Which funding approach is right for me?
Your brilliant idea for an arts project is ready to go. Only problem is, you need a bit of cash to get it off the ground. There are lots of options out there, but which is right for you?
The choices are many and can be confusing. Here’s a rough guide to help you determine what sort of funding might suit your project.
Where your creative project aligns with the interests of a business, you might think about sponsorship. The trick here is that the benefit will need to be mutual.
For a business, this usually means sponsoring projects which generate sales or positive PR, or which align with the personal interests of the business owner. Cash sponsorship is great, but don’t discount in-kind support or donations of goods, as long as they’re beneficial in completing your project.
A project might be suited to sponsorship if it involves something a business is already interested in. If your project takes place in a town where the business is active or wants to be active. If it tackles an issue which is part of company’s core business; for instance a project about mental health might be of interest to a health insurance provider.
Projects which deal with controversial or political issues might find it harder to attract support from a business.
Sponsorship comes with responsibilities. Sponsors need to be looked after and your relationship with them nurtured. Both parties need to be sure that their association reflects positively on both of them, not just for this project but for all future potential collaborations.
Suited to projects which align with a business’s goals and/or values.
Pros: Access to resources – cash and in-kind -which can help get your project off the ground.
Cons: The need to nurture your relationships sponsors and ensure arrangements works for both parties.
Factsheet: Sponsorship 101
Sites like Pozible and Kickstarter have given millions of people a way to generate funds by mobilising their online communities. So Crowdfunding is a good method for people who already have a sizable internet following. It also suits projects which are easily divided into tiers of rewards, which you can use to generate pledges of difference sizes.
First time crowdfunders should consider a modest target for their first campaign. You should also be aware that crowdfunding platforms charge different amounts depending on whether your campaign results in you hitting the mark or not. It’s a calculated risk you need to be comfortable with, so it pays to do your homework and to be confident you can hit your target.
You also need to think about how effectively you can stage your campaign. How much promotional effort will be needed to raise the money you want? Because this is an increasingly crowded market, unusual, attention grabbing projects have a better chance of getting funding.
Here’s a quick exercise: estimate the total number of people in your extended network. Then assume that 10% of people donate an average of $20. Will this be enough to reach your goal? How much additional dough will you need to reach your target?
Suited to projects with modest fundraising targets, which attract attention and can mobilise an existing online community.
Pros: Online platforms makes reaching people easy.
Cons: You still need to convince them to pledge money, which needs planning and a marketing strategy. Plus you need to consider the fees charged by the crowdfunding platform.
Factsheet: The low-down on crowdfunding
3. Individual donations
The crowdfunding model offers supporters various rewards in return for their money. Donations offer no such rewards, but they can still be an effective way of raising funds.
Attracting donations works well for projects which have a social outcome as well as a creative one. People will open their wallets for a good cause, so if your arts project aligns to one, donations could be the way to go.
You can run a donations drive which aims to generate lots of small donations from all and sundry, although crowdfunding has largely replaced that model. But it hasn’t yet replicated the model of attracting sizable donations from high net worth individuals.
This method will work best if you have a network of contacts who are already admirers of your work and can connect you with others. Relationship building skills are essential here, but you may not need a large number of substantial donors to get your project off the ground.
The more tangible the outcome the better: the purchase of a musical instrument, a scholarship for a young artists, or a funding a residency are examples of specific requests donors can easily understand and get behind.
You may also need a connection to a deductible gift recipient (DGR) endorsed organisation in order to offer a tax deduction. Our fundraising platform for artists and arts organisations, the Australian Cultural Fund, allows individuals and organisations without DGR status to offer tax deductibility to their donors.
Suited to projects with short term tangible results and those which progress a social cause.
Pros: Small number of major donors can make a project happen quickly and without too many caveats.
Cons: High net worth individuals can be hard to find and relationships can take time to build. Need to ensure you can offer a tax deduction.
4. Philanthropic foundations
Philanthropic trusts and foundations are entities set up to distribute funds for charitable purposes. They are widely diverse in purpose, amounts they give out and how they operate. They fund a range of different causes – health, education, sport, research or social issues.
Because of the diverse range of foundations, it’s important to find one with aims and values that align with your project. You may well find yourself having to adjust your project to ensure that it advances the aims of the foundation.
While they can offer significant funds in support of a project, their application processes can be onerous and their timelines don’t always match with your plans. Competition for funds is always high.
To whom a trust or foundation can give money is governed by strict guidelines. If your project doesn’t align with its aims and comply with its guidelines, the chance of it getting funding is greatly reduced. Again, you may also need a connection to a deductible gift recipient (DGR) endorsed organisation in order to offer a tax deduction.
You may want to consider using the Australian Cultural Fund, our fundraising platform that allows individuals and organisations without DGR status to offer tax deductibility to their donors.
Suited to projects with long lead times, required to research the most appropriate foundation and prepare an application. Also, projects which match the focus of the foundation.
Pros: Can offer significant financial support.
Cons: Can be difficult to find a foundation which offers a good match for your project and is open at the right times. Application and acquittal requirements can be considerable.
Factsheet: How to approach philanthropic foundations
5. Government grants
All federal, state and local government organisations have programs which support arts projects. Every jurisdiction has different funding priorities, so it’s important to research grant rounds and identify who’s eligible to apply.
Competition for government funding is high and so only the very best applications tend to be successful; this means that the artistic quality of your project is always closely scrutinised.
In addition, application and acquittal processes can be highly detailed. On the other hand, funding from a government organisation can have positive reputational benefits as well as offering significant financial support.
Organisational funding from arts funding bodies is difficult for new entrants to achieve, as many well established organisations continue to be competitive in funding rounds.
Project funding can be a way in, for both new organisations and individual artists. Ongoing communication with funding administrators is useful to know what opportunities are available and when to apply.
Suited to arts and screen projects which can demonstrate high artistic quality.
Pros: Can offer significant financial support.
Cons: Highly competitive, with onerous application and acquittal procedures.
6. Generating your own revenue
If you make a product worth watching, reading, listening to or consuming in any other way, then what about just selling it? If there’s a market for your product, selling can be the fastest way to get money for your art.
This option comes with few strings attached; money raised from government or philanthropic sources will need to be reported on and its impact assessed. Generating your own funds means you can do as you please.
Think about whether you have a viable commercial product on your hands – something people want to buy and that will make you a profit. If so, get down to the local market, open up an online store or start getting a few gigs. If something can be sold, you should give it a go.
Online platforms such as Patreon offer a way of selling creative work on a regular basis to your dedicated supporters. It’s particularly useful for creatives whose work can be delivered digitally, such as writers, musicians and filmmakers. It can also work as a crowdfunding platform (see below).
Suited to products or services for which a customer base exists, and which can be easily delivered to those customers.
Pros: Complete control over the funds raised.
Cons: Requires comfort with selling and a business model which generates a profit.
Microfinance products – where loans for small amounts provided at low or no interest rates – have emerged in a number of different sectors in recent years, including the arts.
For many, these are an attractive option for funding a range of projects, but are particularly useful for purchasing capital items, from which further revenue can be generated.
Online platforms for microfinance such as Kiva.org allow for a range of community projects to seek support from a range of borrowers. Other microfinance programs, like goodshepherdmicrofinance.org.au, are run by sole operators. Many financial institutions will also provide small and low cost loan options, which will have a variety of qualifying criteria.
The important point here is that no matter how small the loan or the repayments, you are still responsible for the repayment of the debt. If you’re considering this as an option, you need to be confident that you can meet the repayments and be aware of the consequences of defaulting on the loan. Microfinance is still a credit arrangement when all is said and done.
Suited to small scale projects, including the purchase of capital items which generate further revenue.
Pros: Can be a quick and effective way of purchasing assets and accelerating projects.
Cons: Loans and interest – although small amounts – must be paid back.