When and how to begin funding your community
Most virtual communities operate without any structured funding. They are powered by the unpaid work of volunteer members. As a community builder who is focused on impact, you may not have a financial model in mind. In the early stages of your community, you may be more focused on growing your membership. But as the community matures and you and your team members continue to invest a lot of time and energy, the need to be compensated for your efforts will emerge.
All communities are different.
Each community must select a finance model that suits their individual needs. Generally speaking, the earlier you begin to pursue funding, the better.
For communities that operate with a budget, finding a sustainable business model can be difficult. If your community is connected to an organisation, foundation, or institution, it may not be immediately urgent to think about financing. This is generally a very favourable situation, especially in the early stages of a community. Nevertheless, finding financing may become relevant when your community is encouraged to become financially independent from the organisation to which it is connected to. The Global Social Entrepreneurship Network, for example, was funded by UnLtd UK for many years however, the community eventually began discussing other funding sources. In the end, they selected a mixed funding model that combined membership fees with core funding from the foundation.
In many cases, conversations about finances are triggered by sources outside the community. For example, when a community starts gathering and organising their own events, creating content, doing projects, and has a good reputation, outside organisations may ask them to provide expertise and services as paid consultants. This is a turning point for virtual communities that can generate important questions like:
- How will the money be divided?
- What community costs will these projects cover?
- Who is included in consulting projects?
It can be a turning point for a community to decide to develop in this direction. The community (or a part of it) might become more professionalised. This can create tension. Paid consulting opportunities, if managed well, can help the community to grow. But they can also create conflict if improperly managed.
During this time it is important to review and consider the guiding elements that ground your community:
Decision-making processes and conflict resolution mechanisms
Are your current conflict resolution guidelines stable enough? Create a pathway for dealing with discussions and tensions that arise so they can be discussed and solved.
Who is responsible for finances and project management, and who else has access to information about those activities?
DNA of the community
What elements of your community’s purpose, values, and culture might change? What level of transparency do you have with sensitive topics?
Will this affect your community’s way of creating impact on people and the planet?
Key members of the community should go on a journey together to discuss the effects of the decision and create much-needed guideline infrastructures and change processes.
Once communities decide to proceed with a financing model they must experiment with various revenue streams to determine which one suits them best.
Generally speaking, there are
two types of revenue streams.
- Internal revenue streams:
- Membership fees
- Internal crowd-funding
- External revenue streams:
- Revenue generated through community assets (consulting, sharing intelligence and data from the community)
- Marketing-based partnerships (sponsorships, advertisement)
- Charity-based partnerships (grants, fellowships)
- Other revenue unrelated to the community
Many communities are financed almost exclusively by internal membership contributions because it is an easier and more natural route to funding.
Internal revenue can be more stable over time than external revenue. It also has the added benefit of making members more aware of the value they receive from membership in the community.
Raising membership fees is a direct measure of success and a metric for how much the virtual community experience is worth to members. If members are not willing to pay membership fees, it’s a clear indicator that the community is not creating the right kind of value.
An example from the League of Intrapreneurs website
The League has a fee for membership to enable us to keep our focus where it belongs: on you, the intrapreneur. We strive to keep our fees to a minimum to ensure no intrapreneur is left behind. We have two payment options to join the League:
Option #1: An upfront payment of $500USD to join for one year.
Option #2: 12 monthly installments to join for one year (totalling $600USD).
if you choose internal funding, experiment with an internal financing model and co-create it openly with your members. If the community is built on trust, being transparent and open about why you want to create revenue is critical.
When sourcing your funding internally, think about:
- Possible membership packages.
- Services or experience that members willing to support financially.
Two warnings about membership fees
- The revenue model is often connected to questions of equality. It can demonstrate how serious a community is about its commitment to diversity. Does the community want to exclude people who cannot afford membership fees? Are there ways the community supports people who cannot afford membership fees, for example, through patrons or fellowships?
- Fees can be a measure of success but do not view them as merchandised services. It can be dangerous if members expect a specific service in return for fees paid. Your costs for satisfying individual member expectations may not make financial sense for the community. Additionally, core members who want to support the community because they believe in its mission and impact may not need to pay a fee. They may be content to contribute to the sustainability of a community that they care about.
If you select a membership fee finance model, remember that clarity and simplicity are critical to success. It should be noted that many communities are increasingly taking a “pay as much as you want” approach to membership fees. This approach addresses issues of inequality and provides direct feedback about how much people value their memberships.
If your community is open-source and you do not have a legal entity, Open Collective offers a solution for internal funding. Open Collective is an online funding platform for open and transparent communities. It provides the tools needed to raise finances and share financial information transparently. It can be used to create contributor tiers, and budget goals are connected to activities; expenses can be managed with full transparency and open-source data.
Cobudget is a simple tool based on a “buckets” concept. Each bucket represents budget lines or mini-projects. The tool makes it easy for groups to crowdsource ideas that contribute to its mission and then fund those ideas through members.
OuiShare uses Cobudget to collectively fund ideas including:
- Community activities, shared resources, and infrastructure.
- Content production and publicly available events.
- Early-stage projects and prototypes that develop their work and organisation.
External revenue streams are rooted in community assets, partnerships, or sponsorship.
Fundraising activities include consulting, sharing knowledge, securing of partnerships, or proposal writing.
OuiShare draws from a variety of funding sources to cover the costs of operational and strategic activities. Those sources include:
- Sponsorships and ticket sales (mostly for events).
- Public grants and subsidies.
- Global partnerships (forward-looking organisations that support OuiShare on an annual basis).
- Revenue from projects.
- Donations from individuals.
Financial models will always be a work in progress
OuiShare Fest, their flagship project until 2017, had been the community’s biggest source of revenue since the very beginning. All of their operational activities such as accounting and communications were subsidised through OuiShare Fest and global partnerships. After OuiShare Fest ended in 2018, the main sources of revenue have shifted and a new funding solution was found in numerous small projects.
Within Enspiral a few ventures emerged seeking to share what finance models worked for their community. Members weave their livelihoods together to support themselves and make the greatest positive impact possible.
Loomio, for example, emerged as a tool that served the community. Eventually, it was clear that many organisations and communities would benefit from a professional decision-making tool. Today, Loomio is a venture unto itself used by dozens of virtual communities worldwide.
Your ability to generate external revenue depends on the brand you created and your community’s credibility. You must also identify funding streams that align with your community’s purpose and values. Reflect regularly to ensure that the community does not focus too much on the hunt for money.
Dealing with finances
Before deciding on the kind of revenue you want to create, consider a few key elements of your financial model.
Draft an agreement document that details how financial decisions are made by the community or a core team. Make the document accessible to all members. Enspiral’s agreement, for example, covers their types of funds and explains their incoming and outgoing funds. See their agreement here.
For-profit versus non-profit
The most natural financial structure for a community is as a non-profit entity. However, with the rise of social entrepreneurship, an increasing number of community builders are exploring for-profit models. Our experience and observations have shown that for-profit structures can be dangerous if expectations are not aligned or if they are improperly managed. In the end, member trust is the most valuable asset the community has and a for-profit model can endanger that trust in the long-term. Some for-profit groups may consider making their community a protected non-profit within their larger organisation to preserve the trust of the members.
How to organise finances
It is necessary to track incoming and outgoing money. You must also make sure bills are paid and financial reports are shared. It is typical for communities to have one person or a small group who are responsible for community finances. Make a conscious decision to build a transparent recognition system into all financial roles. An alternative might be a rotating role (with capacity building on finances). Another option is to distribute some of these tasks among your group.
As a virtual community, there are resources your community will create together (called commoning). These resources, or commons, represent your community’s knowledge assets, operations, infrastructure, and branding elements. Commons are shared by and benefit members. It is everyone’s responsibility to maintain them. But there is often a cost associated with the maintenance of co-creation relationships and of the commons themselves.
Following the OuiShare example, their commons are an extensive network of contacts including:
- OuiShare e-mail addresses
- Knowledge of organisational transformation
- Participatory events organisation
- Repository of projects
- Their brand
- Collaborative tools
Each item is linked to costs such as web and email hosting, tool fees, and resources that require a time-investment in projects and production. These items, though maintained by the whole community, do have a cost. While these may be fixed costs or costs for running your community, you could reframe them as commons to achieve a more collaborative model. This shift allows everyone involved in the governance of the community to become accountable for maintaining and developing commons.
You will be managing concepts like fairness, equity, and value recognition as well as every community member’s relationship with money. Because we come from societies where money is not openly discussed, it can to provide contributing community members with financial literacy training.
These articles will help you dive deeper into the emotional meaning of money in our Western society:
Millionaires and the surprising truth about their money worries
Loving unfairness at work
A tool like Cobudget (see case) can help you practice smooth collaborative finances and learn about the effects these have on your community’s culture.
Financial questions to consider (source Community Canva):
- How is the community financed?
- How does the community generate revenue?
- Non-profit versus for-profit?
- Does the community have a profit motive?
- Does the community rely on revenue from its members (internal), or other sources (external)?
- How can you organise finances in the community?
- How do you build capacity around this topic?
With more than 233 community members, the League of Intrapreneurs is continuously working on ensuring that engagement and participation levels in the community stay high. The community’s shared values focus on transparency, co-ownership, and distributed decision-making. Co-budgeting is useful for creating a participatory culture around financial governance and operationalising these values within the community