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The truth about crowdfunding - it can lose your campaign valuable funds

23rd November 2016 Print

If you’re raising money for a personal cause, setting up a crowdfunding appeal seems an attractive option – set a target, add a photo and tell your story. Share your page through social media and bang, the money starts rolling in.

It’s an increasingly popular option and multiple sites offer this apparently simple solution to fundraising. Why spend time selling raffle tickets, organising charity walks and persuading people to bid in your silent auction when a simple ‘share’ will suffice?

But the reality is less rosy for fundraisers and donors – both could be losing out.

Gill Gibb is CEO of the specialist children’s charity, Tree of Hope. They support families of children with complex needs to help them raise money for treatments and therapies that are not freely available on the NHS. The needs can be as varied as an £80,000 operation for a child with cerebral palsy, weekly sessions in spinal cord rehabilitation for someone who is paralysed and stem cell therapy to reduce debilitating seizures.

“In effect, we offer a ‘charity in a box’ package – all the benefits of a registered charity, none of the drawbacks of dealing with the legalities of setting up a charity of your own. Fundraising through a charity such as ours means that Gift Aid is claimed on individual qualifying donations, an instant 25% boost.

“Increasingly, however, Tree of Hope sees families turning to crowdfunding as part of their campaign. Parents of children who need constant care and attention have precious little spare time to organise fundraising and it’s no surprise they are attracted by the speed and simplicity of a crowdfunding page.

“But the reality is that, for every £100 raised through crowdfunding, page owners lose around £6. Some sites charge a set up fee, most have debit or credit card charges. A family faced with the overwhelming task of raising £80,000 for an operation that gives their child the one chance they have of walking unaided will have to raise the full amount without the added benefit of Gift Aid which can cover fees and still leave enough to give a much needed boost to the campaign.”

And what about donors? A registered charity guarantees through detailed auditing and regulation by the Charity Commission that donations will be put to use for the purposes they were originally intended.

But go, for example, to JustGiving’s crowdfunding page and they make it clear that the site cannot guarantee donations will be used correctly.

If the JustGiving crowdfunding page has been set up by a registered charity, then donors should be reassured. But, if it is an individual page owner, then how can you tell if the cause really exists? Or that the money will be used for the reason given?

Of course, many crowdfunders know the page owner personally and whether or not they can be trusted. But the holy grail of crowdfunding is for a campaign to go viral and if you receive a link via a friend of a friend of a friend, how can you be so sure the cause is legitimate?

Gill says her other concern is over regulation.

“While the Financial Conduct Authority regulates some crowdfunding, it does not regulate crowdfunding for donations to a cause. Another reason for donors to be wary.

“I’m not in the way of progress. Some amazing work has been done by crowdfunding sites with estimates of money raised running into millions of pounds.

“But both fundraisers and donors need to be aware of the potential pitfalls.”

To find out more about the work of Tree of Hope, go to