Is Crowdfunding just charity without the tax concession?

Have you heard of Crowdfunding? Do you know what it is?

I have done a lot of thinking about crowdfunding the last 2-3 years – both as a potential contributor and as a potential fund raiser. It is a little more complex in practice if you are not in North America.

This is what Wikipedia says:

“It usually involves the collection of finance from backers—the “crowd”—to fund an initiative and usually occurs on Internet platforms. The initiative could be a nonprofit (e.g. to raise funds for a school or social service organization), political (to support a candidate or political party), charitable (e.g. emergency funds for an ill person or to fund a critical operation), commercial (e.g. to create and sell a new product) or financing campaign for a startup company.[citation needed] One crowdfunding expert described it as “the practice of raising funds from two or more people over the internet towards a common Service, Project, Product, Investment, Cause, and Experience or SPPICE.”[2]”

(source: http://en.wikipedia.org/wiki/Crowdfunding )

Most crowdfunding platforms require the money seeker to give a reward to the contributor. Most also require that the money seeker apply to start a campaign. In The USA, crowdfunding can be used to raise business capital, but that is not the case here in Australia.

Usually, donated money is held in “trust” by the platform organisation, until the end of the campaign. There are several variations in the way the campaigns can be run – for some you can get all the money raised even if you fall short of your target figure. Many platforms do not let you have the money if you do not get the target figure (I believe the Australian ones follow this method).

I want people to be aware, that giving money to a crowdfunding campaign is just a pure donation. Even if the campaign claims that you will get a reward there is no guarantee and no-one can compel the honouring of that reward. However, campaign owners may get “black balled” if the platform company finds out.

This week, as a result of being a Facebook group administrator, I came across a post for a link to a new campaign. The campaign is by three Australians, using an American platform, to finance their purchase of a farm/rural property. They are using the “flexible funding” regime, i.e. they will receive all moneys raised/donated at the end of the campaign even if they do not reach their goal amount. I was rather concerned at the way the campaign represented what they were doing as the disclosure was very muddied. So, I messaged the campaign owner with some questions. One of my concerns was that they sounded a bit like a non-profit organisation – they even use a “.org” suffix on their url. This is the Campaign Headline:

Help the School of … buy land to expand their … programs …

My questions included – were they an RTO? What names were going to be on the title? There was no disclosure about the business name or registration (this is required in Australia) nor any disclosure about what percentage the funds represent of the purchase price.
At least one of the deed owners – a family of 6 – will be living on the farm permanently (this point is disclosed in the campaign). It is not clear if the other two people will be living there or not.

Currently, for their workshops and possibly for residing at, they lease a smaller rural property where they run weekend workshops on health & sustainable living techniques. They bring in/hire other presenters. They want this bigger property so that they can accommodate more people and more extensive courses as well as have somewhere “off grid” to live.

The campaign owner did not “get” my concerns about the lack of disclosure. Shame. People seem to think that just because it is now easier to circumvent a traditional loan, they do not have to disclose much about themselves and their motives.

Their whole concept is a good one – helping people be healthier, taking better stewardship of the planet, learning important skills. The execution was and is a bit short of my personal expectations.

Do not get me wrong, the crowdfunding platforms do require disclosure but in my opinion it falls well short of what it should be depending on the campaign.

Yesterday I did a quick online search on Crowdfunding. I came across this unfortunate wrap up of one campaign:

“Despite having raised over $560,000 for the adventure game, and having entered beta in 2013, developer Winterkewl Games has canned the project.”

( source: http://www.forbes.com/sites/erikkain/2014/07/17/cancelled-kickstarter-game-yogventures-raised-over-500000-in-crowdfunding/ )

Admittedly, this is somewhat a different type of campaign but it demonstrates the fact that not all campaigns end in a positive way.

What am I trying to say then? Basically, choose who you donate your money to carefully. You deserve to have all your questions answered. There are some wonderful campaigns seeking assistence via the various crowdfunding platforms. If you have never considered any of them, go take look. But – do not expect anything other than a good fuzzy feeling if you ever make a donation.

Peace to all,

Kiss for Life,
Miriam.