2,527 crowdsourcing and crowdfunding sites
Giving to a crowdfunding campaign amounts to donating to a project you believe in, but without the tax deduction that usually comes with charitable giving. Fractured Atlas, an arts non-profit that offers fiscal sponsorship to its members, is looking to change that by partnering up with crowdfunding platforms IndieGoGo and RocketHub. By offering tax deductions for the donations, the non-profit aims to entice larger contributions in tough economic times.
Crowdfunding and art are a harmonious combination. Visually appealing projects make for good video pitches; inspired (and inspiring) artists can convert fans into backers; creative projects offer unique perks. It is little wonder artists are turning to crowdfunding platforms to raise at least a portion of their budget.
Given Kickstarter’s focus on creative projects, the platform has drawn a lot of attention and praise for helping artists find money for their ideas. Kickstarter fields small donations from a number of dedicated followers – starting with friends and family. In the past, however, arts funding has, in many cases, come from wealthy donors encouraged to give more money through tax incentives. The platform does allow projects started “by or within a 501(c)(3) organization” to offer tax deductions. Applying for non-profit certification is a lengthy process, however, making it difficult for independent artists or small collectives to register.
Two of Kickstarter’s competitors – RocketHub and IndieGoGo – have decided to embrace the tax-deductible donation model by pairing up with Fractured Atlas. The hope is, by offering tax deductions, more and larger donors will have an incentive to donate. The larger donations will inspire others to contribute smaller sums, pushing the campaigns to meet, and exceed, their goals.
Fractured Atlas executive director Adam Huttler says the relationships came about due to demand by the organization’s members. The partnerships developed when crowdfunding was first emerging as an alternate way of raising money – in June of 2010 with IndieGoGo, and the following year with RocketHub.
Huttler explained how his organization takes advantage of the tools offered by the crowdfunding platforms:
“Fundamentally, it comes down to the fact that we’re exercising the necessary oversight and regulatory compliance to ensure that IRS and state charities regulations are all being followed. The donors can be comfortable in the knowledge that it’s a legitimate charitable contribution to legitimate charitable work that’s being overseen properly.
“The way we’re able to extend this to IndieGoGo and RocketHub is, on a technical level, we basically built an API for our platform,” Huttler continued. “When you donate on IndieGoGo or RocketHub to a Fractured Atlas project, instead of using their regular credit card processing mechanism, behind the scenes it’s processed by us. The money goes into our bank account, and our projects can log on to our website and see in real time the donations that are coming in, who they’re from. They can manage their sponsored fund in real time right through our website. It’s as though IndieGoGo and RocketHub are a sort of front end to our existing fundraising infrastructure.”
The partnership makes sense for Fractured Atlas and its members – artists are able to tap into an alternate fundraising channel to supplement any other grants they may be pursuing. Raising money through crowdfunding can help strengthen the artists’ grant proposals, as it proves that there is an audience interested in the artist’s project.
Yet the partnerships also make sense for the platforms. “We were very interested in the prospect of not only helping their community to raise funds, but also in the quality of projects that come through Fractured Atlas,” explained RocketHub co-founder and COO Jed Cohen. “Their fiscal sponsorship program is very robust, and as a result, the folks who are approved through Fractured Atlas often have very high quality projects and a motivated network of supporters already in place.”
IndieGoGo co-founder Danae Ringelmann attributes part of the success of Fractured Atlas projects on her platform to the close nature of the relationship.
“We partner really well with Fractured Atlas, providing great education to help the projects do well,” she said.
Both platforms offer discounts for artists who go through their platforms. On IndieGoGo, artists are charged a flat six percent fee (including payment processing costs and Fractured Atlas’ cut), regardless of whether they choose the all-or-nothing model or the flexible one, which allows artists to keep whatever money they raise even if they don’t meet their goal. Normally, the platform charges four and nine percent, respectively, though payment-processing fees are added on top of that. RocketHub also charges a flat fee of six percent.
The tax deduction may be an extra incentive for certain individuals to donate, though Cohen, Ringelmann, and Huttler all believe that it only affects those individuals who would donate substantial amounts of money – several hundred or thousand dollars. Some of the artists who have taken advantage of the program support this hypothesis, while others think it played only a small part in motivating larger donors to open up their wallets.
Theodora Boguszewski and her Hoover Dam Collective were able to raise over five thousand dollars for a project, and she believes that offering her parents and their friends a tax-deductible donation option “made it more appealing for them to donate to us.”
Kristin Russo, who raised nearly $22,000 for her company Everyone Is Gay, does not believe that offering tax deductions played a big part in the fundraising effort.
“Our main viewership is aged 18 to 24,” she said. “So for us, I don’t think it was huge that the donations were tax-deductible. Probably 75 or 80 percent of the donations were on the smaller side. I think we maybe we would have lost one or two of the larger donations, but knowing now the contributors who gave the larger donations, I think most of them would have given to us either way.”
While the effect of tax-deductible donations may be up for debate (though having the option can’t hurt) it seems that crowdfunding art is becoming an increasingly important part of the current fundraising landscape.
Huttler said that Fractured Atlas-backed projects have raised $2.75 million on crowdfunding platforms. Over the same period of time, the organization raised just under $21 million total, meaning crowdfunding was responsible for roughly 13 percent of all money the organization raised.
This amount cannot yet compete with donations of large philanthropic charities, but it is not an insignificant sum, and it is likely to grow as crowdfunding enters the mainstream. For cash-strapped artists and collectives, this can only mean good news.