Kickstarter Lesson #194: Charities, Nonprofits, and Kickstarter

18 July 2016 | 14 Comments

Two years ago, Reading Rainbow raised over $5 million on Kickstarter to build out its app. A core part of its message was, in their words, “No matter how much we raise, we promise that every dollar you pledge will bring Reading Rainbow to more platforms, and provide it for free in more classrooms.”

I was a backer, and I was happy to see Reading Rainbow do so well. But the project left me a little confused about Kickstarter’s guidelines regarding charitable giving. Thousands of backers donated money to help kids in need learn to read.

Kickstarter has a rule about charitable giving: “Our rules only prohibit offering funds raised directly through Kickstarter to charity. However, you are welcome to include information about donating future proceeds (raised outside of Kickstarter).”

That rule seems full of gray areas, so I decided to chat with Kickstarter to get the details about what creators can or cannot do regarding charitable projects. Here’s what they said:

“It’s acceptable to donate a reward or rewards to charity, and it’s also acceptable to donate future profits (outside of Kickstarter) to charity, but it’s not okay to donate any amount of actual funds raised on Kickstarter to charity. The same goes for running contests around donating to charities, since we do not permit contests as well.

In addition, sometimes we do have charitable organizations and non-profits run Kickstarter projects. This is totally fine, as long as the projects fall within our rules and create something to share with others.

Kickstarter is more about the creation of something new than a capital expense (like a new chapel for a church), as long as there were tangible rewards involved and the projects was within our rules, it could potentially be acceptable on Kickstarter.”

I sent Kickstarter some examples (from the perspective of creators), and here’s what is allowed and not allowed:

Allowed:

  • For every item sold on Kickstarter, we’ll donate an item to a nonprofit.
  • If we reach this stretch goal, we’ll give 50 rewards to a charity.
  • Our organization has supported and continues to support a charity (but we’re not specifically saying that Kickstarter funds are going to the charity).
  • Our organization is a charity, but we’re raising money to make a thing.

Not Allowed:

  • 10% of all funds raised for this Kickstarter will be donated to our favorite charity.
  • All proceeds of a specific reward level go to a charity.

That seems pretty clear to me.

The last thing to note is that Kickstarter doesn’t catch everything. They wouldn’t confirm this as I questioned them about charities, but I’m pretty sure they rely heavily on users to red flag projects that violate their guidelines. So you might see a project that doesn’t follow these rules, but unless someone tells Kickstarter about it, they probably don’t know.

So if you’re in doubt about whether or not your project meets those guidelines, ask Kickstarter up front before you launch. That way you won’t be caught off guard 2 days into your project if Kickstarter suddenly realizes that your project isn’t following the rules.

 

 

14 Comments on “Kickstarter Lesson #194: Charities, Nonprofits, and Kickstarter

  1. This is great information. (Wish I had it a few days back.) It explains a lot.

    The last “not allowed” point is confusing though.
    They said “Church can build a chapel” but “Charities can’t make things”.
    Did I miss something there? Is the difference that Churches aren’t “Charities” per-say, so a “Charity” can’t run a Kickstarter, but other “Non-profits” can?

    1. I’m sorry, John, that bullet point was meant to be in the section above it. I’ve moved it to the proper place. Kickstarter confirmed that charities can run Kickstarter campaigns as long as they’re making something to share with others.

  2. Hmm… So, my company is a B-Corp and one of the things that we legally put in our articles of incorporation with the State of Oregon is that we will donate 10% of our net profit to organizations that help victims of human trafficking.

    When we launch our kickstarter, eventually I plan to have the reward levels be fairly similar to what you recommend in your blogs, and what other people do: have them be about the actual product and getting a physical game into the hands of the backers.

    That said, I wonder if I can mention that we will give 10% of our net profit to charities? It isn’t specific to the kickstarter only, and it won’t be “reward” or “stretch” level. But it is something that I want people to know about, that if we do make any profit from the kickstarter, from selling on our website, from other random income, 10% will go to a good cause.

    What do you think? I’ll definitely check with Kickstarter when I submit, but I’m curious to hear your thoughts about this, especially because I’m really passionate about businesses becoming B-Corps. And my example seems to be somewhat in between the 2 categories that you gave!

    1. Corey: Thanks for your comment. I’m pretty sure that you won’t be able to write about that 10% on the Kickstarter page. It’s certainly worth checking with Kickstarter, but it’s consistent with what they wrote to me (as quoted in this entry).

      1. I definitely will, and thanks for your response. And just to clarify, it would be 10% of the company’s net profit at the end of the fiscal year, not “10% of all funds raised for this Kickstarter”.

        1. I ran a charity board game Kickstarter recently (https://www.kickstarter.com/projects/382508138/shenanigans-the-musical/description) for a charity and wrote to KS before starting it to get confirmation on what I could and couldn’t do. I got similar responses to Jamey, charity work is okay but you can’t directly donate KS funds to charity.

          I get the impression that “We’ll donate 10% of profits from KS to charity” would not be okay but “We’ll use profits from this Kickstarter to print extra games and will use those to raise funds for charity” would be.

          The language I used was to say in vague terms that supporting this KS was supporting a charity on the main page and clear it up in the FAQ as follows:

          “The People’s Orchestra is a registered UK charity (charity no.1151321). However while we are a charity, this is not a charity project.

          First and foremost this is a games project that’s offering a great game at exceptional value. The project is being run by a charity and any profits the game later generates will feed back into that charity, but ultimately we’re offering pledge incentives, not soliciting donations. This project is about creating, manufacturing and distributing an excellent game :)

          In short: Supporting the game helps our charity work because we can print more copies as merchandise for our charity performances, but your pledge is not a charity donation. The funding goal and pledge levels are set purely on what it’ll take to develop, manufacture and ship the game.”

  3. Hi Jamey!

    I’m writing for one ‘simple’ reason; I have no idea what would be the most appropriate avenue for funding my new endeavor.

    The endeavor is one where I’ve helped bring a few other individuals together to found a non-profit organization organization “dedicated to the promotion of live entertainment through its professional productions, development of new works, bold educational programs, and the unique resources it makes available to all levels of entertainers. The organization is committed to integrating new technologies to help expose more of our society to the power of live theatre.” That’s not the final draft of that, for the record!

    We are a COMPLETELY new organization. Officially recognized by the State on 9/12, and 501(c)3 looking us in the face as we speak. I’ve got a Freelancer.com campaign running for a logo, and a “very” temporary landing page.

    My professional background is appropriate for the non-profit and our immediate focuses. You’ll understand that for somewhat obvious reasons, I’m opting to not spell all of that out, if for no other reason than to avoid giving Tolstoy a run for his money,

    We’ll just say the company aims to (eventually) have a hand in many of the disparate parts of our industry, bringing many under one roof, and – hopefully – those efforts will result in greater availability and exposure to professional live works at affordable prices for local audiences, and even later, building on top of the existing regional theatre structure in order to move productions around on circuits similar to those from the hayday of Vaudeville. It is our hope to negotiate with the parties involved in order to record the productions and make them available for streaming, but while that is something we want to get to from the beginning, it’s not the focus of this input request. From the get-go, we have three major things in focus: Education, Production, and, oh yeah we want to build a theatre facility.

    We’ll just be quick with it here, but just know that this facility is supposed to be a 4-theatre complex, with total seating right around 1,000 (theatre sizes of 399, 299, 199, and 99 seats. It will also house an educational wing for that portion of our organization, as well as space to put together the things we ourselves produce, as opposed to any programming for those spaces.

    Those are some major goals. Due to the nature of theatre, we founded the non-profit, and our initial thinking is that the non-profit will own separate for-profit companies that will own and operate the theatre, and a couple others for similar areas, allowing the organization to mitigate risk wherever possible. Thoughts on that are also appreciated, but the main area of my question(s) at this time deal with raising money for the facility. Because yes, one might say that we can begin doing our own productions and build up to something that might be possible once that has had gotten traction and finances have been accumulating, but in our area, which is in the suburbs outside of a metro area, it’s important from the start that these initiatives are available to those not inside of the boundaries of that city. The suburban area has no real Arts center, but a lot of demand and many organizations that would like to use the space when we can make stages available and assist with their band/theatre piece/dance recital, etc.

    For the moment, we’ll ignore the cost of productions, and focus on the rest.

    Less helpful to the situation is that none of the founders are well-off – to be more specific, the economy and family issues have caused the four of us, for varying reasons, to have poor credit.

    The business filings, etc are from LegalZoom, in order to avoid some of the complications that come from doing it all internally.

    So with all of that exposition in mind, how do you think one “should” finance the above? And what would be the first steps you’d advise for our particular situation?

    I believe it to be best that any crowdfunding to actually go through Indiegogo as opposed to Kickstarter. But being a non-profit, I’m not sure if money raised through crowdfunding would be tax-deductible once the 501(c)3 is approved. I do know that allows for 27-month backdating on donations.

    I know the above is basically like asking, “how do I car?” but, sometimes it’s more in one’s favor to present it as such.

    While we’re trying to do this in a much less than ideal situation, we’re in the dirt bound to climb up and build something that will stand for itself and much more, regardless of the challenges.

    Any thoughts or suggestions from you or your readers would be much appreciated!

    1. Charlie: Thanks for sharing your question here! There’s a lot to think about here, as it’s quite an ambitious undertaking. Given how ambitious this is, my recommendation for funding (and other elements) is to start small. You can execute certain elements of your plan with minimal (i.e., personal) funding to test them out, see how they work, and build a passionate community. Once you have that in place, you can select the next step and use crowdfunding to bring it to life. As for the platform you choose, I prefer Kickstarter, but IGG is fine too. The key is that you are funding the creation of something specific and that your backers get a piece of that creation for themselves (in terms of tangible, precious rewards, not equity or swag).

  4. Hi Jamie,

    I was wondering if you had any thoughts about whether there might be a negative aspect to offering rewards for charity. In particular, I have a game playable by young kids, and I want to offer a premium level (or add-on, basically) where for an extra $20 (on a $49 anchor price) I will send a copy to a Children’s hospital.

    I guess I’m worried about it sounding gimmicky instead of sincere. My oldest daughter spent a lot of time (with me) in hospitals, so I know it ISN’T a gimmick, and I’m fine with sharing that, but I don’t want to sit around defending the offer either, if that makes sense.

    Do you know of others who have done something like this? Thanks for any advice.

  5. Jason: Thanks for your question. I think the negative aspect of offering something like this is that people may see it as a lack of focus on the core objective, which is making a great game for them (the backers). I know your version of it still gives the choice to the backer and shows that you’ve run the numbers, but I wouldn’t recommend doing it. You could always do it on your own as a feel-good thing after the project funds (and after you deliver to backers).

    1. Thanks for the advice. I had a sense that it was a mistake but I couldn’t quite give myself a good reason.

      I will certainly still make some donations myself after I get it published.

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