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