Crowdfunding for culture: challenges and opportunities for a paradigm shift?” ISW, University of Macerata 2-3 December 2019 Elena Borin Associate Professor, Director MSc Arts and Cultural Management, Coordinator Research Group ACM Seminar’s objectives
1. Understanding the phenomenon of crowdfunding in the broader fundraising paradigm 2. Knowledge of crowdfunding characteristics and main models 3. Development of critical thinking: challenges and opportunities of crowdfunding for the cultural and creative sector 4. Understanding of a basic crowdfunding plan EVALUATION
• Participation during lessons
• Group works and final presentation The phenomenon of crowdfunding in the broader fundraising paradigm Money and more important things
There are so many things in life more important than money! But they cost so much! (Groucho Marx) Fundraising and the cultural and creative sector
Organizations, industries and stakeholders in the cultural and creative sector have usually ethical, social and cultural priorities not making money or focus on raising funds …
But in order to carry out their activities, reach their objectives and realize their mission and vision they need to have the necessary funds Connection between funding, strategy, management control, communication chain and knowledge build-up
FUNDING; CONNECTION TO STRATEGY, MANAGEMENT CONTROL, COMMUNICATION CHANGE AND KNOWLEDGE BUILD-UP If we are able to guarantee stable funding streams, we can focus on knowledge building and development, involvement of audience, long-term strategies
Source: A. Stockenstrand, Ander, IJAM, 2014 Some preliminary considerations…..
Crisis 2007/2008: financial crisis – real economic (credit crunch) – governmental level – public expediture and impact on cultural and creative organizations and institutions ➢ Decreasing of public funding for culture (estimated 30% in some European countries) ➢ Small cultural organizations have been forced to close ➢ Big cultural organizations, while still getting the majority of public funding, have reduced financing from state and local authorities (Bonet and Donato, 2011) Some preliminary considerations…..
Increasing debate on public funding for the arts…..
• In 2012 published Kulturinfarkt (Dieter Haselbach, Armin Klein, Pius Knusel, Stephan Opitz) ➢ Totally cancel public funding for culture ➢ Darwinian approach: only strongest and "best" arts organizations will survive ……But also debate on implementation of ecosystem perspective for cultural financing (Donato, 2013; Borin and Donato, 2015) Funding for CCS: funding structure of the arts and cultural organizations (EU - USA)
Earned income
Governmental funding
Individual Earned support income Foundations
Corporate sponsorships
Traditional sources of funding for cultural and Sources of funding for not-for-profit cultural creative organisations in EU (Source: St'ART SA, organisations in the USA (Source: Arts Funding, 2013) 2017) What does that mean for arts and culture? Especially in the European context, cultural organizations should learn how to deal with the effects of the reduction of public funding and look for other types of financing to reach sustainability What does that mean for arts and cultural organizations?
• Ability to develop multiple funding sources increase resilience of cultural organizations in times of crisis
• Fundraising as part of the funding differention of cultural organizations Individual giving
Focus on Individual Giving in the USA 1975- 2015 Individual giving Fundraising: could it be a solution?? Fundraising: definition
Emotional definition
• Fundraising: "the gentle art of teaching the joy of giving" • (H. Rosso, Founder of the Fundraising School, San Francisco) Raising funds • Fundraising = to raise, to increase, to develop Fundraising: definition
"Fundraising is the science of financial sustainability of a social cause. Fundraising is not an end in itself. When it becomes that, both the organization and the donor are diminished. Fundraising is the consequence of the mission, objectives and social benefits that the organization aims to reach" • (H. Rosso, Founder of the Fundraising School, San Francisco) Fundraising definition
Greenfield (1999, 2004): Approach to fundraising as a strategic activity
➢ Part of the organization's strategy ➢ Getting financial resources is part of the strategy that aims at ensure financial sustainability over time and support its development ➢ Fundraising as a set of rules, theories, concepts that are necessary to identify and prevent financial risks ➢ Fundraising= strategic approach at designing and managing the development of an organization Fundraising definition
"People give to people. People don't give to an institution. They give to the person who asks them" (James Gregory Lord, 1995)
Burnett (1996, 2002) approach: relationship fundraising – importance of relationships with the surronding environment "Fundraising is not merely the moment in which you collect funds, it is the whole process of fund development". This process spans from the transformation of project ideas in real projects (strategic management), to the involvement of external stakeholders in the project (communication). This involvement could lead to the transferring of financial resources. Fundraising is at the same time: 1. a method: social relations as opportunities for financial support, involve people of the organization, meet the needs of the stakeholders outside the organization 2. a technique: ▪ to analize the "external world" with a marketing approach ▪ identify the potential supporters ▪ promote a fundraising campaign, effectively manage human resources, as well as technical and financial resources ▪ keep a good relations with the supporters Fundraising origins
Long traditions in fundraising (especially for not- for-profit organizations)….. Charities and religious associations (social responsibility and community belonging)
• First fundraising school and research center in the USA in 1970s by Henry Rosso
• Since 1980s and 1990s – recognized figure of the fundraiser Fundraising: preliminary concepts
Types of Fundraising organizations
Fundraising for ➢ not-for-profit organizations (cultural organizations such as museums, performing arts companies, etc.) ➢ for-profit organizations (start-up, cultural and creative enterprises, etc.)
However, fundraising is still often intended for non-profit organizations Fundraising: preliminary concepts
Types of potential fundraising markets:
➢ Private subjects (including foundations, corporate giving and individuals) ➢ Public subjects (governmental and public grants) Fundraising: preliminary concepts
Types of activities for which you can do fundraising
Fundraising as a set of methods to ensure financial sustainability of organizations at different stages of development a)To start an organization b)To ensure the development of an organization c)To ensure the development of special projects Strategic planning and fundraising
Fundraising is incorporated as a part of strategic planning for a cultural organization. ➢ It is usually included in the operational plans ➢ It applies strategic management and marketing principles
Fundraising impact on the cultural organization on two levels:
• External level Design and implementation of fund raising programs Networking with external subjects • Internal level Human resources, responsibilities and involvement in the fundraising process Decision-making mechanisms and internal communication Fundraising: preliminary concepts
➢ Fundraising is based on different relations (both internal and external) and its aim is to generate exchanges at different levels, possibly in the long-term ✓ Exchange between organizations doing the fundraising and the donors/sponsors ➢ Fundraising strategy: how can I enhance these relations and exchanges and continue them in the long-term? ➢ Match supply and demand, we need to answer to two fundamental questions: 1. What is our organization looking for in this exchange? 2. What are donors looking for in this exchange?
25 Fundraising: preliminary concepts
Point of view of the organization Types of raised funds: ➢ Funds for recurrent donations (e.g. membership programs) ➢ Funds for specific projects (e.g. Sponsorship, crowdfunding for special projects) ➢ Funds for participation in the capital (e.g. capital investment/equity base crowdfunding)
Financial support, but also: • In-kind: material, equipment, services, etc... • «In-skills»: «working» for the beneficiary, ESV – Employer Supported Volunteering programs Fundraising: preliminary concepts
What are cultural organizations looking for in fundraising initiatives?
▪ Financial support ▪ Volunteering ▪ Increased networking and relations ▪ Human resources and skills ▪ Credibility ▪ In-kind donations (materials, equipments, softwares, etc) ▪ Increased attention ▪ "Supporters"/"ambassadors" (Source: F. Colbert, 2012)
27 Fundraising: preliminary concepts
Point of view of the donor
What are donors looking for when donating?
▪ "Feel better" ▪ Public acknowledgment ▪ See results in the initiative they have funded ▪ Enhance their community/territory ▪ Establish relationships they will use for work-related purposes ▪ Establish new social relations ▪ Advertising and branding opportunities for their activities and companies ▪ Gain votes and consensus (Source: F. Colbert, 2012)
28 The main fundraising tools
Direct marketing (through variety of media including Donors/philanthropic text messaging, email, websites, database marketing, associations fliers, catalog distribution, promotional letters, etc..)
Corporate philantropy schemes Street fundraising
Legacies schemes Web fundraising tools/social media marketing Individual Philantropists/big donors Membership programs contacts Specific Fundraising events Partnering/sponsorshi crowdfunding p agreements Fundraising
Usually fundraising means: • Starting from research and knowledge of the identity of the institution/organization • using a combination of different tools and strategies in a planned way • Addressing different types of donors Potential funds raised for cultural and creative organizations
International
Public funding National
Local/community
Fund for arts and cultural Independent organizations Foundations Corporate
Operating
Private funding Community Individual Large donors Corportate giving Fundraising preliminary concepts: the pyramid of donors
Collected funds 10 % Big donors 60%
20 % "middle"donors 20%
70 % Small donors 20%
Source: French Pyramid of donors association of fundraisers, 2015 FUNDRAISING PLAN: PLANNING FUNDRAISING STRATEGIES
inheritance, legacy Large donations Individual warm and Testament giving: donations The pyramid of donation Large donations
Small donations and personal committment to donations
Incremental annual giving
Membership, first donations, sporadic cold participation to events, crowdfunding Small donations General public
33 some examples in the arts and cultural sector….
➢ Public funding ➢ Foundation giving ➢ Corporations: ➢ Corporate giving, sponsorship, membership ➢ Individuals: ➢ Philantropic agreements, legacies and individual donations ➢ Membership programs ➢ Crowdgiving/Crowdfunding ➢ Support by specific associations Some examples of different types of fundraising in CCS The opportunities of Public funding– state, regional, local
• Usually governments supports arts and culture
Looking for grants and funding opportunities at diffent levels: ➢ State (national agencies, ministry of culture, etc..° ➢ Regional (province or regional authorities or agencies) ➢ Local level (municipality, local authorities)
BUT ALSO INTERNATIONAL LEVELS (e.g. Creative Europe program) FOUNDATION GIVING
What is a foundation? • "Not-for-profit corporation with the principal purpose of making grants to unrelated organizations or institutions or individuals for scientific, educational, cultural, religious or other charitable purposes" (Highlights of foundation yearbook, 2011) • Two main types: ➢ Public foundations (National agencies) and Community foundations (eg Cleveland Foundation), Part of public funding or arm's lenght agencies ➢ Private foundations Foundation giving
Main types of private foundations
➢ Independent foundations: usually created by an person (Ex. Andrew W. Mellon Foundation) or family (Family foundations) Ex. Peter Norton Family Foundation. ➢ Corporate foundations: foundations founded by a corporation but independent. Ex. Orange foundation; included bank foundations ➢ Operating foundations: created with the specific objective of internal activities (own museum, own cultural activities) Getty Trust o il Packard Humanities Institute. They do not aim at providing financial support to other entities! Usually grants and sponsorships but on own initiative.
But also mixed models! Foundation giving
Foundations can donate in the framework of specific calls for projects They can also donate for project proposed by organizations and institutions
➢ To successfully apply for foundation funds we need to present consistent projects ➢ Similar to corporate sponsorship: present a detailed and consistent sponsorship request, in line with the corporation mission and objectives Foundation grants
Fundation support mainly through grant applications but also special agreements SOME EXAMPLES OF ASSOCIATIONS FOR DONATIONS/ SUPPORT PHILANTROPIC DONATIONS/CORPORATE GIVING vs SPONSORSHIP
• Philantropic donations imply that the donor (also big donors or corporations/corporate giving) is usually donating with the sole purpose of contributing to a cause (McNicholas, 2004; Colbert, 2007) • Different from sponsorship in which there is a contract between sponsor and sponsee • Sponsorship similar to advertising (Lewandowska, 2015) • Focus on conditions and benefits (Thomas, Pervan and Nuttall, 2009) PHILANTROPHY, CORPORATE GIVING AND SPONSORSHIP some examples: individual philanthropic donations
Donation (often financial or of private collections), often with specific contractual clauses
Legacies Corporate giving or sponsorship?
Sometimes the boundaries are blurred Corporate giving is more similar to sponsorship (although emerging trends are appearing –KOEO)
➢ Sponsorship means establishing a customized contractual relation between the cultural and creative organization and the corporate sponsor ➢ Different from philantrhropy and corporate membership programs!! ➢ Importance to identify reciprocal advantages Corporate sponsorship
Some preliminary considerations:
➢ Usually private companies priviledge sponsoring specific activities and initiatives ➢ Corporate sponsoring usually in line with mission and vision of the company ➢ Usually cultural organization should request sponsorship (no voluntary sponsorship) ➢ Usually specific offices to manage sponsorships in the private companies ➢ Increasingly, companies priviledge sponsorships that could provide benefits for their customers or for their staff ➢ Increase in in-kind donations (services, materials, human resources, branding activities, etc.)
• Colbert, 2012
46 Corporate sponsorship
• Main reasons for corporate sponsorships (D. Rich, 2006) :
• Objectives related to the launching of a new product or new branding • Enhancement of the company image • Establish links and relationships with the territory • Create long-term partnership possibilities (in common with partnership programs)
47 CORPORATE SPONSORSHIP
What are the benefits sought by companies in sponsoring a cultural initiative, organization or event? (Fisher, Brouillet,2009)
Better company image Benefits for companies and branding
5% 4% increase sales
15% 37% reaching specific customers target
Increased visibility 15%
2% Playing a role in the 22% community
48 CORPORATE SPONSORSHIP
How to catch private companies' attention? ➢ Information about the company (mission, vision, products, etc...) and its relation with the territory ➢ Catch information about their sponsorship "policies" and past activities ➢ Identify the best contact person in the company ➢ Present a sponsorship proposal that could be in line with the company ➢ Identify common objectives and needs (Melandri, 2007)
Present a consistent and detailed sponsorship request
49 Some examples of corporate sponsorships Some examples of corporate sponsorship
British Museum (London, UK) Some examples of corporate sponsorship
British Museum (London, UK) and BP – British Petroleum
BE CAREFUL! MEMBERSHIP PROGRAMS
• Establishment of a program, to which companies or individuals can subscribe becoming “members”
• The company/individual receiving certain benefits • Normally it is an annual program, but you can also be multi-year => “regular giving” • identifying different membership fees for different subjects in light of their real willingness to finance the cultural organization Some examples: individual membership programs
• Palazzo Grassi – Pinault collection in Venice, Individual membership schemes:http://www.palazzograssi.it/en/membership/ some example: individual membership programs
Gunggenheim Museum NY Individual membership schemes some example of CORPORATE membership programs
• Palazzo Grassi – Pinault collection in Venice • Corporate membership:
• http://www.palazzograssi.it/ en/venue-hire/corporate- membership-card/ JUST FINANCIAL TYPES OF DONATIONS?
• Not just financial donations
In-kind donations • Donations of competence and skills (considered as a particular type of in-kind donation) • Specific branch of fundraising called « people-raising » ➢Increasing importance of people raising Some example of individual « skill » giving
Donation of time and competences to a cultural organization is very frequent
Volunteering and people raising activities
But also ESV – Employer Supported Volunteering programs Mismanaging volunteers
(Volunteer Management Capacity Study, CNCS, 2010) Volunteering management and planning
• In order to capitalize opportunities offered by volunteer talents, cultural organizations need to ➢ expand their vision of volunteering ➢ integrate volunteers into their strategic planning ➢ reinvent the way organizations support and manage volunteer talent • Need to professionalize use of volunteers and integrate volunteer management in the strategic planning of the organization
CREATION OF STRATEGIC VOLUNTEER PLANS Volunteering in the cultural and creative sector: some examples
The British Friends of Museums association • Volunteers association • Organizing several activities to support museums and heritage sites Best practices in the arts and cultural sector: not just volunteers, but also ambassadors
Restoration "L'Atelier du peintre" Gustave Courbet
Large scale crowdfunding campaign 1335 donors/backers
Large support by media partners and sponsor: in-kind, time donations
Promotion of the events by ambassadors Best practices in the arts and cultural sector: using different skills and competences of volunteers
Friends of Museums of Verona (Italy)
Museum of Castelvecchio in Verona (Italy) Best practices in the arts and cultural sector: using different skills and competences of volunteers
Friends of Museums of Verona (Italy)
Fantasie per Castelvecchio project: restoration of a part of the museum
http://www.amicideimuseidiverona.it/wp- content/uploads/2018/12/FANTASIE_low.pdf Best practices in the arts and cultural sector: using different skills and competences of volunteers
Friends of Museums of Verona (Italy)
Acquisition program 2012: "Portrait of Girolamo Pompei" by Giovanni Benini Best practices in the arts and cultural sector: using different skills and competences of volunteers
Friends of Museums of Verona (Italy)
Restoration of the North Eastern Tower of the Castelvecchio Museum • Project by FoM members • Financing by FoM + fundraising campaign through a series of fundraising events • Promotion of the restauration intervention Best practices in the arts and cultural sector: VIP volunteers
Foundation El Instante
Project of "time donation" (25 minutes of their time) by important VIP Each VIP choses to donate half to an organization of his choice and half to the foundation
Dahn Vo, Michelangelo Pistoletto, Hans Ulrich Obrist, politicians and other VIP Fundraising and crowdfunding….. Crowdfunding in the fundraising paradigm
Crowdfunding = funding by the crowd
• Crowdfunding has emerged as a powerful fundraising tool over the last decade
• It has become a buzz word also in the cultural and creative sector Remember the pyramid of donors…..
Collected funds 10 % Big donors 60%
20 % "middle"donors 20%
70 % Small donors 20%
Source: French Pyramid of donors association of fundraisers, 2015 So why implementing crowdfunding activities?????? • Crowdfunding often contradicts the traditional paradigms of fundraising: is the pyramid of donors still valid?
• It implies a paradigm shift in the way we interpret the relationship between CCS and its audience and stakeholders
• It is to be understood in the broader framework of the e- fundraising and is deeply linked (and by some academics even considered as part of) the crowdsourcing paradigm Crowdfunding background: E-fundraising
➢ E fundraising also called digital fundraising is the use of digital tools to raise and collect funds, as well as to fidelize donors ➢ It is a trend that has been constantly increasing since the 1990s ➢ E-fundraising has been increasignly integrated as part of fundraising strategies ➢ In 2014, 63% of internet users made a donation (Massolution report, 2015) Some digital fundraising tools
Examples ➢ Emailing ➢ Online advertising in general ➢ Websites ➢ Advertising on Social networks ➢ Pay per click (Adwords) ➢ Crowdfunding Digital fundraising
• Pros ✓ Usually low costs ✓ Possibility to reach a very wide audience ✓ Easy monitoring
Cons • Usually cold relations • Donations of small amount • Need of specific competences and skills (often technical) Crowdfunding background: crowdsourcing Crowdsourcing
• model of outsourcing – ideas, information and solutions are provided by an eterogeneous variety of subjects (crowds and communities) not only professionals (different from open-source in which a community of people/professionals makes a « creation » available for free to the wider community)
• Collaborative practices (Schwienbacher and Larralde, 2010)
• Interactive value creation (Belleflamme, Lambert and Schwienbacher, 2014) Crowdfunding background: crowdsourcing Why crowdsourcing?
➢ Interest in collective knowledge: chance to access a wide variety of information and skills ➢ Development of a digital culture based on interaction between amateurs and professionals ➢ Creation of online communities based on "affinities" and common interests ➢ Prosumer (Toffler, 1970 and 1980) and produser (Bruns 2008), users collectively creating contents and producs Crowdsourcing in production
Crowdsourcing in CCS content creation
The Twitter Opera 2009 ROH in Covent Garden (ROH and Deloitte) The first opera based entirely on 140-character snippets sent by users on the popular microblogging website, Twitter, played at the Royal Opera House. The seven-act collaborative composition has been performed to the original music composed by Helen Porter, intertwined with familiar opera tunes to mark the Deloitte Ignite 09 festival. www.twitter.com/youropera Definition of crowdfunding Creators of a project and supporters (backers) PROJECT CREATORS "Crowdfunding is a way of raising money to finance projects and businesses. It enables fundraisers to collect money from a large number of people via online platforms. CF PLATFORM One could describe crowdfunding as involving “an open call, essentially through the Internet, for the provision of financial resources either in form of donation or in exchange for BACKERS some form of reward and/or voting rights and royalties” (Belleflamme et al., 2014) Definition of crowdfunding
"Crowdfunding refers to the efforts by entrepreneurial individuals and groups – cultural, social, and for-profit – to fund their ventures by drawing on relatively small contributions from a relatively large number of individuals using the internet, without standard financial intermediaries”
(Ethan Mollick, The dynamics of crowdfunding: An exploratory study, Journal of Business Venturing, 2013)
For non-profit organizations: new way of funding alongside sponsorship and philanthropic donations Crowdfunding: longitudinal perspectives
Long tradition: In 1884 Statue of Liberty – "crowdfunding" campaign of Joseph Pulitzer with 120,000 micro- donations In 1997 Marillon – 60,000 $ for Found Tour ➢ 2001: Justgiving for social causes ➢ 2003: Artistshare fan funding platform ➢ 2005: Kiva.org micro-lending ➢ In the mid 2000s Indiegogo, Kickstarter….. Focus on entertainment industry But Crowdsourcing and crowdfunding "codified" by Jeff Howe (The rise of crowdsourcing, June 2006 in Wired) Crowdfunding used very successfully in different types of campaigns
« Join the movement! »
14 February 2007: www.barackobama.com
6 million donations of $100 or less Crowdfunding Markets & trends
Source: Massolution report, 2015