Business Clinic
Crowdfunding in social care

The panel comments on the role of crowdfunding in social care.

Crowdfunding is a relatively new approach to sourcing funding for projects. It has grown steadily in recent years, with a number of online sites offering people a platform to promote their projects amongst potential investors and get them off the ground. However, is it a model that could work for social care? One potentially new community care company is trying it out.

According to the UK Crowdfunding Association (UKCFA), ‘Crowdfunding is a way of raising finance by asking a large number of people each for a small amount of money. Until recently, financing a business, project or venture involved asking a few people for large sums of money.

Crowdfunding switches this idea around, using the internet to talk to thousands – if not millions – of potential funders. Typically, those seeking funds will set up a profile of their project on a website. They can then use social media, alongside traditional networks of friends, family and work acquaintances, to raise money.’

Initially developed in 1997, crowdfunding has grown steadily ever since. There are three ways for people to invest or receive investment. These are donation or reward crowdfunding, debt crowdfunding and equity crowdfunding.

Donation/reward crowdfunding

People invest in projects because they believe in the cause or want to make a difference without receiving a financial return. Some projects offer rewards or gifts to investors which can be anything from a ‘thank you’ on their website, to a month’s trial of their service if successfully funded. Rewards can vary and can be intangible.

Debt crowdfunding

This is also known as peer-to-peer lending and sees investors get a return on their investment with interest. It is explained by UKCFA as allowing ‘for the lending of money while bypassing traditional banks’.

Equity crowdfunding

The final crowdfunding option, equity funding, as the name suggests, enables investors to purchase a stake in a company in return for their investment.

Raising awareness

Crowdfunding, in theory, has potential. It could be assumed that those projects with social value are more likely to find funding in an increasingly socially aware society.

However, it’s only likely to be as successful as its promotion. Just setting up a project on a website isn’t enough, it’s important to raise awareness. Social media is the most logical platform to do this, with associated Facebook, Twitter, LinkedIn and other accounts being used to raise awareness and push the project.

Crowdfunding in social care

Given the social interest of social care, it might be felt that there would be a plethora of social care projects being funded by crowdfunding.

However, they seem to be severely lacking. CMM sent out a number of requests to identify crowdfunding in social care and only one live project came to light. A community care project seeking funding in Stafford.

Affexa has set up a crowdfunding site to raise start-up capital for a home care service for adults and older people in Stafford and the surrounding areas. Under the title of Helping to transform social care locally, it is looking to raise £7,500, however it says that the crowdfunding site is only one of the methods being used to raise capital.

Initially set up in March, the crowdfunding project runs until 26th May. The project aims to offer high standards of care and an opportunity to drive change in the sector. Affexa aims to change the way community care is regarded as a sector as well as offering careers in social care by working with local jobcentres and careers coaches to help people get back into employment.

Investors are able to pledge from as little £1, for which they would receive a ‘thank you’. Investors of £5 or more, would receive a ‘thank you’ on social media including Facebook and Twitter. Those pledging £10 or more would be listed on the organisation’s ‘Wall of Fame’ on its website, receive a personalised thank you letter and also a mention on social media. Investors of £25 or more receive the same as those pledging £10 plus a free goody bag.

As the pledges increase so do the rewards, for £50 or more investors would be invited to a community coffee morning and be entered into a prize draw to win an iPad mini as well as receiving all the other rewards mentioned so far. Finally, if anyone was to invest £100 or more in the project they would be able to try Affexa’s services for free, if they live in the local community. The trial would be limited to 10 hours and could be used as the individual wished. They would also receive a handy bag and all of the other rewards mentioned above. CMM will be published as the project closes but at time of print it has only raised £215.

Crowdfunding overseas

In the Netherlands, a recent, innovative social care project exceeded its crowdfunding target by 336%, raising €167,750. The aim of the project is to connect older people needing support with medical students living nearby, who will support the individuals with anything from companionship to household or social care tasks, whilst updating family and friends with a ‘digital diary’.

In the US, there have been crowdfunding projects for assistive technology and community care services, with varying degrees of success.

Is it time for UK-based social care to push crowdfunding as an alternative source of financing?

Over to the experts…

Given the rise in crowdfunding and the associated websites, is there a place for it in social care? Given that social care is highly-regulated, is there a risk that the interest of parties in debt or equity crowdfunding would be limited to those organisations with a track record of quality care and compliance?

Could crowdfunding help to boost the ability of social care start-ups to become a reality in what is still a tight lending landscape for smaller providers? Is social care slow on the uptake of this investment model?

Definitely an additional form of funding

In theory this form of innovation in funding ought not to be any less important for the social care sector than any other form of investment through a bank, organisation or individual.

As yet crowdfunding is not common in social care in the UK and, therefore, is untested as a method of funding. In that respect it is a less familiar way of generating income to fund social care initiatives.

There is a tendency within the current mode of operation to seek out certain, not speculative, funding as opposed to other areas of income.

Crowdfunding could be another form or source of funding for social care, especially with community and people-led initiatives. These approaches to social care add greater variety of provision.

It would seem that only one live example of crowdfunding in this sector has been identified to date. It is therefore, difficult to comment on that specific site or initiative per se.

As services become more diverse and the value of community-led initiatives are recognised, then more examples of innovative funding streams, such as crowdfunding, may occur in line with the spirit of person-centred and co-produced ideas and practice.

Initiatives led by the people for the people. Indeed this may enhance how social care is perceived.

It is definitely an additional form of funding within the sector, I would suggest that it has great potential within the context of charities and not-for-profit organisations. In these sectors of social care it can play a part in furthering innovation to bring about a wider range of provision.

Sharon Blackburn RGN RMN, Policy and Communications Director, National Care Forum

Has great potential for community enterprise

We think that crowdfunding has great potential for community enterprise.

There are a number of possible platforms including, of course, the well-established Kiva; a peer-to-peer investment with an expectation that loans are repaid and then reinvested in another project.

Kiva works through microfinance institutions and its mission is to eradicate poverty by helping people to set up businesses. It encourages lenders to look for projects that connect with issues that they care about and whose story touches them in some way. Kiva’s peer lenders seem less concerned about regulation and more interested in the person and the project. This is an approach that could connect well with the social care sector.

Another interesting development in peer-lending is Funding Circle. Created with a big idea to revolutionise the outdated banking system and secure a better deal for everyone.

It operates as a bank (and is the fastest growing bank in the UK). It offers businesses the opportunity to borrow directly from a wide range of investors, including more than 40,000 people, the UK Government, local councils, a university and a number of financial organisations.

Currently we are exploring a number of platforms with the aim of linking our own web platform for community enterprise, Small Good Stuff, with an appropriate crowdfunding platform. The Small Good Stuff directory offers providers of very small scale services and supports a chance to tell people what they can offer. We find the stories of our community entrepreneurs inspirational and we think peer lenders will as well.

Sian Lockwood OBE, Chief Executive, Community Catalysts CIC

May offer interesting possibilities community

Crowdfunding may offer interesting possibilities for social care projects. Homecare services generally have extremely low financial barriers to entry – little capital spend is required – the biggest costs are probably preparing for registration (including developing suitable policies and procedures), the recruitment of staff and attracting customers.

However, in a UK market with over 9,800 locations already delivering regulated care, funding the set-up costs of more micro-providers may not be an attractive position for prospective investors unless the service offers something genuinely innovative, or which can be shown to be missing in the local area.

In deciding whether crowdfunding could be an effective option, people should consider precisely what they can offer investors in terms of vision, knowledge and skills.

Previous experience in a frontline social care role is valuable, but running a homecare service requires a range of business skills, not least of which include being an employer, meeting regulatory requirements and managing what can be a financially fragile organisation, where workers rightly expect to be trained, supported and paid. Maintaining cash-flow is even more crucial to success than simply securing set-up costs.

Adult social care services are not well-understood by the public, and what awareness exists is often coloured by media reporting of inadequate, under-resourced state-funded care. Where crowdfunding may be particularly successful in social care could be in supporting the development of co-operatives of personal assistants or developing services which are highly-differentiated from what is already widely available.

Colin Angel, Policy and Campaigns Director, United Kingdom Homecare Association


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