HM Insights

Why crowdfunding is a serious player in the future of sports funding

Not so long ago, the concept of crowdfunding – gathering small amounts of investment from a large number of people to fund a specific business or objective – was seen as a slightly wacky way to raise money. Much as many football clubs would have loved their fans to donate to a fund to buy Lionel Messi, the reality was somewhat different.

However, since the financial crash in 2008, crowdfunding has moved from the alternative to the mainstream as a route to funding businesses.

As a result, many sports clubs, governing bodies and sports people have seriously begun to consider and use crowdfunding as a platform to generate commercial funding.

From high-profile examples such as the Caterham F1 team, to clubs and fan-groups attempting to generate funds to pay sportspeople, the growth in this innovation is set to continue and offer Sports Governing Bodies (SGBs) an alternative method of revenue generation

Grass roots and in action

The crowdfunding model that has tended to be used for sport is reward and donation-based crowdfunding. Athletes are coming up with alternative ideas as to how to reward people e.g. a swimming lesson with them or being able to get the gear in which they competed.

Funding of sport, particularly those in which the athletes are not professionals, can be tough. For many athletes and teams, the difficulty is that in order to qualify for the funding you need to be at a very high level. However, being able to dedicate enough time to reach that level requires support.

Could crowdfunding be a way for less mainstream sports to raise money – perhaps in situations where UK and Scottish level funding isn't there to the extent required to allow the athletes to train?

Crowdfunding platforms have been established solely for the purpose of funding athletes. One example is Rallyme, a US-based platform for individual athletes, teams or organisations to raise funding for their sporting goals.

A number of crowdfunding campaigns started to gather pace on the run up to the Sochi 2014 Winter Olympics. The British Nordic ski team raised £7705 to assist them with their training and competitions in the run up to the Games while the Jamaican bobsled team also managed to raise over £100,000 in just two days to help them get to the Sochi Games.

In the run up to the Glasgow Commonwealth Games in 2014 there were a number of crowdfunding campaigns to help get athletes not only to the Games themselves but also to fund warm weather training camps and expenses. One girl from Jersey managed to raise £1490 to attend a warm weather training camp with the GB team. Although these are small amounts, athletes are managing to appeal to their fan base and fellow sports fans to allow them to better themselves as athletes.

Another example from October 2014 was a Scottish surfing team raising £4605 on the Crowdfunder platform, after seeking only £3000. Surfing only managed to obtain formal governing body recognition in summer 2014 therefore the sport is still quite new and looking for ways to fund athletes. The money was to assist with the team's accommodation and contribute towards flight costs for the team to go to Peru for the International Surfing Association World Games.

It is perhaps difficult for centrally-funded athletes to watch non-funded athletes potentially raise more money than them, especially as sponsors may also enjoy the idea of crowdfunded athletes and could make offers to these athletes based on the popularity they may gain from the crowdfunding campaign.

Whether or not you agree with this there is no doubt that one advantage of crowdfunding is the PR that it can generate. For an athlete who is looking for sponsorship, this can't be a bad idea. However, is there an issue with an athlete who receives SGB funding also using crowdfunding?

Top flight

Equity crowdfunding is the more serious side of the industry, where investors get a share of the business they are funding. One area of sport where equity crowdfunding has already been used is in relation to football clubs, particularly those which have found themselves in financial distress.

Are fans and supporters willing to get behind their failed club to assist them in getting back on their feet?

Darlington Football Club successfully raised 110.1% of their initial target of £50,000 with Squareknot in order to secure financial stability. This is an example of equity crowdfunding being used as they were offering up to 14% equity in the club depending on the amount invested.

Another recent example of a sports team crowdfunding their way out of financial difficulty is the Caterham F1 team, which entered administration in October 2014 and subsequently commenced a crowdfunding campaign with Crowdcube. They managed to raise more than £2.35 million - just over their target and a significant amount to be raised in by any standard.

Left field

To diversify slightly from team/athlete funding, there are other ways in which crowdfunding can apply to sport. Crowdracing is a new crowdfunding platform which allows investors to purchase shares in race horses. The return for investors is based upon any winnings and any proceeds from a sale of the horse.

In 2013, Freedom to Ride organised a crowdfunding campaign which essentially sought funding to create a Bristol Cycling Manifesto and Cycling strategy which was used to influence decision makers in creating a comprehensive cycling network for Bristol.

Crowdfunding could be applied across the board with sports perhaps funding sporting events locally, nationally and even internationally. A campaign this month has started to help fund Merseyside's own darts tournament.

Crowds no longer just spectators

In all sectors, including sport, crowdfunding is filling a hole where funding perhaps has not been available in the past.

From the examples it is clear to see that crowdfunding can be used for a number of sporting goals whether that's the athletes themselves or initiatives to get more people involved in specific sports, or just sport in general.

Given the drama and excitement which defines great sport, the future is certainly going to make interesting viewing.

If you'd like to find out more about crowdfunding, and how we could help, please email paula.skinner@harpermacleod.co.uk or call 0141 227 9271.