As with many controversial ideas or phenomena, there tends to be some confusion about crowdfunding. In a word, crowdfunding is what it sounds like: a way to connect “crowds” to individuals, causes or movements that need to raise funds – sans middleman.
Crowdfunding might be more thoroughly described as funding a specific project or a venture by raising many small amounts of money from a large number of people online. Artists, filmmakers and other creatives have successfully raised funds and fostered awareness through crowdfunding via platforms like Causevox and FirstGiving. Other so-called intermediaries that host crowdfunding pitches include Kickstarter and Indiegogo, among several others. And there are a handful different crowdfunding models to consider, each with their own pros and cons.
According to Beth Kanter, author of one of the longest running blogs for nonprofits, the average donation through crowdfunding is $88, and the average total amount raised when groups work together to fundraise is $9,237. Importantly, 28% of donors are repeat donors.
Kanter further summarizes these best practices for nonprofits using crowdfunding platforms:
- Set realistic fundraising goals
- Brand the fundraising page and develop a plan to promote the campaign
- Tell engaging stories and demonstrate impact
- Keep your crowdfunding community updated on your progress
- Always thank your donors
Several nonprofits have seen noteworthy results: Habitat for Humanity raised more than $5 million via the crowdfunding site Fundly; and charity:water has brought in some $9 million by using its crowdfunding platform to raise money – and awareness.
The mechanics of crowdfunding span donations, investments and loans as means to stimulate the economy, create jobs and improve quality of life. Best of all, crowdfunding is a way for nonprofits to tap donors who want to put their money to work – even if they only have $20 to contribute.
That said, there are downsides to crowdfunding, too: for starters, donors and investors are susceptible to fraud or incompetence.
And while crowdfunding continues to gain momentum as a means for nonprofits to elevate their causes, it’s important to realize that successful crowdfunding campaigns are time-intensive (e.g., branding, advertising, communicating updates and acknowledging gifts from individuals, etc.). As well, crowdfunding – while ideal for short-term fundraising directed to specific projects – is generally not considered a long-term, ongoing fundraising approach that targets major donors.
As such, it makes sense to do your homework before launching a crowdfunding campaign. The ideas and resources presented here a starting point.
