Crowdfunding

We take a donation-based crowdfunding approach for our development fund. Let's explore the reasons why this approach is necessary. We'll start with some definitions, then look at voluntary payments, value creation, and mission alignment.

Crowdfunding

The practice of raising funds for a project by obtaining contributions from multiple contributors. Common types include donation, reward, and equity-based crowdfunding.

Donation

The voluntary transfer of money, goods, or services to a recipient without any legal requirement to give anything in return. Contributors trust that their donations will be used for their intended purpose.

Not-for-profit

An organisation whose primary purpose is not to make profits for distribution to owners or shareholders; any surplus is reinvested into its mission. In the UK, there are three main types of not-for-profit organisations: charities, Community Interest Companies (CICs), and non-charity companies limited by guarantee (CLGs).

Non-charity CLG

This project uses a CLG. All funds go into the public benefit mission. Funds are used for salaries, equipment, brand creation, marketing, legal, fundraising, and other expenses. Not-for-profits can obtain tax-exempt status if their activities serve the public benefit.

Public benefit

A legal and practical concept used in UK charity and not-for-profit law. It refers to activities that benefit the general public or a sufficient section of it, rather than private individuals or specific groups for personal gain.

This project has the potential to offer significant global public benefit by providing free open source software (OSS) that is available to anyone, anywhere, without restriction, whilst also providing educational value through access to its code.

Free access

The source code is freely available under the MIT license. Charging for it is possible, but few people would pay since it can be easily accessed and redistributed for free. Therefore, to fund this project, we must self-fund and/or receive voluntary payments.

Voluntary payments

Much software is paid for by making mandatory payments, ie subscription, license, or usage-based fees. OSS is typically funded (partially or wholly) through volunteer payments – donors choose how much and when to pay.

Value-to-Cost Ratio

The Value-to-Cost Ratio (VCR) is a metric used to assess the value received relative to the costs incurred in obtaining a product, service, or investment.

Value

The monetary value of the benefit or outcome you are receiving. Often assessed in relation to an alternative solution, eg your current solution. Value can be provided in a number of ways. For example:

• Functionality
• Efficiency
• User experience
• Customer experience
• Revenue
• Distribution
• Lower development costs
• Lower maintenance costs
• Lower training costs
• Lower license fees
• Lower subscription fees

Cost

The monetary expenditure or investment required to achieve that benefit. Example costs:

• Subscription fees
• License fees
• Usage-based fees
• Voluntary payments
• Hosting costs
• Maintenance costs
• Updates
• Training
• Data migration
• Admin costs
• Development costs
• IT support

Whether payments are mandatory or voluntary is irrelevant. What matters is the VCR – how much value you receive relative to the cost.

Example

Here's an example for a commerce business. Five software options. Each evaluated for costs and value provided. You could assess the value over varying time frames, eg 1 year, 5 years, 10 years. For the example below, we assess the costs and value provided over 5 years.

Mission alignment

Crowdfunding helps ensure the project's mission remains aligned, prioritising the ecosystem's and users' needs rather than investors'. This approach can lead to the product offering a much higher Value-to-Cost Ratio (VCR).

We can build a community of highly-engaged supporters who can provide feedback, influence the roadmap, participate in usability testing, contribute to development, and offer input for commercial offerings down the line.