Funding Models A discussion paper by Richard Taylor Before and during a Planning Committee meeting, I did some thinking about funding and financial models for NCF. These models are not necessarily mutually exclusive, but some have policy implications. I think it would be very useful for both the Development Committee and the Finance Committee if the Board could make some decisions about which funding models we want to pursue as an organization. Then the Board could do our job of passing the required policy, and the other committees could get on with their jobs. At the Board meeting of 15 October, 1996, the Board used this paper as a basis for discussion. Some revisions have been made and notes added as a result of that discussion. Models: 1) Voluntary contribution model We depend on the willing support of our members in sending donations. This requires on-going reminders to members. The annual membership renewal process can do this (supplemented by a few special fundraising events to boost awareness and spirit). There is also the regular income from new members. Based on this year's performance, we could expect about $10,000 per month from member donations. I recommend that the Finance Committee attempt to give us a bare-bones base budget showing what kind of organization and system we could run on $120,000 per year. Board members had no objections to continuing with this model, although it will be very difficult the run the existing system with this level of base budget. There was much discussion of the membership renewal program. 2) Corporate Sponsorship We solicit a small number of corporate and institutional sponsors, trying to find organizations willing to support our goals to the extent of ongoing sponsorships of tens of thousand of dollars. We have some such sponsors already who have donated office space and equipment. Need to establish good and continuing relationships with major sponsors. Board members agreed that a good quality recognition program needs to be maintained in order to give sponsors some "value" for their donations. Need Board members with good contacts and diplomatic skills. This model is being actively pursued, but could use more help. To attract others, we may have to adjust some of our policies to suit the sponsor. For example, we might offer Board representation, or Web site space. These ideas were not well received by the Board. 3) Government/Foundation Sponsorship We have received start-up support from various levels of government. On-going support may be possible, but will require lobbying, and grant applications. Charitable status may help for some grant applications. Policies reflecting government priorities may also be important in attracting support (eg. language policy). This funding will almost certainly be intermittent, so should only be used to fund specific short-term projects with a fixed budget. Need volunteers/staff with political connections and skilled at grantsmanship. This takes a lot of professional labour. Some grant applications have been made, but it will be a few months before we know the results. 4) Advertising model We currently have a very small "advertising" component in the form of line sponsorships. The Development Committee is investigating a possible expansion of this model by allowing sponsorships of many other NCF components. Under this model, we would have to have policies and procedures that set a value on NCF components in terms of advertising space. We would also have to be careful to control unpaid advertsing. To maintain good relationships with many small sponsors, we would have to make some changes to accomodate them such as organization memberships, commercial use of NCF accounts etc. To maintain good relationships with members, we would have to be careful to limit intrusive advertising. Labour intensive. Need people who can sell ads. There was a lot of discussion about this model and comparing it with the corporate sponsorship model. We must be careful how we describe sponsorship and on-line recognition. If we were to start selling advertising, there would be tax implications. In general, Board members seemed to prefer the sponsorship model to the advertising model. 5) Selling products This model was briefly mentioned at the meeting. We have done a small amount of selling things via the FreeNet Boutique and the Auctions. In general, this method takes a LOT of effort and management and does not bring in a lot of money. No problem for a few special events, but not to be counted on as a regular source of funds. 6) Membership fees Some other Freenets do charge a small membership fee. To date, the NCF Board has opposed having any fees. However, given a choice between continuing to operate with a fee or not continuing to operate, we may want to change our minds. Such a change would require a major change to our philosophy and mission statement. The transition would almost certainly reduce the number of members, but the funding provided by members would be more stable and predictable. Members would expect some improvement in service as compensation - for example, removal of 2-hour time limits. Such a change would offend some existing volunteers. This model also had a lot of discussion. Board members seemed to feel that we should not consider mandatory user/membership fees except as a last resort. However, there were some suggestions for "voluntary" membership fees or having fees for some attractive services that would subsidize free basic service. Other Board members considered that being free, and having equal access for all were fundamental principles of NCF. 7) Partnership If we can't run this thing ourselves, it might be of benefit to our members to form a partnership with another organization. This would probably require a major change to the organization, so it could be considered as the end of NCF and the birth of a new and different organization. -- =-=-=-=-=-=-=-=-=-=-=-=-=-=-= Richard P. Taylor, aa333 WWW Home Page http://www.ncf.carleton.ca/~aa333 rptaylor@FreeNet.Carleton.Ca National Capital FreeNet Board Secretary and board newsgroup moderator