Free-software foundations face fundraising problems

In July, at the GNOME annual general meeting (AGM), held at GUADEC 2024, the message from the GNOME Foundation board was that all was well, financially speaking. Not great, but the foundation was on a break-even budget and expected to go into its next fiscal year with a similar budget and headcount. On October 7, however, the board announced that it had had to make some cuts, including reducing its staff by two people. This is not, however, strictly a GNOME problem: similar organizations, such as the Python Software Foundation (PSF), KDE e.V., and the Free Software Foundation Europe (FSFE) are seeing declines in fundraising while also being affected by inflation.

In April, GNOME Foundation board president Robert McQueen wrote on his blog that the foundation had been operating at a deficit for more than three years. That was possible because the foundation had received "some substantial donations" in the years prior, but the organization had now used up the surplus. GNOME has a reserves policy that requires it to keep enough in reserve to maintain core operations, which meant "the Board can't approve any more deficit budgets — to keep spending at the same level we must increase our income".

GNOME has not, however, increased its income. In fact, the organization brought in less money than expected during the fiscal year that ended on September 30. According to the board update, the problem was twofold, a "very challenging fundraising environment for nonprofits, on top of internal challenges" that included the departure of executive director Holly Million after less than one year.

The board published a follow-up on October 9, with more detail about the unexpected announcement of budget cuts. McQueen said that the board had been presented with a break-even budget for the year that ended on September 30, 2024. That budget had projected $1.201 million in revenue, and $1.195 million in expenses for the fiscal year. The revenue figure included an additional $475,000 that was expected to come in via donations, grants, and event sponsorships, but did not materialize.

Aiming for surplus

The budget for GNOME's current fiscal year, which runs October 1, 2024 through September 30, 2025, is about half of the prior year's budget. The foundation is projecting expenses of about $550,000 and income of about $586,000, its smallest budget since 2019 by more than $80,000. Those figures do not include the money that the foundation holds for GIMP, or money that it handles as part of a €1 million grant from Germany's Sovereign Tech Fund (STF), as neither are part of the foundation's general fund.

Nearly 50% of the budget comes from a $250,000 grant from Endless, and $200,000 of that is a targeted donation for specific work, such as running Flathub, maintenance of the GNOME Software application, work toward adding donations and payments for applications on Flathub, and more. Less than half of the foundation's income is expected to come from individual donations and fees for organizations to be on the GNOME advisory board.

The foundation is only allocating $10,000 of this year's budget for interim executive director Richard Littauer, who is expected to continue in that role until December 10. The foundation is currently searching for a new executive director, with a base salary between $120,000 and $150,000. GNOME hopes to find someone else to foot that bill, at least for the first year. McQueen said that the board is negotiating with a sponsor to cover the first year of a new director's salary. Whether GNOME will make a hire before Littauer departs is unclear.

GNOME's income has been highly variable in the past few years. The foundation brought in more than $870,000 in 2019, and more than $967,000 in 2020. In 2021 its income was less than $300,000, and 2022 the foundation brought in about $560,000. Some of that can be attributed to the pandemic, which meant in-person events (and accompanying sponsorships) did not take place. GNOME has not returned to its pre-pandemic income levels.

Viewed in isolation, it might appear that something is amiss with the GNOME Foundation in particular—but GNOME is not unique in seeing a decrease in donations. I sent questions to the PSF, KDE e.V., and FSFE to get a more complete picture of free-software fundraising in 2024. All of the organizations are facing fundraising or budget challenges, to varying degrees.

Python squeezed by inflation

Deb Nicholson, executive director of the PSF, said that the foundation had seen a small decrease in fundraising, coupled with inflation, "which no one can escape". The effects of inflation were particularly noticeable with respect to the costs of putting on PyCon US. One bright spot, Nicholson said, is that the PSF had seen more willingness by organizations to fund security work.

The foundation plans to do "a little belt-tightening" in 2025 "because we prefer to act proactively to maintain a comfortable financial cushion". How much tightening, though, is unclear—she said the PSF does not have a budget for 2025 to share at the moment.

Python is also operating with a much larger budget than GNOME. According to the 2023 annual report that was published in May, the PSF brought in about $4.36 million through its 2023 fiscal year and spent more than $4.5 million, for a deficit of about $152,000. However, it also has a comfortable cushion, with more than $5.4 million in assets on hand.

Eike Hein, treasurer for KDE e.V., said that there were parallels between GNOME and KDE aside from the obvious. For example, "both foundations have in past years received large one-time donations" that increased reserves. She said that KDE e.V. had an obligation under German nonprofit law to put resources towards its mission, and it had used the money to grow the footprint of the organization. For example, "by directly contracting more types of work, from event and project coordination to software development." That means the organization has been running an "intentional deficit for two years and going". It had hoped to spend down its reserves sooner, she said, but "COVID-19 made spending money difficult".

According to a report presented by KDE's financial working group, the project has seen "a lot of new fundraising" and income increased from €285,000 last year to €350,000 this year. Hein said that the organization had expanded the ways donors could contribute; since then, it has seen a large increase in recurring donations, and individual contributions have increased.

Expenses have also increased, from €385,000 to €475,000, the bulk of which are personnel expenses. Hein also noted that events are more expensive than ever:

For example, these days we generally have to rent or otherwise pay for the venue, even at universities; in the past, the community got more support for free. 2024 in particular has been a more difficult year for event sponsorship, also for LAS [Linux App Summit], with many recurring corporate sponsors having no budget this year.

Corporate sponsors tightening budgets is a recurring theme. She said that donations from corporate donors are stable, but "we've not seen new corporate sponsors in the last year and generally have the feeling that money is indeed tighter for many of them these days". Hein added that KDE e.V. has not raised its corporate membership prices "in about 20 years", making them relatively low compared to other organizations. For next year's budget, KDE e.V. expects to increase its income to €475,000 and start working toward a break-even budget in the 2026-2027 time frame.

Raising more to do the same

Matthias Kirschner, president of the FSFE, said that it was also having a challenging time raising money:

Fundraising has always been a challenging task, and in recent months, it has become even more difficult due to the current global situation. High inflation, political instability in and around Europe, widespread layoffs, and budget cuts in the IT sector have all had a direct impact on our ability to secure funding.

He also noted that inflation was driving up costs across the board, affecting salaries, infrastructure expenses, as well as travel. That means the organization has to raise more money just to maintain the same level of services. Raising more money, though, has been a challenge—especially as competition for limited resources increases. Kirschner said the feedback from grant providers indicates "there are now significantly more applications competing for the limited funding sources still available", which makes things even more challenging.

Hein said that there was public money available in Europe via programs like the Next Generation Internet (NGI) fund through NLnet, the Prototype Fund, STF, and others, but tapping into that money as an organization is difficult:

It's generally smarter to apply as individuals to many of these opportunities, as low per-project caps make splitting initiatives across multiple heads and grant applications maximizes payout - recommended strategy by the spokespeople ot several of these funds. For KDE e.V. this means we help facilitate grant application processes (e.g. letters of support for applicants outside Europe, who we can give our backing to as an EU-based org), but don't receive funding ourselves.

Kirschner noted that some of the public funds were also drying up, with significant cuts to NGI for next year. He was also more pessimistic than Hein about public monies in general, and said that the FSFE free-software organizations and individuals are "currently facing a significant lack of sustainable long-term public funding at both the member state and EU levels".

He also argued that the companies and individuals that consider withdrawing support during hard times should consider the long term:

If you value the work of non-profits dedicated to work for achieving software freedom, please consider making a donation to support them. Reducing your contributions to charitable non-profits during times of inflation and other crises threatens their long-term missions.

Looking forward

Even though GNOME is not the only organization facing environmental challenges for fundraising, it does have some unique problems in addressing them. Without a full-time executive director to work on fundraising, the organization is going to have a hard time bringing in new money to return to previous spending levels. It is also unusually dependent on a single donor, Endless. Diversification of funding is going to be increasingly important not just for GNOME, but for most if not all free and open-source organizations. Perhaps the Open Source Pledge, or something like it, will help drive more donations.

The GNOME Foundation hopes to launch a crowdfunding platform in the next year, which may be helpful. KDE's individual supporters account for about a quarter more than half of that organization's income, but individual supporters only contribute about 13% of GNOME's revenue. Doubling that figure wouldn't solve all of its problems, but it would be a start. If it can persuade more users to chip in, it may be able to offset the decline in corporate sponsorships. Hopefully GNOME will complete its search for an executive director soon, and the foundation will be able to put its budget woes behind it.

There are many other free and open-source organizations, beyond the four mentioned here, that are struggling for money today. Outreachy, for example, recently put out a call for help, saying that it has also found finding funding "extremely difficult this year". Some, such as the Open Collective Foundation (OCF), have already folded. The overall forecast for free-software fundraising looks like rough weather for the foreseeable future.