A new kind of association service — Open Collective

by Adrian Segar

A new association service, Open Collective, offers an intriguing way to raise funds and provide radical financial transparency to members.

I like to think of an association as a group of people with a shared mission, the incarnation of a community of practice. Open Collective supports communities of practice like meet ups and open source developers that can benefit from an open administrative and financial structure, but the service could be used by any association that wants to outsource fund raising and offer financial transparency on how funding is raised and spent.

Here’s how it works.

Fund raising
Open Collective makes it easy to request funds for specific activities or goals (example). You can quickly create a sharable link to the request, which can be one-time or monthly. Flexible donation tiers allow you to create named donation levels, like “backers” or “sponsors” and feature them appropriately on your website. You can also sell tickets to events (currently in beta).

One interesting feature allows an umbrella organization to empower local or networked chapters/projects to raise money and have their own budget, without having to open a separate bank account for each one.

Financial transparency
Unpaid expenses and available funds can be seen by all members (example). Definable (and changeable) core members can approve or reject submitted expenses (example). Anyone can see the money flow in and out of the organization.

Cost
From the website: “Open Collective takes 10% of the money raised by the collective for managing bookkeeping, taxes, and admin (fiscal sponsorship), as well as providing your Open Collective page and the software it runs on. We share this commission with the fiscal sponsor (legal owner of the bank account that holds the money on behalf of the collective). Additionally, our payment processors charge a fee, usually 2.9% + $0.30 per transaction.”

This seems reasonable, though it’s not clear how the commission sharing works. The non-profit service Network for Good charges a 5% administrative fee (which includes payment processing charges) for donations, but Open Collective offers many more services than just accepting donations.

More information
As I write this, Open Collective is supporting over two hundred organizations with a combined annual budget of over half a million dollars, and you need to apply to join; it’s not automatically open to anyone who signs up. A two-part article by one of the founders (formerly cofounder/CEO of Storify.com) offers a useful summary of the history and philosophy of Open Collective.

What I think
For the first ten years of its existence, a non-profit association edACCESS I co-founded in 1991 was run informally under the auspices of another non-profit. Because the group was committed to transparency right from the start (our books were always open for anyone to see) Open Collective would have been very helpful for managing edACCESS’s finances.

While a structure like this isn’t appropriate for every non-profit, I think the service offers a novel approach to supporting communities that want to be financially transparent. It could be especially useful for localities that want to support citizen-created collectives using shared infrastructure (example: the city of Brussels). If it fits for you, Open Collective is well worth investigating.

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