Looking to Turn a Profit? One Good Cause at a Time

Tuesday, August 23, 2011

A wave of entrepreneurs are trying to turn a profit by helping good causes find donors to back them.

The tool they use is called niche crowd-funding. Entrepreneurs set up websites for very specific types of charitable projects, like supporting small farmers in developing nations or helping victims of natural disasters. People who need backers can put fund-raising pitches on the site-and the entrepreneurs take a cut of whatever money they raise.

The sums involved are usually modest. Users generally donate about $20 to $100, and most projects don’t have big funding goals. Still, many of the site owners aren’t looking for a big payoff-they see themselves as social entrepreneurs whose first priority is helping others.

And some site owners say that over time their efforts can bring reasonable returns. “The social-business model isn’t meant to make a lot of money,” says Michael J. Greene, founder of WorldPennyJar.com, which focuses on natural-disaster relief. “But it all adds up.”

For instance, visitors to GreenFunder.com, a Venice, Calif., site that launched in March, recently gave more than $5,000 to Forè Bamboo-a group of Haitian farmers who want to help their countrymen grow bamboo as an earthquake-resistant building material. The site collected a 5% service fee.

Forè Bamboo recently raised more than $5,000 on the niche crowd-funding site GreenFunder.com. The group used the money to help their fellow Haitians grow bamboo as an earthquake-resistant building material-and GreenFunder collected 5% as a fee.

“We’re already really close to recouping our start-up costs, which were very low,” says Molly Rasmussen, who pooled her savings with a partner to get the site up and running. As with other entrepreneurs in the field, she says, their goal was to do some good, and make money at the same time.

Helping people raise funds for relatively small projects isn’t an entirely new idea. A number of popular sites-such as Kickstarter and IndieGoGo-already let people in need of money connect with potential backers.

But those sites aren’t devoted to single themes; people with all sorts of projects in need of backers can put up requests for money. The owners of the niche sites are betting that people want smaller, more focused venues where they don’t have to compete for attention with thousands of unrelated projects.

Crowdsourcing.org, a Dallas-based site that tracks the crowd-funding industry, has identified more than 400 websites around the world geared toward raising cash for a variety of needs and causes-up from just a handful of sites a decade ago.

The sites are relatively cheap to set up; some established crowd-funding operations have started licensing their online platforms for as little as $17,500, says Carl Esposti, founder of Crowdsourcing.org.

Source: The Wall Street Journal (link opens in a new window)