Monday, October 08, 2012

Why Plan 28 decided not to use Kickstarter

Firstly, this is not a post about how Kickstarter is evil, bad for you or anything similar, it's about why the UK charity I run, Plan 28 (which is working on building Charles Babbage's Analytical Engine), chose not to use Kickstarter. I get asked this question a lot so here are the answers.

1. Tax efficiency

As a UK charity Plan 28 is eligible for Gift Aid; this means that Plan 28 is able to claim back tax paid by UK taxpayers on donations they make to the charity. That means that UK donations are increased by around 25% because the charity claims back the tax. Doing that means collecting information on UK taxpayers. This would be very complex with Kickstarter and an administrative burden.

(Note that US donors have asked if Plan 28 plans to become a US 501(c)3 so that US taxpayer donations can become deductible: not at this time. The legal and administrative burden of running two non-profits is too high for a small charity like Plan 28.  As we grow this may change.)

2. Kickstarter's fees are quite high

Plan 28 originally planned to use Kickstarter and had a range of incentives already thought up, but the board of trustees objected based on the overall Kickstarter fee structure. To quote from the Kickstarter FAQ:
If a project is successfully funded, Kickstarter applies a 5% fee to the funds collected. Our payments processor, Amazon Payments, will also apply credit card processing fees that work out to roughly 3-5%.
So, worse case the total cost to the charity would have been 10% of the donation.

Contrast that with JustGiving (which Plan 28) uses. They charge 3% to 5% of the donation amount plus up to 1.3% from the credit card company. The worst case is that Plan 28 pays 6.3% of the donation, but JustGiving also handles the Gift Aid process: they automatically make the 25% claims to the tax authorities for Plan 28.

3. All or nothing funding

The Analytical Engine project is a very long one. It could easily take 10 years. The board of trustees were concerned that this was somewhat at odds with the spirit of Kickstarter which revolves around funding a specific project where somewhat immediate gratification is involved.

Implicit in the Kickstarter process is that the amount of money asked for is enough to make the project happen. In the case of Plan 28 that's likely £5m over ten years. But also Kickstarter is 'all or nothing' so we could have found ourselves falling short of the money we need and receiving nothing.

All these things lead us to conclude that working with JustGiving made more sense. We may return to Kickstarter when we start to build the actual machine and the end is in sight, but for the moment we are going the traditional fund-raising route.

If you are interested in donating to the project click here.


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If you enjoyed this blog post, you might enjoy my travel book for people interested in science and technology: The Geek Atlas. Signed copies of The Geek Atlas are available.

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