Research into crowdfunding

Blog post by mmadia on Sat, 2013-05-25 13:49

For our needs, Indiegogo is a better fit. It allows fundraising for a general purpose (e.g., to fund contracts for Haiku development), rather than for creating a specific thing. If you have not looked into it yourself, there are two style of fundraisers on Indiegogo (and are functionally similar on Kickstarter): "Fixed Funding" and "Flexible Funding". With Fixed Funding, a monetary goal is set. If and only if that amount is reached or exceeded, will money be collected from donors and Indiegogo will take a 3% cut. With Flexible Funding, a monetary goal is set. Whether or not the goal is reached, money will be collected from donors. If the goal is reached (or exceeded), Indiegogo will take a 3% cut. If less money is raised, a whopping 6.75% cut will be taken by Ingiegogo. Worse still, those are not the only fees incurred.

About the fees ... Since Haiku, Inc. is a 501(c)(3), Indiegogo will reduce their fees by 25%. The fees listed above take that into account (and are normally 4% and 9% respectively). So, that helps. But there is also the fees for the payment processor (Paypal, AmazonPayments, credit card processors, etc.), which is roughly another 3% and brings the total fees up to 6% and 9.75% respectively. This next bit is unclear, but it seems that Indiegogo uses a payment processor (FirstGiving) to send the money to the 501c3 and they charge a 4% fee. If this is understood correctly, the total fees would climb to 10% and 13.75% respectively. (From Indiegogo's website: [1], [2], [3])

In other words, instead of just the normal 3% fee of using our normal donation processors, donations made in an Indiegogo fundraiser could fees costing 3 to 4.5 times as much! (Ok, it is possible that the math works out slightly different depending if the fees are applied at once or in succession, but it would be negligible.) Keep in mind that the bulk of our current donations would not help towards reaching the crowdfunding goal. This includes recurring donations (around $450 USD per month) and any other donation made directly to Haiku, Inc. (around another $800 USD per month). Forcing those donors to use Indiegogo, in hopes of securing a lower fee seems like a bad, bad idea. If we try to raise $20,000 USD, $2000 to $2700 of that could be lost as fees. That is a huge amount of money to lose, simply for the luxury of having a crowdfunding donation drive. So ... what do we do? Tell us on the haiku-inc mailing list.