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 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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What funding model for Social Business?

  1. 1. finance + social business + web 2.0What funding model forSocial Business?April 11, 2011 SUNII
  2. 2. About the contributorsUnder the initiative of danone.communities, Accenture and HEC Social Business chairconducted a survey on Social Business funding modelsdanone.communities is an incubator for social enterprises, born at the initiativeof Professor Muhammad Yunus and Danone. Its mission is to promote, supportand fund social business, responding to questions from malnutrition and poverty…Accenture is a global management consulting, technology services and outsourcing company, withmore than 215,000 people serving clients in more than 120 countries. Combining unparalleledexperience, comprehensive capabilities across all industries and business functions, and extensiveresearch on the world’s most successful companies, Accenture collaborates with clients to help thembecome high-performance businesses and governments.HEC Social Business chair develops action research and quality research on strategic innovationin societal fields and offers a teaching program examining Social Business themes and studying theinvolvement of business in the fight against poverty. The chair is co-presided by Pr. MuhammadYunus and Mr. Martin Hirsch and receives the financial support of Danone, Schneider Electric, theFrench government (DGCS) and private donors.Thank you to the HEC students Markus Beck, Tine Fossland, Tyler Goin and Felix Heinrich for theirvaluable contributions.Contactsdanone.communities Accenture HEC Social Business chairdanonecommunities.com accenture.com hec.edu/certificates/social-businessEmmanuel Marchant Michel Moullet Bénédicte Faivre-TavignotChief Executive Senior Executive Executive Directoremmanuel.marchant@danone.com michel.moullet@accenture.com faivretavignot@hec.frOlivier Maurel Frédéric TonduSocial Innovation Animation Manager Managerolivier.maurel@danone.com frederic.tondu@accenture.comfinance + social business + web 2.0 2
  3. 3. About the contributorsThe survey has been conducted with the support of danone.communities partners,including: SUNIIThe following organizations have been interviewed: izi-collecte, FriendsClear, Groupe SOS, aiderdonner, entrepreneurscommons, Kiva, Babeldoor, MicroDon, Babyloan, Nexii Global, SUNII / Blue Green Energy, Regioneo.finance + social business + web 2.0 3
  4. 4. Abstract• 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.finance + social business + web 2.0 4
  5. 5. Contents Online Fundraising overview What model(s) for Social Business? Conclusions Appendix -Analysis of funding models -Detailed analysis of websites -Data collectedfinance + social business + web 2.0 5
  6. 6. We analyzed funding models beyond platforms addressing Social Business needs Mapping of analyzed platforms 75 websites Charities Charity projects Social entrepreneurs Entrepreneurs Creativity and Individuals Axa Atout coeur, Koeo, Sparked, Volunteermatch , Idealist, Startupschool, babelbee Dreamshake Help jagispourlanature.org Jumo, Everywun, Care2, WiserEarth MySpace Follow • Causes (facebook), Act of Good • Babeldoor, Ullule, Kickstarter, • betterplace, bringlight, global giving Kisskissbankbank, RocketHub, Pozible, • Aiderdonner, Justgiving SASIX (Nexii), IndieGoGo, Invested.in, MyFootballClub Donate • izi-collecte, Network for Good BVS&A (BOVESPA) • Fans Next Door, PledgeMusic • Ebay GivingWorks, Endorse for a Cause, • Jaimel’info socialvest.us, CauseOn • Flattr • Veosearch, Mailforgood, Olozim Kiva, Babyloan, Xetic, Wokai, Main Lend MyC4, RangDe, Friendsclear, Fairplace, Lending Club, Prêt d’Union, Zopa,focus energyincommon Microplace, Dhanax Funding Circle, Cofundit Prosper, Rate Setter, Yes-secure, Quakle • Wiseed, Crowdcube, Microventures, Shareposts, • MyMajorCompany, Sellaband, Invest 33needs Mission Markets CrowdaboutNow CatWalkGenius • Profounder, • GrowVC Most websites belong to 4 categories: •Charity fundraising (22%) •Crowdfunding for Creativity and Individuals (17%) •P2P loan for Entrepreneurs or Creativity and Individuals (15%) •P2P micro-credit (7%)Note 1: Paid crowdsourcing platforms (innocentive, cofundos...) or open source project platforms (wikipedia, mozilla...), that could be compared to such websites as Volunteermatch, Babelbee or Dreamshake were not included.Note 2: Social market places exist, still in a project phase: IIX Asia, BVS (Euronext Lisbon), Social Stock Exchange (London), NextSSE (Germany), PII (France); Gate finance + social business + web 2.0 6
  7. 7. We see a large diversity and high specialization of fundingplatforms, per domain and per type (no all-inclusive solution)Platforms per type •• Crowd-funding is particularly prolific Crowd-funding is particularly prolific •• Online fundraising is largely widespread, Online fundraising is largely widespread, •• Loan is the main model in Loan is the main model in with 2 (opposite) models with 2 (opposite) models with a lot a innovative models; most of them with a lot a innovative models; most of them entrepreneurship business (interest- entrepreneurship business (interest- o Give for free/ fun o Give for free/ fun support causes rather than projects support causes rather than projects free, via MFIs in social business) free, via MFIs in social business) o Lend for (high) profit o Lend for (high) profit Charities Charity projects Social entrepreneurs Entrepreneurs Creativity and Individuals Startup trainings Volunteer recruitment Help P2P translation Volunteer recruitment Follow Music social networks Charity social networks Fundraising portals General crowdfunding “Social return only” Fundraising event pages Stock markets Themed crowdfunding Donate Donations mgmt tools Shop for a cause Flattr Browse for a cause Lend P2P Micro-credit P2P loans P2P consumer credit GrowVC 33needs danone.communities Community investment Invest Private investment •• We see investment models, but mostly in a starting We see investment models, but mostly in a starting phase phase •• Popularity around ‘Investment-like‘ models is actually Popularity around ‘Investment-like‘ models is actually driven by the success of MyMajorCompany driven by the success of MyMajorCompanyfinance + social business + web 2.0 7
  8. 8. We see an accelerated growth in Funding platforms over the last 3 years, driven by the emergence of new models for Entrepreneurs and for Creativity & Individuals ~65% created in Trends 2008-2010* Based on 75 identified websites (non exhaustive, mostly from Western Europe and USA) 8 8 Idealist Axa Atout Coeur Sparked Koeo Jagipourlanature VolunteerMatch WiserEarth Everywun Jumo Care2 Fundraising portals / 33needs Charity Charity JustGiving event pages Causes (facebook) ActofGood Shop/ browse CauseOn NetworkForGood bringlight aiderdonner MailforGood for a cause Global Giving betterplace Endorseforacause eBayGivingWorks Izi-collect Olozim Socialvest.us VeoSearch BVS&A SASIX Startupschool P2P micro- Social Social Babyloan Kiva MyC4 Xetic credit entrepre- entrepre- Wokai Dhanax Microplace Energyincommon neurship neurship RangDe Despite an early start, we don’t Despite an early start, we don’t MissionMarkets see strong development trends in see strong development trends in Social entrepreneurship Social entrepreneurship DreamShake Friendsclear FundingCircle Entrepre- Entrepre- Fairplace Cofundit neurship GrowVC neurship Private investment Wiseed Profounder / community investment CrowaboutNow Shareposts Crowdcube / investment club MicroVentures MySpace Babeldoor Invested.in Crowdfunding Kickstarter Kisskissbankbank Ulule MyFootbalClub IndieGogo Creativity PledgeMusic RocketHub Pozible Creativity Fansnextdoor Flattr & & Individuals Individuals RateSetter Quakle Zopa Prosper LendingClub P2P consumer PretdUnion Yes-Secure credit Sellaband MyMajorCompany CatwalkGenius* Includes Jan & Feb 2011 Help Follow Donate Lend Invest finance + social business + web 2.0 8
  9. 9. Still, 9 of the top 10 websites were created before 2007 and #1 &2 were created in the early 2000’sTop 10 websites Charity Entrepreneurship (incl. Social) Creativity and Individuals #1 JustGiving: €100M /y #7 Kiva: €29M /y #3 LendingClub: €100M /y o Fundraising event pages o €146M since 2005 o €169M since 2007 o €840M since 2000 o 260,000 projects funded o 22,000 projects funded #2 Network for Good*: €100M /y #9 Funding Circle: €11M /y #4 Prosper: €100M /y o Donations mgmt tools/ portal o €11M since 2010 o €168M since 2006 o €372M since 2001 o 34,000 projects funded #5 EbayGivingWorks: €38M /y #6 Zopa: €70M /y o Shop for a cause o €120M since 2005 o €154M since 2007 o 20,000 projects funded #10 Causes (facebook): €8M /y None of Kiva’s followers could None of Kiva’s followers could #8 KickStarter: €19M /y o Charity social networks replicate its success replicate its success o €29M since 2009 (closest follower is 10 x smaller) (closest follower is 10 x smaller) o €23M since 2007 o 6,500 projects funded o 140M members No significant alternative to P2P No significant alternative to P2P micro-credit was invented social micro-credit was invented social business business Lending website dominate this Lending website dominate this Half of top 10 websites are donation Half of top 10 websites are donation category; Lending Club & Prosper category; Lending Club & Prosper models, in the charity category models, in the charity category Funding Circle is a recent lending Funding Circle is a recent lending actually make 10-15% of loans to actually make 10-15% of loans to website, focusing on business loans website, focusing on business loans entrepreneurs (i.e. More than Funding entrepreneurs (i.e. More than Funding Circle) Circle) Recently launched KickStarter is Recently launched KickStarter is emerging quickly emerging quickly What new models to accelerate the funding and development of Social Business? Which existing models can be replicated / adapted to address Social Business funding needs?* Network for Good manages fundraising transactions; funds raised are a consolidation of funds actually raised by charity websites.finance + social business + web 2.0 9
  10. 10. Contents Online Fundraising overview What model(s) for Social Business? Conclusions Appendix -Analysis of funding models -Detailed analysis of websites -Data collectedfinance + social business + web 2.0 10
  11. 11. To fill the gap in Social Business fundraising, the selectedmodel will need to address specific challengesChallenges for Social business fundraising Potential paths for improvement • Most funding opportunities available on platforms are • Leverage existing local structures withLimitations located in emerging countries and are not eligible to tax tax exempt status to fund projectsto tax exemptions abroadexemptions • There is no organization similar to Red Cross with local • Opportunity to build an international offices that are granted tax exempt status network of local structures • Lack of understanding of what Social Business is • Educate on “impact investment” andLack of • High share of voice of charities: strong communication “social return” as an objective andvisibility means and fundraising strategies, with clearly stated benefit, not just a selection criteria. impacts • Increase trust of potential investors in • Very diverse forms of businesses/ projects, from small and the relevance of projects and in the useComplexity informal individual entrepreneurship (e.g. in need for additional of funds, potentially through a trusted livestock) to larger businesses (e.g. aiming at investing in new non-profit organization, or a certification machines or facilities) of the project selection process. • Communicate on exemplary successes, • Lack of illustrative successes (e.g. Public Enemy by Sellaband) promote social impacts around andLack of • Difficulty for entrepreneurs to explain and promote their beyond the project itself.appeal? need and the benefits from collected funds (limited access • Help each entrepreneurs build trust and to technology) envy on their name Beyond the type of model, the communication and marketing approach will be key to develop fundraising for Social Businessfinance + social business + web 2.0 11
  12. 12. Most high performers differentiate themselves with innovativecommunication and marketing approaches to attract investorsGood practicesHigh performers(Donate) • Leveraging communities (family / friends / co-workers) is very powerful and allows to defer marketing costs toJust Giving your best supporters,KickStarter o They directly mobilize their networksCauses (facebook app) o It increases trust in the cause/ project • Kickstarter (and copycats) opens new ways to address the new generation of funders (ability to raise funds with an appealing approach and with projects in connection with personal interests)(Lend) • Sourcing projects is important to maintain funders’ interest (a large number of projects allows to segmentKiva funding opportunities and better address funders expectations) • ... but proper qualification is key: Kiva leverages local partners, which are rated as wellNB: all other models have alimited international potential • Besides, this network of partners is necessary to scale up the model.because they rely on localcredit licences (or localagreements with banks)(Invest) • MMC (see Profounder is entrepreneurship) built a model to share success (revenues or ‘net revenues’) withMyMajorCompany less legal/ financial/ compliance constraintsGrowVC • GrowVC offers an “Investment club” approach (1 common fund with democratic allocation process), with anCrowdCube innovative profit sharing mechanism, linking funders dividends to individual votes. • CrowdCube is the first example of fully online marketplace open to non accredited investors; they chose a ‘crowdfunding’ approach (website similar to Kickstarter) to attract investors Most of these approaches can apply to all types of funding modelfinance + social business + web 2.0 12
  13. 13. All types of models can apply to Social Business, depending onthe amount of the investment, its horizon and the expected ROIAddressable types of projectsModels Pros Cons Fit with Social business projectsDonate • Untapped in countries such as France • Sustainability – reliance on economic • Adapted to very long term projects/ with no – huge potential trends return / early development starter • Relevant to least advanced projects • Reduces value of fund provided – • Opportunity to rely on donations to invest in or individuals most in need: lower lack of incentive/ accountability shared infrastructures benefiting to social pressure • Does not induce changes (relief only) businesses “dependency” – inequality • Lack of returnLend • Incentive to build for the future • Risk on pay back for both the • Addresses only projects with a return (or • Attractive (reversible donation) supporter & entrepreneur at least payback) within 12-36 months • Circulation of money – multiplication • Charge of interests implies short and effect medium term investments only (risk/ • Lower reliance on economic trends cost too high beyond 3 years) (effects on new funds collection rather • Costs of credit scoring than loans stock)Invest • Attractive (profit) • Profits out of the country (less local • Addresses only projects with a return • Ability / potential to raise more money impact) within 12-36 months and beyond per project • Illiquidity (for the investor) • Amounts raised should be higher to • Lower/ positive reliance on economic • Due diligence and administrative absorb costs of collection and admin/ trends (especially if low liquidity) costs mgmt costs • Governance shared with funders: risk to impact the project DNA/ weaken the projectNB: The choice of a model also strongly depends on the definition of an Investment Philosophy (i.e. the overall set of principles or strategies that guide the investor)finance + social business + web 2.0 13
  14. 14. While donation and lending models allow to fund small to mid- sized projects, only investment models allow to fund larger projects (but never as large as d.c projects) Fundraising capacities 25,000 Max (variable) Sample of 40 websites Prosper NetworkForGood €100M - JustGiving Funds raised Most P2P micro-credit Most P2P micro-credit models allow to collect models allow to collect LendingClub per year limited funds per project Zopa A few (recent) private A few (recent) private limited funds per project investment platforms, (€300-2,000) (€300-2,000) investment platforms, reserved to accredited reserved to accredited eBayGivingWorks investors, allow to fund investors, allow to fund Kiva larger projects larger projects Kickstarter It also includes MicroVentures It also includes MicroVentures or Shareposts or Shareposts €10M - RateSetter FundingCircle Causes (facebook) P2P consumer credit is very P2P consumer credit is very popular and allows to raise €5- popular and allows to raise €5- danone.communities 8,000 8,000 MyC4 Global Giving MissionMarkets* betterplace GrowVC Izi-collect aiderdonner MyMajorCompany €1M - Wiseed Amounts raised Amounts raised Babyloan include annual include annual membership fees membership fees IndieGogo Yes-Secure SASIX Sellaband MyFootballClub Ulule RocketHub In most countries, Donate Kisskissbankbank Profounder Community investment Community investment private placement is Lend €0.1M - PledgeMusic (including ‘investment-like (including ‘investment-like limited: it must be Wokai models’ such as MMC) Babeldoor Pozible models’ such as MMC) public beyond Invest Crowdfunding models Crowdfunding models models allow to raise €25- models allow to raise €25- allow to fund €2-5,000- 100,000 per project €100,000 in France, it allow to fund €2-5,000- 100,000 per project Charity projects projects It also includes Crowdcube It also includes Crowdcube is reserved to VeoSearch accredited investors Social Entrepreneurship Xetic Fansnextdoor above $1M and must Flattr Energyincommon be public beyond Friendsclear Entrepreneurship MailforGood Olozim $5M in the USA Creativity and Individuals 0 1,000 3,000 10,000 30,000 100,000 300,000 1,000,000* MissionMarkets raised equity for 2 social enterprises (Feb 2011): Lumni, a fund that invest in the education of diversified pools of Funds raised per project students, raised $50,000. HotFrog, an online media portal that has yet to launch, raised $25,000 (per year for causes) finance + social business + web 2.0 14
  15. 15. Given average contributions per supporters, a project needs toattract 24 times more donators or 4 times more lenders thaninvestors to be fundedFundraising capacitiesContribution per supporter Estimate sources €0.5 – browse/ shop for a cause Olozim ~€50 Ulule, Babeldoor,Donate €40-70 euros – crowdfunding Kickstarter Aiderdonner €30-100 – causes fund raising Networkforgood Avon Walk* x24 €50-170 – micro credit Xetic, Babyloan, Kiva ~€300 Prosper, RateSetterLend €200 – consumer credit x4 €600 – business credit FriendsClear €40 euros – community investment/ Creativity and Individuals MyMajorCompany ~€1,200 Wiseed (Regioneo), €400-700 euros – community investment/ Business ProfounderInvest €2,000 euros – investment club GrowVC (accredited investors) Mission markets >€50k euros – Private equity (accredited investors, min. 50k)* Not P2P Internet fundraising finance + social business + web 2.0 15
  16. 16. In the investment model, the funded project should yield returnof ~20% to cover collection costs, vs. only ~5% in loans and noreturn required in donationsCosts of collectionas a % of funds collected 1-2% -payment mgmt 1-2% - payment mgmt 1-2% - payment mgmt 1-2% - payment mgmt 3-4% - platform operating costs 1% - bank/ licence fee 4-6% - platform operating costs 2-4% - platform operating costs 4-8% - mgmt fee (fixed costs) 10-15% - platform operating costs 95% 94% 95% 80% Donations Micro-credit P2P Investment Loans Loans €10-€25,000 €300-€2,000 €5,000-€35,000 €25,000-€5M /project /project /project /project• Payment management costs vary • Kiva reduces payment • In most cases, platforms rely on • Management fees include the depending on the payment means management cost to zero thanks to banks, which charge ~1-2%; administration of the investment (from ~1% with credit card to ~2% a special agreement with Paypal alternatively, some players obtain structure; it is very dependent on the with Paypal) which bears the cost of Paypal and their own credit licence to reduce investment size• Platform funding costs include credit card transactions. that cost • Operating costs cover due diligence website management, but also • Amounts charged by platforms to • Operating costs % is limited thanks and communication/ marketing costs communication and marketing costs, fund their operating costs reach to higher average loan size and with screening of projects (especially for ~5% (due to the low amounts raised attractive interest rates (for lenders crowdfunding platforms) per collection) and for borrowers rejected by banks)Notes:•Fiscal positive impacts are not included, as they are actually already integrated in funders’ expectations•Depending on the website, costs of collection can be carried either by the entrepreneur (not 100% of funds transferred, or interestscharged), or by the funder (e.g. via suggested or minimum donation to the platform)finance + social business + web 2.0 16
  17. 17. Contents Online Fundraising overview What model(s) for Social Business? Conclusions Appendix -Analysis of funding models -Detailed analysis of websites -Data collectedfinance + social business + web 2.0 17
  18. 18. Key outcomes• There is no single answer to address Social Business funding needs and the diversity of models (especially from a marketing perspective) is key to maximize the flows of funding to Social Business: donation, lending and investment models may fit different projects, depending of their size, maturity, entrepreneur objectives... but also to the funder “investment philosophy”: principles, return expectation...• New models are being invented to allow investments in Social Business or more generally in Entrepreneurs’ projects, but financial, fiscal and legal constraints remain strong (limitations in total investment, to accredited investors, to local entrepreneurs and/ or investors...); Social stock exchange projects are complex and still require time to go live (existing such platforms are actually donations with social returns only)• Evolutions in regulations may be required to truly accelerate the emergence of P2P funding models, for instance exempt securities offerings with €100 maximum per investor from registration, or soften rules for tax exemptions for Social Business• While diversity is key, structuring of the sector could help social entrepreneurs make their voice(s) heard, support cross- border funding, or maybe provide common and cheaper financial means (e.g. payment means)• Besides, there is a need to educate and inform on Social business on the funders’ side, to raise awareness and sensitivity to this cause. Although initiatives already exist (social entrepreneurs associations, general information websites...) and awareness will actually raise progressively word of mouth spreads the concept.• 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.finance + social business + web 2.0 18
  19. 19. Contents Online Fundraising overview What model(s) for Social Business? Conclusions Appendix -Analysis of funding models -Detailed analysis of websites -Data collectedfinance + social business + web 2.0 19
  20. 20. HelpExisting solutions & trends Website Creation Language Members SpecificitiesCharitiesVolunteers Idealist 1995 En, Sp, Ca 1M Allows volunteers to support non profits with skills on local andrecruitment Volunteermatch 1998 En 2.5M national as well as international levels Sparked 2008 En 150,000 Using books and fairs to create awareness jagispourlanature.org 2006 Fr n.a. Connects volunteers and organization to offer environmental volunteering possibilities in France (1h up to >6 months) Axa Atout Coeur 2009 Fr 15,000 Allows AXA Group employees to volunteer to support events organized by associations (Axa Atout Coeur created in 1991)Tools for Koeo 2008 Fr n.a. Platform for charities and companies to offer and receivecalls for donation of professional skillsvolunteersEntrepreneursStartup StartupSchool 2009 En 21,000 A marketplace to schedule meetings, talks and classes as wellsupport entrepreneurs as a virtual Classroom to meet live and interact via chatting, audio and video conferences in order to share, screensCreativity and IndividualsCalls for Dreamshake 2008 Fr 15,000 Market place to connect dreams & projects to needed/ proposedvolunteers skills• There is no identified example in social business of website facilitating the provision of skills by individuals to projects.• Examples go from a consolidation of calls for help from non-profit organizations (Axaatoutcoeur), to an offering of education by a community of volunteers in a virtual academy (startupscholl as an example of SuperCoolSchool) and to a market place intermediating entrepreneurs with needs and individuals with skills (dreamshake).finance + social business + web 2.0 20
  21. 21. HelpFunctional coverage T1 Supporters T2 1 •• Supporters post their profile and propose their skills to project owners, or respond to projects needs Supporters post their profile and propose their skills to project owners, or respond to projects needs posted on the platform posted on the platform 1 •• They offer a volunteer pool including professional skills, time, in kind donations to either the They offer a volunteer pool including professional skills, time, in kind donations to either the platform or to a specific project (P2P) platform or to a specific project (P2P) 3 Platform •• The platform communicates the need of volunteers, providing the possibility to find adequate The platform communicates the need of volunteers, providing the possibility to find adequate volunteering (e.g. Sparked Micro volunteering for people with a time constraints) volunteering (e.g. Sparked Micro volunteering for people with a time constraints) 2 Projects 2 •• The platforms provides a tool for project owners to publish their project and define their needs, The platforms provides a tool for project owners to publish their project and define their needs, facilitating projects and nonprofits with a communication channel and systemic ways to find these facilitating projects and nonprofits with a communication channel and systemic ways to find these volunteers more effectively volunteers more effectively 3 •• Supporters actually provide their time or services Supporters actually provide their time or servicesfinance + social business + web 2.0 21
  22. 22. HelpEvaluation • Helps create a sustainable community of supporters around a project Fit with • Adapted to project launch phase (e.g. review business plan, design website, translate documents), Social rather than recurring activities (contrary to charities) Business Ability to • Constraints to match volunteers and projects across borders; all identified platforms are national (except reach startupschool) or even local supporters • Platforms allow projects and supporters to post time/ skill needs or proposals • Databases can be searched to facilitate matching Technical capabilities • Koeo offers a white label platform (in french) to companies, giving the opportunity to their employees to support an organization, organizations in a selected domain, or all organizations enrolled in Koeo (environment, education...)finance + social business + web 2.0 22
  23. 23. FollowExisting solutions & trends Model Creation Language Members SpecificitiesCharitiesThemed social Care2 1998 En 15M 100% of administrative costs ad financed, credits system, earned vianetworks volunteering, petition…, and distributed on favourite causes (funded by corporate sponsors) WiserEarth 2007 En, Fr, Spa, Port 45,000 NGO directory of more than 112,000 organizations worldwide Everywun 2008 En n/a Allows to spend money by using virtual credits – website down since end of 2009 Jumo 2010 En n/a Online network service “for the social sector” closely linked to FacebookCreativity and IndividualsThemed social MySpace 2003 15 languages 100M Recommendations engine, recommending users profiles they might likenetworks based on their browsing history• Models in this category are themed social networks, allowing to follow your favourite causes and NGOs and get in touch with people supporting the same causes; there is no example in social business• Rather than giving money, some of them (Care2, Everywun) provide opportunities to act, and thus earn and redistribute credits to causes (funded by advertising)• Growth parallel with Facebook (creation in 2004 – boomed in 2005-6…)• Although the platforms are mainly focused on causes, there is a huge leverage of network members to friends on the network, as most of them allow Facebook connect and publish activity on the profilefinance + social business + web 2.0 23
  24. 24. FollowFunctional coverage T1 Supporters 1 •• Allows organisations to have a presence on the platform to more easily connect to supporters Allows organisations to have a presence on the platform to more easily connect to supporters •• They can develop networks of fellow concerned supporters or with organizations They can develop networks of fellow concerned supporters or with organizations 2 Platform 1 2 •• Supporters connect to the social network to keep track of the causes or interests they care about Supporters connect to the social network to keep track of the causes or interests they care about •• As a result of the platform, supporters and projects can be directly connected (in some cases you As a result of the platform, supporters and projects can be directly connected (in some cases you Projects can give donations via the platform (e.g. Jumo) can give donations via the platform (e.g. Jumo)finance + social business + web 2.0 24
  25. 25. FollowEvaluation • Allows to lead a network of ambassadors/ promoters of a project, to find new clients/ contributors/ funders (cf. Regioneo example) Fit with Social Business • Follow model better suited to large causes, having the ability to gather tens/ hundreds of followers (social business not being a cause itself) • Not much benefits at a project level (for most projects) Ability to • No limitations to internationalization reach supporters • Can be a gateway to future donations/ financial funding by followers Technical • Allows to regularly publish information to a targeted audience (which opted in) capabilitiesfinance + social business + web 2.0 25
  26. 26. DonateExisting solutions & trends (1/2) Model Creation Language Funds per Specificities year / projectCharitiesThemed Causes (facebook) 2007 En €8M / €290 Themed social networks allowing to donate to causes (notsocial Act of Good 2008 En n/a specific projects)networksFundraising Globalgiving 2002 En €2.9M / €8,500 Fundraising portals and marketing services to nonprofits andportals Betterplace 2006 En, Ge €2.5M / €3,700 to provide donors with the information they need to make Bringlight 2007 En n/a informed donationsFundraising Just giving 2000 En €105M / n/a Provide the tools for nonprofits to raise funds onlineevent pages Aiderdonner 2008 En, Ge, Fr, Du €1-2M / €10-20kDonations Network for Good 2001 En €100M€ / €6,200 Tools consolidating the flows from multiple websitesmgmt tools Izicollecte 2008 Fr €1.2M / n/aShop for a EbayGivingWorks 2003 En €38M / €8,300 Allows users donate to nonprofit organizations when they buycause SocialVest 2009 En n/a and sell through an e-commerce site Endorse for a cause 2010 En n/a CauseOn 2010 En n/aBrowse for a Veosearch 2007 En €60k / €600-4,000 Provide direct marketing services (mail newsletters, ads oncause Mailforgood 2009 Fr €10k / €550 search sites) to collect funds later provided to charity as micro Olozim 2008 En €20k / €4,000 donationsSocial business BVS&A 2003 Port n/a Promotes an engaged way of giving charity-“investments” SASIX 2004 En €300k / €23k (donations) with pure social return• Donation aroused the creation of many creative models for charities and personal projects• SASIX and BVS&A are the only donation model in Social businessfinance + social business + web 2.0 26
  27. 27. DonateExisting solutions & trends (2/2) Model Creation Language Funds per Specificities year / projectCreativity and IndividualsGeneral crowd- MyFootbalClub 2007 En €0.5M / €0.5M P2P platforms for supporters to connects with projects,funding Indiegogo 2008 En €0.4M / €2,500 individuals, and artists to offer all-or-nothing funding via a Kickstarter 2009 En €19M / €4,500 crowd of donations. Babeldoor 2009 Fr €110k / €2,000 Most platforms require a reward for supporters. Rockethub 2010 Fr, En €200k / €2,400 Ulule 2010 Fr €180k / €2,000 Pozible (prev. Fundbreak) 2010 En (Aus) €110k / €2,600 Kisskissbankbank 2010 Fr €190k / €6,200 Invested.in 2010 En n/aMusic crowd- Pledge music 2009 En €200k / €5,400funding Fansnextdoor 2010 Fr, En €30k / €4,400Micro-funding Flattr 2010 En n/a / €1-10 Provides a flat-rate platform to pay for online content where you “flattr” different projectsfinance + social business + web 2.0 27
  28. 28. DonateFunctional coverage T1 Supporters T2 1 •• On most models, supporters give small amounts or pre-assigned funds to the platform; supporters On most models, supporters give small amounts or pre-assigned funds to the platform; supporters provide a network for donations where they can donate micro-donations through endorsements or provide a network for donations where they can donate micro-donations through endorsements or 1 4 their paychecks, or select one or several projects and donate a portion of needed funds their paychecks, or select one or several projects and donate a portion of needed funds 2 Platform 5 2 •• Via the platforms, supporters give funds to causes, projects, nonprofits and individuals; provide the Via the platforms, supporters give funds to causes, projects, nonprofits and individuals; provide the 3 critical mass necessary to fund large projects through donations critical mass necessary to fund large projects through donations •• Raise awareness for projects Raise awareness for projects Projects 3 •• Platform allocates and transfers the designated funds to projects once fully funded; raises awareness for projects Platform allocates and transfers the designated funds to projects once fully funded; raises awareness for projects •• Donation management platforms offer a support function via collecting money or managing databases Donation management platforms offer a support function via collecting money or managing databases 4 •• Via the platforms, projects can reach their base with information and updates (events, projects plans, updates, or a general Via the platforms, projects can reach their base with information and updates (events, projects plans, updates, or a general description of the cause) description of the cause) •• In Social Stock Exchanges, compliance with reporting obligations is a requirement In Social Stock Exchanges, compliance with reporting obligations is a requirement 5 •• Some projects provide non financial rewards Some projects provide non financial rewardsfinance + social business + web 2.0 28
  29. 29. DonateEvaluation • Relevant to least advanced projects or individuals most in need: lower pressure • Adapted to very long term projects/ with no return / early development starter Fit with • Opportunity to rely on donations to invest in shared infrastructures benefiting to social businesses Social Business • Reduces value of fund provided – lack of incentive/ accountability • Does not induce changes (relief only) “dependency” Ability to • No limitations to internationalization reach supporters • Value proposition is clear and well known; there is a significant potential in countries such as France • Requires the platform to implement a payment solution: “contrat VAD” with a bank (financial solution) + Technical Electronic Payment Term (technical solution e.g. Atos or Paybox); paypal provides both solutions in 1 capabilities (with higher transaction costs)finance + social business + web 2.0 29
  30. 30. LendExisting solutions & trends Model Creation Language Funds per year Specificities / projectSocial BusinessP2P micro credit Kiva 2005 En €29M / €290 Providing P2Pwith no interests MyC4 2006 En €3M / €2,000 No interest rates RangDe 2006 En, Dk n/a Working together with MFIs Dhanax 2007 En n/a Wokai 2007 En, Ch €290k / €450 Babyloan 2008 En, Fr €700k / €300 Xetic 2010 En, Fr €40k / €330 Energyincommon 2010 En €20k / €70... with interest rates Microplace 2006 En n/a P2P, through MFIsEntrepreneursP2P loans Friendsclear Family 2008 Fr €200k / €1,500 P2P Lending to Entrepreneurs including interest model Friendsclear Pro 2010 Fr €300k / €10k Funding Circle 2010 En €11M / €35,400 Fairplace 2010 Br n/a Cofundit 2010 En n/a / €200,000Creativity and IndividualsP2P consumer Zopa 2005 En €70M / €6,000 Personal creditsto fund creative ideas, individuals, businesses orcredit Prosper 2006 En €100M / €5,000 projects Lending Club 2007 En €100M / €7,700 Quakle 2008 En n/a Rate Setter 2010 En €7M / €5,200 Yes-Secure 2010 Fr €400k / n/a Prêt d’Union not started n/a • There are a many websites offering P2P loans to entrepreneurs, with very similar models; interest rate vary widely: from zero in social business (Kiva, Babyloan… with the exception of microplace offering up to 3% to the lender) to 4-8% (5-13% for the borrower) • Models in social business partner with MFIs, allowing them to collect and lend worldwide. • Other models partner with banks or obtain their own credit license (e.g. zopa in the UK); they collect and lend only in countries where licensed; in France, pretd’Union intends to receive its own license. In such models, lenders and borrowers must be in the same country.finance + social business + web 2.0 30
  31. 31. LendFunctional coverage T1 Supporters T2 1 •• Supporters access a list of projects with funding needs; Interest rates are dependent on credit Supporters access a list of projects with funding needs; Interest rates are dependent on credit ratings, defined by MFIs or regular rating companies; Some use hard information while others use ratings, defined by MFIs or regular rating companies; Some use hard information while others use 1 6 soft information for ratings; for most P2P lending in social business, loans are interest-free soft information for ratings; for most P2P lending in social business, loans are interest-free •• They can select one or several projects, and lend a portion of needed funds They can select one or several projects, and lend a portion of needed funds 2 Platform 4 •• The funds are collected by the platform The funds are collected by the platform 3 5 2 •• Platforms funding businesses allow supporters to exchange with borrowers to enable supporters to Platforms funding businesses allow supporters to exchange with borrowers to enable supporters to Projects challenge the business plan, offer advice and assess the risk challenge the business plan, offer advice and assess the risk 3 •• In P2P micro-credit to social businesses: When a project is fully funded, the platform transfers the money to a MFI on the ground In P2P micro-credit to social businesses: When a project is fully funded, the platform transfers the money to a MFI on the ground (usually an interest-free loan), which actually screens borrowers, provides the loan with interests and collect the money back (usually an interest-free loan), which actually screens borrowers, provides the loan with interests and collect the money back Published projects are actually already funded by the MFI: the lender backs-up the MFI, who can thus grant a new loan. Published projects are actually already funded by the MFI: the lender backs-up the MFI, who can thus grant a new loan. •• In P2P loans & consumer credit: loans transferred immediately once approved; some platforms guarantee loans In P2P loans & consumer credit: loans transferred immediately once approved; some platforms guarantee loans 4 •• Information flow through the platform directly from projects to supporters includes project updates and business plans Information flow through the platform directly from projects to supporters includes project updates and business plans 5 •• Reimbursement of funds and possibly interests from the specific individuals or projects to platform, platform keeps a portion to Reimbursement of funds and possibly interests from the specific individuals or projects to platform, platform keeps a portion to finance the platform finance the platform 6 •• Reimbursement to lenders, gives project evaluations based on hard or soft facts; Provides an alternative to donations through Reimbursement to lenders, gives project evaluations based on hard or soft facts; Provides an alternative to donations through providing access to money instead of pure giving providing access to money instead of pure givingfinance + social business + web 2.0 31
  32. 32. LendEvaluation • Addresses only projects with a return (or at least payback) within 12-36 months • Incentive to build for the future Fit with • Circulation of money – multiplication effect Social Business • Risk on pay back for both the supporter & entrepreneur • Charge of interests implies short and medium term investments only (risk/ cost too high beyond 3 years) • Comparable to a reversible donation Ability to • The P2P micro credit model is fully international, on both lender and borrower sides reach • On the contrary, the standard P2P loan model, based on a partnership with a bank or on the ownership supporters of a credit license, allows loans only with borrowers and lenders in the same country (in the USA, licenses are even granted by state only) • Besides payment capabilities (cf donation model), it requires additional capabilities: • Credit rating: can be conducted by MFI or by lenders themselves (by allowing them to exchange information, ask questions to borrowers before the project is funded); in most cases, the platform Technical performs this activity capabilities • Manage payment schedules and collect reimbursements • Communication between lenders and borrowers along the project execution • Reporting on default rates, project successes and impacts...finance + social business + web 2.0 32
  33. 33. InvestExisting solutions & trends Model Creation Language Funds per Specificities year / projectCharity projectsPrivate market places 33needs 2011 En n/a Enables to invest, make a social impact, and earn financial rewardsSocial BusinessPrivate market places MissionMarkets 2010 En €2M / €2-500M Many missions united in one market, facilitates focused investmentEntrepreneursCommunity Wiseed 2009 Fr 1.0M€/0. 33M€ Allows funders to invest in ventures and get a share of profitsinvestment CrowdCube 2010 En n.a. MicroVentures 2009 En n.a. CrowdaboutNow 2010 Dutch n.a.“Investment club” GrowVC 2009 En 9.0M€/0.04M€ Platform for seed funding for startups, community based (social network) , crowdfundingCommunity Profounder 2010 En 0.2M€/ 0.2M€ Allows funders to invest and get a share of revenuesinvestmentCreativity and IndividualsMusic community inv. MyMajorCompany 2007 En, Fr 1.2M€/n.a. Platform for artists to use a limited timeframe to mobilize Sellaband 2006 En 0.33M€/0.09M€ sponsors, patrons, and supportersFashion community CatWalkGenius 2010 En n.a. Online investment portal allowing interested people to getinv. involved in fashion; concept of crowdfunding to the fashion • Only a few online platforms allow to invest and become a shareholder of a specific business (e.g. Wiseed), and also trade shares on a private secondary market (Mission markets); despite many projects, no regulated social stock exchange has been launched yet. • As an alternative, GrowVC is similar to an investment club, allowing to invest in a fund, recommend allocation on startups and receive a share of return based on recommended startups • Other models allow to financially support an artist, designer , sport club or a friend and be eligible to a share of net revenues.finance + social business + web 2.0 33
  34. 34. InvestFunctional coverage T1 Supporters T2 1 •• Supporters access a list of projects with investment opportunities; return is dependent on success Supporters access a list of projects with investment opportunities; return is dependent on success •• They can select one or several start-up projects, and invest a portion of needed funds, or you can They can select one or several start-up projects, and invest a portion of needed funds, or you can 1 6 invest in a specific fund which in turn is allocated once the funding target is achieved invest in a specific fund which in turn is allocated once the funding target is achieved •• The funds are collected by the platform The funds are collected by the platform 2 Platform 4 3 5 2 •• Via the platforms, supporters exchange with companies to give funds, challenge the business plan, Via the platforms, supporters exchange with companies to give funds, challenge the business plan, Projects help market the product through social networks, offer advice, assess the risk help market the product through social networks, offer advice, assess the risk 3 •• Most platforms transfer the funds once fully funded and some platforms invest themselves in kind (e.g. MyMajorCompany) Most platforms transfer the funds once fully funded and some platforms invest themselves in kind (e.g. MyMajorCompany) •• Some offer a support function (e.g. MMC acts as a record label) Some offer a support function (e.g. MMC acts as a record label) 4 •• Information flow through the platform directly from projects to supporters includes project updates, business plans, and marketing Information flow through the platform directly from projects to supporters includes project updates, business plans, and marketing materials, in addition to the return on investment materials, in addition to the return on investment 5 •• Provide source of projects and income stream for platform based on platform financing criteria; return of investment and possible Provide source of projects and income stream for platform based on platform financing criteria; return of investment and possible revenue-sharing from the specific individuals or projects to platform; platform keeps a portion to finance the platform revenue-sharing from the specific individuals or projects to platform; platform keeps a portion to finance the platform 6 •• Reimbursement to investors, gives project evaluations based on hard or soft facts; provides access to new type of investments Reimbursement to investors, gives project evaluations based on hard or soft facts; provides access to new type of investments •• Expands the venture capital world into a giant social network Expands the venture capital world into a giant social network •• Democratizes access to investment Democratizes access to investmentfinance + social business + web 2.0 34
  35. 35. InvestEvaluation • Addresses only projects with a return within 12-36 months and beyond Fit with • Amounts raised should be higher to absorb costs of collection and admin/ mgmt costs Social Business • Profits out of the country (less local impact) • Besides Creativity and Individuals projects, investments are usually reserved to accredited investors; Ability to CrowdCube investments are not restricted, but they are open only to UK residents reach supporters • This type of model in Social Business is very recent and maturity is low; liquidity seems difficult to ensure • Capabilities are similar to lending models Technical • In addition, it requires: capabilities • The ability (methodology) to value shares owned to allow investors exit • The ability to track and report projects financialsfinance + social business + web 2.0 35
  36. 36. Contents Online Fundraising overview What model(s) for Social Business? Conclusions Appendix -Analysis of funding models -Detailed analysis of websites -Data collectedfinance + social business + web 2.0 36
  37. 37. Detailed analysis of websites Charities & charity projects Social entrepreneurs Entrepreneurs Artistic/ personal projects Help Follow Donate Lend Invest Analysed websites in boldfinance + social business + web 2.0 37
  38. 38. Help – Charity AXA atout Cœur Activity and Key Figures Comments • Offers three activities: mobilization of • Using employees volunteering & skills, volunteers and skills; 3,500 Corporate Citizenship in order to volunteers with IT, Accounting, etc. skills not only increase the image of to support >250 charities (only France) the company but the raise the • Approx. 300 actions supported (e.g. employees‘ motivation and selfIdentity collection of clothes, food..., garage identification level with the sales, manual/ admin help,...) company• Founded in 1991 by the Axa Group, • In 2008, 1.5 million euros budget as the website was launched in 2009 financial support of field activities by• Available only in French volunteers (as equivalent working hours)• Based in France, 55 correspondents AXA sites in France Volunteer Match Activity and Key Figures Comments • Platform to connect people who want to • Platform received recognition by volunteer on a local and national level Obama • Addresses NPOs, Corporations and Volunteers • Revenues $3mIdentity • #1 search result for “volunteer” on Google and Yahoo! - 850,000 online monthly• Founded by Four MBA’s Mark visitors Benning, Joanne Ernst, Steve • 100,000,000+ pages served in 2008 Glikbarg, and Cindy Shove • 73,500+ participating nonprofits & 112• Founded in 1998 corporate clients • 2.5 million registered members• Available only in English • 4.5 million volunteer referrals since 1998• Based in California, USAfinance + social business + web 2.0 38

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