The last session I attended today was Cat Allman’s “Fundraising 101” or “Free as in Freedom, so who pays for the beer?” session on the basics of open source fundraising. She started out stating that its clear that open source projects need money: Bandwidth/hosting, hardware, travel costs, meeting in person and the all-important t-shirts all cost money. How can OSS projects raise money to support their project?
Cat says: “Asking for money is hard”. Therefore you should have a basic plan for raising funds. You will need to determine what your project needs and setup a budget to carefully examine on what you’re going to spend money. Remember to add a bit of cushion into your budget to cover unforeseen expenses. You should set quarterly, annual and long term fundraising goals to support your budget. But, raising funds isn’t all about asking someone to give you money; you should consider if your project has something to sell. Can you sell schwag with your project logo? Can you sell CDs with your software? Anything you can create that people are willing to open their wallets for are fair game. Be creative, but make sure that you have buy-in from your community when deciding what to sell. When fundraising, make sure that you have responsibilities for bringing in funds carefully assigned to people who are helping you fund-raise. People need to step up to the responsibility for raising funds in order to reach your goals.
Cat continued on to tell us that there are many forms of sponsorships: From small amounts of money to large amounts of money; in-kind donations, grants and software bounty programs. Though, Cat cautions about bounty programs that reward certain features with financial rewards. They can work in some cases, but its also easy to have your project turned into a code-for-hire project that may distract from your goals. It all depends on what your project goals are. One easy way to accept sponsorships is to setup a PayPal account — whether or not you like PayPal, its easy and relatively cheap to use. However, she cautioned against trying to accept credit cards over the net, since that has many pitfalls and has quite a few costs. Note: You can easily and cheaply accept credit cards with a PayPal account.
There are many types of sponsors as well: Individuals contributors like friends or fans of your software; small businesses in your communities or businesses that use your software. Look at your download logs to see which businesses use your software and consider approaching local, state or federal governments and foundations. And as most open source developers have day jobs, you might try and ask your employer for financial support.
Sponsors will likely be interested in buying visibility in your project, like having their name/logo on your website. You may also opt to sell ads on your site (for products, companies or help wanted ads), but you will need to be careful about your community. A lot of open source communities do not look kindly on ads, so be careful. Cat also suggested that you stay away from selling your email list of your users — many open source people hate this and would not look kindly on being spammed.
Once you’ve managed to get someone to commit giving you money, you’ll need to arrange how money will be accepted. There are tax ramifications that relate to accepting funds, and Cat suggests that you get professional help in determining how to best do this. Don’t put funds into your personal checking account, since that will surely create a nightmare come tax time. You’ll also need to keep careful records of what is happening with the money your project received. Again, getting professional help from an accountant will save you a lot of trouble later. Cat warned to not procrastinate on collecting your funds — all too often people forget to collect their money. Be prepared for the process of billing a large company for the donation to take quite a while — don’t procrastinate.
If you do not have a non-profit company that can accept donations you may want to consider working with an organization that specializes in helping smaller open source project accept funds. The Software Freedom Conservancy, Software in the Public Interest and the Apache Foundation work with open source projects in this manner. Cat also cautioned about starting your own non-profit company since the IRS may not consider all open source projects fit for being a non-profit. The question of wether or not you should start your own non-profit was beyond the scope of this talk and Cat encouraged the audience to hold talk about this at the next OSCON.
When you’re making a pitch to a company, you should be well prepared. Most important, put yourself into the shoes of your sponsor — does sponsoring your project make sense? When you submit materials to a company, make sure that your contact info is on the materials and make sure the name of the project and URL are clearly visible. Consider giving a brief background on your project and offer to provide more information on request. Make sure to convey what your project does, how many people are involved, who it helps and why it matters to the world. Finally, Cat stressed that you should never expect that people owe you anything. Just because these companies are using your software doesn’t mean that you are entitled to anything. You don’t get to demand a pony and you don’t get to pick the color.
If you’re trying to get a sponsorship for an event, Cat stressed that you should provide complete information on your event. Provide online materials and a PDF for the company to evaluate you proposal. As with other materials, make sure you mention the name of the event, the URL, provide your contact information and state where and when the event will be. Also provide information on the expected audience and how many people you expect to attend your event. If your event has a program committee, provide details for the committee; if there are different levels of sponsorship for your event, make sure to include details about the different levels of sponsorship. When throwing an event, make sure that you consider the following things: Conference networks, insurance, first aid (some venues require this), unexpected costs, an anti-harrassment policy and bathroom capacity.
When you’re getting ready to ask for money, Cat stressed again that you should put yourself into the shoes of your sponsor. Then, you should make it easy to give you money — if its hard to give you money, chances are that it won’t happen. Make sure to give complete contact information on your materials and don’t use proprietary means for making your pitch — Facebook is not a proper venue for asking for sponsorships. While this should be obvious, Cat reminds that you should be polite when making a pitch for a sponsorship. Finally, ask for help and at the same time offer to help resolve any questions or issues that might arise in when the company evaluates your proposal.
To wrap up, Cat offered tips for things to avoid: Don’t put donations into personal accounts! Don’t ask for too much money — it puts off sponsors. Don’t over promise things that you can’t deliver. Don’t forget to send the invoice for money when your sponsor has agreed to sponsor you! Finally avoid the baby ducks problem, where an organization continually pesters potential sponsors all the time. Taking up too much time with one open source project is not a good way for a potential sponsor to spend their time. If you have several occasions in a year to ask for sponsorship from one company, consider rolling up all of the requests into one annual request, so that you don’t annoy your sponsor.
This concluded Cat’s presentation and she took questions from the audience. One audience member had one important point: If you solicit money from the general public and you don’t have a non-profit, do not ask for donations. According to the IRS, only non-profits can ask for donations — and whatever you do, avoid trouble from the IRS. It will only cost you money and waste much of your time!
Thank you so much for your presentation on how to raise funds, Cat! Next time I personally go begging for money from Google, I’ll use your advice to hone my pitch. :)