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.


barryhunter said...

BT MyDonate (very similar to justgiving), change zero fees. And the CC/Debit card process fee is a fixed 13/15p. And they handle Gift-Aid :)

John Graham-Cumming said...

We did look at MyDonate as its fees are, as you say, much lower than JustGiving, but opted to use JustGiving because they offer the option to select an international currency.

Plan 28 has a huge number of supporters who are not in the UK. Balancing between UK Gift Aid and the needs of non-UK donors.

JustGiving allows the selection of USD, EUR and a number of other currencies.

Dogsbody said...

In the same vein I'm a huge supporter of Virgin Money Giving which is a non profit version of JustGiving with charges that are a lot lower.

Plus, as an event organiser that has raised over £160,000 through these sites JustGiving have been very rude to me while Virgin Money Giving have been in contact with me the entire time asking how they could help.

Just my 0.02 GBP

John Graham-Cumming said...

Dogsbody: thanks for that comment. I will look into getting Plan 28 set up in parallel on either BT MyDonate or Virgin Money Giving.

John Graham-Cumming said...

Virgin charges a 'set up' fee of £120 to use their service. Fees are about 3.5% per donation.

BT MyDonate is the cheapest. No set up fee and 13/15p fixed fee.

Perry E. Metzger said...

You might want to reconsider the question of US tax deductions. Yes, you're a small nonprofit, but the population of the US is very large compared with that of Britain, and so there's a much larger donor base here. Large donors would be especially concerned about the tax status of their donations as well, and a large fraction of the world's computer entrepreneurs (i.e. people who can write $10,000 or $100,000 checks without blinking) live here. (This also argues, by the way, for you doing a fundraising trip to the SF Bay area at some point. A few public talks about the machine and how you intend to build it might work wonders.)

One option you might consider would be to team up with an existing charity such as the Computer History Museum and have them handle your US donations on your behalf, thus eliminating the need to directly manage a US legal entity.

On a different topic, I agree that Kickstarter isn't appropriate for funding your overall project, but Kickstarter or Indygogo (which allows charity campaigns, unlike Kickstarter) might be considered not for funding the entire project, but for raising money for particular targeted subgoals -- say just to raise money for a particular engineering study or to purchase a CNC machine or what have you.

hughserious said...

So, do you have your finite difference log polynomials all worked out. did Babbage even? I'm intrigued to know if Babbage had his operational polynomials figured. Or was he going to use the French ones.

Some time ago i investigated this problem. i derived some differences based on the capacity of the DE2. my results and a simulator program can be got here

good luck with the project.