Fundraising falling? Then set up a start-up
As income from traditional fundraising methods starts to come under strain, a three-year project has been exploring new models of income generation for charities. Rebecca Cooney looks at the results so far.
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Three years ago, the Good Innovation consultancy initiated a project with a simple but radical mission: to discover new ways to bring money into charities.
At the time, a small group of fundraisers – the team at Good Innovation among them – were beginning to suspect that difficult times lay ahead and that fundraising income growth would never bounce back to the levels seen before the 2015 scandals.
In the face of falling donations and changing consumer habits, these fundraisers believed charities desperately needed to change how they were funded. The idea behind the Good Innovation project, Good Lab, is that such radical innovation can’t be achieved by one organisation. Instead, it brought together 12 large UK charities, including the British Heart Foundation, the British Red Cross, the NSPCC, the RSPCA, Oxfam and Save the Children.
Good Lab moved from generating ideas for new income streams to prototyping them and supporting them to get off the ground. Three years later it has ended up with three spin-off ventures and a jointly-owned fundraising agency. It also produced a report documenting its progress, with the tantalising title New Ways to Grow Income.
As evidence mounts that non-legacy donations are stalling and that fears about the future of fundraising might prove well-founded, what lessons can other charities take from Good Lab’s experiences?
The first thing charities can do is to work out which of their assets can be monetised. And these, says Kevin Waudby, co-founder of Good Innovation, might be right under a charity’s nose. "There are billions of pounds tied up in the assets, skills, knowledge and, really importantly, the services that charities provide," he says. "The first step towards unleashing that commercial money is knowing what your assets are and that they have a market value. Then you can develop them into commercial propositions."
Janine Chandler, partner at Good Innovation, says charities shouldn’t look at this as "selling the soul of the charity", but a way of funding vital free services out of what the charity is good at. She points to the British Red Cross selling first-aid training to private companies as one example.
But to make the most of these assets, she says, charities need to fundamentally shift their internal behaviour and seek to emulate small start-up companies. What this means in practice, Chandler says, is that charities need to be "really happy with uncertainty, embracing it" and be prepared to change course quickly if things aren’t working.
"What you start with has to evolve and pivot as you do things," she says. "You have to give the people working on it permission to go off and do things without having to consult a hundred stakeholders first." According to Waudby, this could also have the result of devolving decisions and giving charity staff enough freedom to unleash entrepreneurial skills and creativity they already possess, but do not use. "There are people in the sector who have the talents for these ventures, but in the context of the bureaucracies and the decision-making process it doesn’t help them fulfil their potential," he says.
Both acknowledge that, for charities, such a huge shift in behaviour and the structural changes required might not be practical. This leaves charities with two options. First, to work with existing start-ups: as the commercial sector increasingly prioritises incorporating social good into its business model, Chandler says, many young businesses want to work with charitiesIf that doesn’t work, there’s the option on which Good Lab ultimately ended up focusing most of its attention: encouraging charities to set up their own social enterprises and spin them out as separate entities that pass their profits back to the charities but are able to operate outside of their structures, changing course when needed.
Good Labs has launched three such spinoffs (see Case study, right) and a fundraising agency, Good Giving, which is jointly owned by the RSPCA, WaterAid, the RNIB, the BRC, the Royal British Legion and the BHF, and will focus on reinventing payroll giving. Good Giving will be launched later in the year.
One of the advantages, Chandler says, is the type of people you get to recruit: "We’ve got people who’ve come in from PwC and John Lewis, people you might not hire for a charity. You incentivise them in different ways, ways you wouldn’t feel comfortable doing within a charity, and you allow them permission to make it theirs."
And, Chandler says, it frees the start-up to apply for funding and support that charities would never attract. Some Good Lab programmes have benefited from venture-capitalist funding or help from business accelerator programmes run by Facebook and Cambridge University.
The combined Good Lab portfolio is forecast to be worth £250m within five years, with the potential to be generating more than £200m annually in 10 years.
Waudby says the clear message from Good Lab has been the need for charities to accept that radical change to the fundraising model is needed, and to collaborate, both within and outside the sector.
"The rate of change we’re seeing in the rest of society is exponential, but in the charity sector change is very slow," he says. "If we don’t speed it up, the charity sector will be shaped by events, and it won’t be the sculptor of its own future."
Case study: OnHand helps bring in money
The Good Lab project has created three start-ups, all of which generate income for charity and are 15 per cent owned by the Good Lab member charities.
One of them, OnHand, matches elderly people in need of occasional assistance with people nearby who can help, in return for donations.
Clara Maguire, head of growth and investment at Good Innovation, says: "You get a text saying there’s an elderly person nearby who needs a hand."
Of the donation, 80 per cent goes to charity; 20 per cent is platform revenue. The charities also own the intellectual property licence for the product.
As well as generating funds, OnHand also does a social good because, as Maguire says, many people go into care homes prematurely because there’s no one to help with simple tasks.
In the four months after it was launched in 2019, OnHand brought in £2,488 for charity, growing 100 per cent month on month.
All the start-ups are led by independent "founders", who bring focus and passion to drive the company forward. On Hands’ founder, Sanjay Lobo, is ex-marketing vice president at Vistaprint.
OnHand has the potential to deliver £65m in donations to the sector over the next five years, according to Good Lab, and could generate £19m a year if it achieves just a 2 per cent share of the £3.79bn-a-year in-home care market.