What funding model for Social Business?
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Internet already transformed charities’ fundraising strategies and danone.communities wanted to investigate the potential to accelerate Social Business development, by leveraging Internet’s ...
Internet already transformed charities’ fundraising strategies and danone.communities wanted to investigate the potential to accelerate Social Business development, by leveraging Internet’s capacity to call for crowd-funders and in the same time establish Peer-to-Peer relationships.
We examined almost 80 websites covering P2P fundraising , sourced mostly from developed countries in America and Europe, to have a good understanding of the trends and identify emerging models. Also, we conducted interviews with danone.communities partners to share their experiences and investigate the barriers and key success factors for Social Business fundraising.
In fact, we found more websites than we expected, allowing supporters to follow their favourite causes, offer their time, and give, lend or invest funds in non-profit organizations or specific projects. Most examples lay in the domains of charities or creativity & individuals’ projects.
Although most websites in our sample were created over the last 3 years (65% of identified websites created over 2008-2010), with the emergence of Entrepreneurship and Creativity & Individuals’ projects, most of top 10 websites (above €8M funds raised /year) were created before 2007. Only two recently launched website reached the top 10: Kickstarter (crowdfunding portal) and Funding Circle (P2P loans).
Overall, Social Business remains little covered.
The gap can be explained by the complexity and the variety of funding opportunities, and probably the lack of visibility and appeal of social business projects compared to charities or creativity & individuals’ ones. To overcome these challenges, good practices of best performing websites such as innovative communication and marketing approaches could be leveraged to attract investors.
In terms of funding model, P2P lending has been significantly developed for social business, mainly by Kiva and its numerous followers; however, it addresses only small-size projects (up to €3,000).
Investment platforms (1 specialized in Social business) offer to fund larger projects up to €300-500,000, but this model is not economically viable for projects below 20% ROI due to high admin, due diligence and communication & marketing costs (should d.c. mutual fund be distributed beyond the current Danone employees basis, it would not cover those costs)
This study is a first step in a larger process. It helped us design one picture of the financial landscape for Social Business and evaluate the state-of-the-art of Internet technologies in 2011. We hope it could serve other organizations. We are very open for new collaborations if others want to share ideas and concrete actions on how to finance social businesses through the web.
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