Will universities allow you to raise money through crowdfunding?

Will universities allow you to raise money through crowdfunding?

Jai Ranganathan

Note: there is now a second part to the university-crowdfunding series.

The thinker
Wondering what the #SciFund Challenge means for universities…

So, as of this writing, 134 scientists have signed on to the #SciFund Challenge! Incredible. And sign-up closes on October 1st, so do sign up now.

With that out of the way, on to the point of this post. If you are a  scientist based at a university, will your university allow you to fundraise via the #SciFund Challenge? Short answer: likely yes (but do check with your local grant administrator).

Universities are just beginning to grapple with crowdfunding, so there is going to be some variation in the official response to crowdfunding. However, I can tell you about the response of the University of California, Santa Barbara (UCSB), which is a large Tier 1  research university. It also happens to be where I am based.

According to a grant administrator to whom I spoke today at UCSB, money raised from crowdfunding can be considered a direct donation to a scientist’s research program. After all, in the end, RocketHub will just be sending you a check, with neither strings attached nor reporting requirements. This donation is exactly the same as if a local benefactor wrote you a strings-free check to support your research.

Once you get this check, you’ll have two choices. If your crowdfunded project involves any university resources (university office, university-supplied computer, lab equipment purchased through the university, etc.), you’ll have to hand over the check to the university, via your local grant administrator. At UCSB, the money will then go to the Office of Development, who will then administer the funds back to you. The Office of Development takes a 2% cut to cover administration costs, but the rest can be used by you.

On the other hand, if your project is something you can do entirely without university resources, then the university doesn’t need to be involved. Keep the check from RocketHub and spend it on your own to move your research forward.

So, that’s the scenario at UCSB. I would guess that the situation would be similar at most research universities, but you should definitely check with your local grant administrator.

There is a related question here about the tax implications of money raised by crowdfunding and we’ll be addressing it in a future post.

10 comments on “Will universities allow you to raise money through crowdfunding?Add yours →

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  1. Hi–this is a very exciting initiative. I’ve signed up and hope to participate.

    I’ll be very interested to see what you find out regarding the tax implications of donations. This is a very large issue in my mind. I’ve given a lot of thought to crowdfunding over the past few months. Some questions to consider: will the institutions (universities or NGOs) “see” the donation coming from RocketHub, or from the individual contributors? Who will be responsible for providing a receipt that can be used for tax purposes (these need to have standard language about not having exchanged any goods or services for the gift, etc.)? There are other sites out there, such as http://razoo.com, http://www.give2gether.com/, http://www.crowdrise.com/, and a host of others that might be more in-tune with raising charitable funds for research purposes. It would be great to see your thinking of the advantages of RocketHub over those.

    Beyond the nuts and bolts of the mechanics, it is worth giving this article a read (http://ow.ly/6F13E). The author, who is a fundraising consultant, argues that most of these sites are not “donorcentric” and, therefore, are not living up to their potential. Food for thought…

    1. Great points here Kent. To answer your last point about why we went with a for-profit general crowdfunding platform (RocketHub), as opposed to a charity-specific platform, we chose RocketHub extremely carefully. In the online-space, brand awareness and site traffic are extremely difficult to come by. In my opinion, in any one online category a few major players will see most of the action. In the crowdfunding space, there are three major players: Kickstarter, Indiegogo, and RocketHub. The vast majority of the crowdfunding success stories have occurred here. We pitched the SciFund Challenge to all three of the majors, and RocketHub was – by far – the most enthusiastic. RocketHub is going to be doing a tremendous amount to help promote SciFund projects and to advise SciFund participants about how to run a crowdfunding campaign. The most essential point for us is that we wanted to go with a platform that gets a lot of traffic, which will provide a real tailwind to SciFund projects. How does that sound?

  2. My grant administrator (at another large research tier 1 university) also references the previous commenter’s point about the donors needing to not receive anything in return for their donation. This seems counter to Rockethub’s “rewards” system. If this is an issue, it might be worth warning everyone that having the “rewards” will affect tax and/or university handling of the donations.

    1. I can add that in a normal charity / nonprofit that, say, invites people to a dinner and asks for a donation, the tax receipt for the event needs to mention the value of the donation, minus the value of the dinner. For example, if I’m invited to a gala and there’s an expected gift of $100, with a “cost” of the dinner (to the charity) of $25/person, then I’d only be able to deduct $75 as a charitable contribution (gift minus goods I received). It is my understanding that the IRS doesn’t get worried about smallish things, like NPR giving you a mug if you make a donation. I believe there is a gray area, and it would be very smart for all involved in this great idea to has as much info going in as possible. A perspective that we’d all want to have front-and-center is that of the prospective donor. Knowing that a donation could be used within a university setting is, of course. I’d recommend contacting folks within your university foundation as they are generally the ones who handle charitable gifts. I’m happy to do more digging if it is useful.

    2. Important point here. I will be touching base with my local grant administration folks about this rewards business and I will write a follow-up post about how rewards can work within the university system.

      1. Kent, another great set of points. I’ll be writing a post in the near future about the whole question of tax-deductions for donors. And the issue is very complicated, so I would be glad for any digging that you would be willing to do. Thanks!