Here you are, a harried development professional or an executive director who has been struggling to get the board more involved in fundraising, and your newest board member comes to you, excited about the Ice Bucket Challenge or other online fundraising craze, with a “new” idea: “Let’s crowdfund!”
Crowdfunding is a fairly new term to describe raising money for a project by getting small gifts from a large number of people, usually through fundraising webpages and such. In this way, it’s no different than what we call “grassroots fundraising”, except that it’s done online. Artists as well as for-profit entrepreneurs, seeking investments from their community for creative projects or start-up businesses, first used the term “crowdfunding”. It has become increasingly popular with non-profits as online strategies become a larger part of groups’ fundraising and communications work.
But what do you need to know to assess whether crowdfunding is the right tool and strategy for your nonprofit organization? First of all, it’s important to note that crowdfunding relies on the same underlying principles of more traditional, offline fundraising. You will have the greatest likelihood of success with crowdfunding if you have:
- A realistic monetary goal,
- A compelling reason for people to give,
- A list of people to solicit, and
- A team of staff and/or volunteers who will ask people they know for gifts.
So how is crowdfunding different from other individual donor fundraising strategies? It relies on an online platform, such as Indiegogo, which introduces potential donors to your campaign and encourages them to give. Crowdfunding tends to focus on very specific projects and capital needs—not general support—and offers perks or benefits for different gift levels that are related to a nonprofit’s mission (eg, a handmade card from women working in a cooperative in Africa), or give concrete examples of what different gift amounts would “buy”, such as a day’s worth of meals for homeless residents at a local shelter. While traditional fundraising appeals use these tactics as well, they are a more central feature of crowdfunding campaigns.
These crowdfunding platforms ask for specific information about your campaign—what you are raising the money for, how much you need raise—and often require a deadline by which you will raise your funds. They therefore force you to have a systematized approach to your fundraising campaign. In this way, crowdfunding has helped create more savvy and sophisticated donors, so that even if you don’t think crowdfunding is the right strategy for your nonprofit, the more popular crowdfunding becomes, the more your donors are going to expect clear, well-run fundraising campaigns, with compelling stories, regular updates about the progress toward your goals, and timely thank you notes. If your organization’s fundraising drives don’t have these key elements donors may lose confidence in your operation.
So good crowdfunding is based on sound fundraising practices. But does it save time and will it raise the money you need? According to the Crowdfunding Industry Report, crowdfunding platforms raised $2.7 billion and successfully funded over 1 million campaigns in 2012. It is estimated that global crowdfunding volumes have doubled since 2012, totaling nearly $5.1 billion in 2013. And social media expert Beth Kanter reports that 30% of the $5.1 billion crowdfunded went to nonprofits, an increase of 60% from 2012 to 2013.
Sources differ about the average donation size through crowdfunding, with the range offered being between $75 and $88. Individual solicitors raise an average of $534 for nonprofits through their own crowdfunding pages. And nonprofit organizations have raised an average of $7,000 to $9,238 through crowdfunded campaigns. Only about 40 campaigns have raised more than $1 million since crowdfunding was first used.
So how to know whether crowdfunding is something your nonprofit should try? Crowdfunding as a strategy can be used in conjunction with your annual or semi-annual campaigns. Factors that would suggest doing a crowdfunding campaign include having enough people to participate in asking their contacts and/or enough names on your social media or email lists to approach. Crowdfunding is best for getting lots of small gifts, not for the more personalized approach you’d use for major gift solicitation.
Another factor to consider is how much time a crowdfunding campaign will require from staff, board and other volunteers. Many people think that crowdfunding effort will save time, but that is not always the reality. First off, with more than 500 crowdfunding platforms out there now, it takes a little time to research which will be right for you. Additionally, studies show that campaigns using a video raise twice as much money as those without one. Creating a strong video will require a budget and some basic skills as well.
And just like in traditional fundraising, you have to start the campaign with people you already know—current donors, staff, board and volunteers—who can make the first gifts, and only then might you be successful in reaching new folks. According to Razoo, campaigns that receive their first donation during the first 3 days of the campaign are more likely to hit their goal than those who don’t, regardless of the length of the campaign.
Getting the word out about the campaign is key—through email blasts, in your e-newsletters, on the front page of your website, and on all your social media feeds. (You know all those people who have “liked” your group’s page on Facebook? Now is the time to build up those followers!) And you have to get your board, staff, supporters, and volunteers to do the same: email their friends asking them to donate to the campaign, post asks and information on their social media feeds, and create their own individual pages on the crowdfunding site. You won’t get donations from those you don’t know until you have a good amount of traction from your own network.
So when does it make sense to go the crowdfunding route? Here are some situations in which crowdfunding could be a good option:
- If you have a very specific, tangible need that is less than $20,000, such as buying a new van to transport the youth you serve or to pay for members to travel to and attend a conference in another state.
- If you are a brand new organization and don’t have any donors but do have a lot of people wanting to help.
- If your organization has tried other, more traditional fundraising activities and nothing has really gotten off the ground, especially if your staff, board and volunteers have networks that they relate to often online and via social media.
But remember, asking for gifts from several major donors or prospects in-person could easily exceed the $7,000 to $9,000 average that is raised from crowdfunding campaigns. Also, one by-product of more personal interactions with your donors is that you will lay the groundwork to make future asks a whole lot easier.
Crowdfunding can be one of the tools in your toolkit, but it will not replace or make traditional fundraising strategies irrelevant—such as more high-touch strategies, like personal solicitations of major gifts, mail and e-mail appeals, as well as house parties or other small-scale events. As with any good tool, knowing when and how to use it is critical to using it well.
By Richard McPherson
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