They say that crowdfunding is the future of fundraising, but I hope for the sector’s sake that they’re wrong.
We are increasingly seeing families turn to crowdfunding to raise money for the children's charity I run, Tree of Hope. Parents of children who need constant care and attention have precious little spare time to organise fundraising and it’s no surprise they are attracted by the speed and simplicity of a crowdfunding page.
But the reality is that for every pound raised through crowdfunding, page-owners lose part of that pound because some sites charge a set-up fee and most have debit or credit card charges. Page-owners also have to raise the full amount for their chosen projects without the added benefit of Gift Aid, which can cover fees and still leave enough to give a much-needed boost to the campaign.
On top of all that you usually have to wait until you hit your crowdfunding target before you can access your funds, and if you don’t hit your target you often get nothing at all.
And what about donors? A registered charity guarantees, through detailed auditing and regulation by the Charity Commission, that donations will be put to use for the purposes they were originally intended.
But go, for example, to JustGiving’s crowdfunding page and it makes it clear that the site cannot guarantee donations will be used correctly.
If the JustGiving crowdfunding page has been set up by a registered charity, donors should be reassured – but what if cowboy organisations start to take advantage? And if a page is owned by an individual rather than a charity, how can donors tell if the cause really exists? Or that the money will be used for the reason given? Getting an email telling you that your donation will be taken only if a target is reached can also be very off-putting to donors.
Of course, many crowdfunders know page-owners personally and know whether or not they can be trusted. But the holy grail of crowdfunding is for a campaign to go viral – and if you receive a link from a friend of a friend of a friend, how can you be so sure the cause is legitimate?
One last thing. While the Financial Conduct Authority regulates loan-based and investment-based crowdfunding, it does not regulate the donation-based kind. Another reason for donors to be wary.
I’m not against progress. Some amazing campaigns have been run on crowdfunding sites, with the money raised reaching millions of pounds.
But both fundraisers and donors need to be aware of the pitfalls.
Gill Gibb is chief executive of the specialist children's charity Tree of Hope