Crowdfunding: A New Way of Financing for Non-Profit Entities

Crowdfunding: A New Way of Financing for Non-Profit Entities

José Antonio Ariza-Montes (Universidad Loyola Andalucía, Spain), M. Carmen López-Martín (Universidad Loyola Andalucía, Spain) and Ana María Lucia-Casademunt (Universidad Loyola Andalucía, Spain)
Copyright: © 2014 |Pages: 20
DOI: 10.4018/978-1-4666-5974-2.ch006
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Abstract

This chapter provides a brief review of the main ways of obtaining resources from the non-profit entities in order to appreciate the new tools for doing so, as well as the possibilities of new technologies in this field. More specifically, this text analyzes how the social networks and the development of Web 2.0 affect the possibilities of obtaining resources for these organizations through crowdfunding, which represents an additional source of income to help fund projects with very specific characteristics, but is not the only way to enable these organizations to sustain their cost structures.
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The Financing Of The Nonprofit Entities: General Aspects

The main existing alternatives for obtaining resources by the non-profit entities are as follows:

Individuals Proceeding Funds

This is usually the most widespread form of financing, especially if we consider that most of these entities have their origins in a group of people standing together with a common motivation. This fact makes this group originate most of the resources initially received, as well as most of the hours of work necessary for the institution to achieve its goals.

Fundraising from individuals can be done by any of the following ways:

  • 1.

    Partners' fees

We can distinguish between two types of fees, depending on the compensations that individuals who pay them obtain from the organization:

  • a.

    Fees as compensation of some services: Are fees paid by users who benefit from the services offered by the organization.

  • b.

    Fees as donations for NGO activity. Fees are intended to assist in the work done by the organization. The donor gets no direct compensations, since it is not the direct beneficiary of the activity of the entity.

    • 2.

      Occasional donations

The main difference between these occasional donations and membership fees is the degree of commitment between the organization and the donor. While the member who pays a periodic fee is committed to the company and its objectives, the occasional donor is rather a supporter willing to collaborate on special occasions.

Generally, non-profit organizations are concerned about increasing both membership fees and these occasional donations. Since the commitment degree is less in the latter case, to promote them, occasions where supporters increase their relationship with the organization and, consequently, their commitment to it can be found or created. To achieve it, there are often used, for example, collections, parties, sponsorship of specific projects, inheritances and bequests, etc.

  • 3.

    Merchandise Sales

In this case we have the sale of products in which there appears the logo of the institution or its image. Although it is a form of relatively recent fundraising, it’s widespread in certain cases, but it isn’t the essential source of these entities, rather it is a secondary element in this field and its use is necessary clearly differentiated from the sale of services related to the activities of the organization. To achieve the increase in the sales of these products, catalogs can be published, or Christmas cards, etc.

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