” he adds.

So, there are certainly upsides to crowdfunding via a website dedicated to it. The problem is, Scott believes, that crowdfunding hasn’t evolved to meet the needs of the various organisations it serves – and it certainly wasn’t created with the public sector in mind.

One issue faced by various organisations, as fed back by survey respondents, was lack of control over who views business documents (42%), the inability to communicate directly with investors (38%), paying success fees for investment generated independently from their own sources (28%) and investors being charged to invest (28%).

So, while alternative funding can prove incredibly useful for schools, just be careful, and do your research regarding how you choose to pursue that funding, lest you suffer the burden of excessive costs.

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