Ethical investment – Can crowdfunding work for social enterprises?

Crowdfunding has revolutionised how small businesses think about looking for start-up investment. It’s already enabled hundreds of innovative products and services to go to market, and many people are attracted by its grass-roots people-power approach. Can crowdfunding do the same for social enterprises like Dazin?

One of the key challenges faced by social enterprise crowdfunding is the lack of tangible products for funders. Successful crowdfunding campaigns typically have a highly desirable product or service which is offered as a reward to incentivise supporters. Therefore, not having a product to offer initially seems to be a disadvantage. However, it’s not just the material perks that draw crowd investors – people enjoy the sense of community that comes with supporting an entrepreneur in achieving their vision. Value isn’t always just material, and if social enterprises are able to clearly communicate their vision of change then supporters can feel rewarded by standing with the cause – a feeling of direct involvement in positive impact can also be valuable. To do this social enterprises should be confident about their mission and vision to forge an emotional connection and attract potential supporters.

Although forging strong ethical resonances between funders and campaigns can be difficult, the crowdfunding format offers opportunities for democratising the social enterprise sector by enabling small start-up organisations to access funding and begin working. Large and well-known organizations with big PR budgets have typically overshadowed smaller or more innovative organisations when competing for donations. Often, these big organisations pursue such long term aims that it can seem as if they fail to make any visible difference. In contrast, crowdfunded social enterprises pursue smaller, more local and more specific goals. The crowdfunding format forces start-ups to think creatively, realistically and practically, and enables them to effect rapid change without the bureaucracy that larger organisations are tied down by.

For us at Dazin, the crowdfunding format aligns closely with our concept – because our business model is based on crowdsourcing! Crowdsourcing is the process of obtaining services or content by soliciting contributions from a large group of people rather than from traditional suppliers, and this is exactly what we do to obtain our raw materials. Unlike other fuel producers we don’t buy raw materials to make our fuel. Instead we mobilise rural communities in Bhutan to provide us with forestry wood waste. In exchange for this wood waste we offer them smokeless stoves and an efficient source of compressed fuel called a ‘fuel cookie’. Therefore crowdsourcing really is at the heart of our business model as by ‘crowdsourcing’ our raw materials we make our sustainable fuel and clean stoves accessible to those who cannot normally afford to buy them– people earning less than $2 a day.

We sell the surplus fuel cookies in urban areas and use the profits from the sales to cross-subsidise the services we offer in rural areas. Therefore the crowdsourced wood waste we get from rural communities is exactly what makes our business unique as it enables us to both make a profit and make a positive impact. We see our crowdfunding campaign as an opportunity to connect with others who share the same passion for alternative business models where people, planet and profit go together.

Of course both large and small organizations (like us) alike are faced with the administrative challenges of organising a campaign and creating a large network. Crowdfunding campaigns are notoriously hard work both before, during and after. But this hasn’t deterred the thousands of committed entrepreneurs who try and it won’t put off those who are committed to make a positive social and environmental change either. Because by making a direct link between ethically minded funders and determined social entrepreneurs, crowdfunding offers everyone the opportunity to make a change.

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Ethical investment – Can crowdfunding work for social enterprises?
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