Crowdfunding 101: Is it For You…or Not?
By Avrum Lapin and Andrea Otto
Crowdfunding has been heralded as the next “really big thing” in philanthropy. According to a recent Pew Research center study, 22% of American adults have supported a crowdsourced online fundraising project. Translation… more than $34 billion in worldwide donations in 2015. The rapid rise of crowdfunding is stunning; commanding that development staff, executive directors and board members take notice.
What is Crowdfunding?
Crowdfunding is a term used to describe a method of fundraising using an online platform, offering individuals the ability to start their own fundraising initiative encouraging people to support a specific cause or goal. When used by nonprofits, crowdfunding adds a twist to conventional fundraising efforts, where organizations asks donors for support. In this method, the premise is somewhat different – supporters act as agents for the nonprofit and raise money for specific projects. It is also important to note that crowdfunding can raise money for individuals or organizations with no tax exempt status.
This type of campaign is mounted over social media and email. Supporters of the organization share the campaign with their friends and family, encouraging them to join in as supporters. Many crowdfunding campaigns focus around an event such as a bike ride or a walk. Often, supporters set a more limited target that contributes to an organization’s larger goal. For example, a crowdfunding campaign might be to “Help Joe raise $500 to support pet adoption” or “Sponsor me on the Ovarian Cancer Walk.” And there may be individual donation pages that link to the organization’s donation page.
Most crowdfunding falls into the personal fundraising category, with projects like those on the Go Fund Me platform that help support a person’s medical expenses or aid in mitigating a personal tragedy. Indeed, the Pew study found that contributions to help individuals in need are the most common type of crowdfunding donations made, amounting to 68% of the total crowdfunding gifts.
It is estimated that 30% of crowdfunding benefits social causes. While the overall numbers seem big, crowdfunding for nonprofits is still not a significant source of revenue for the majority of organizations. The average amount donated by an individual user was $66 in a crowdfunding campaign in 2015 according to MobileCause. According to Blackbaud, the average online gift as part of a more “traditional” email marketing campaign was $126 in 2015, indicating that a direct “ask” remains the most effective means for fundraising.
How Does it Work?
Crowdfunding is relativity straightforward. The goal is to set up a fundable project, engage ambassadors, and then engage with social media. Frequent updates keep things fresh and help to inspire new supporters.
- Choose a project and set a goal (usually $5,000-$10,000 for the project or $500-$1000 for individuals to raise personally on the organization’s behalf)
- Get set up with software and messaging
- Connect with supporters and start sharing
- Post updates about the campaign
- Thank donors and add new donors to your organization’s database
Is it right for my organization?
It is important to note that crowdfunding campaigns are generally suited for the smaller, limited and more definable project. The average successful campaign raised $7,000, though only 50% of the campaigns mounted in 2016 were successful. For crowdfunding to be an effective part of a broader fundraising strategy, it should be designed and implemented to support a project in the $5,000-$10,000 range.
If the goal of crowdfunding is expand the donor pool, it can be a very effective tool. Using this platform, organizations can widen the donor pool to engage new audiences. On average, 62% of the money raised in a crowdfunding campaign is from new donors, and 28% of those donors, according to MobileCause, said that they would likely give again. With a strong social media and online presence, crowdfunding can help to spread the message to new audiences. The “typical,” or average donor to a crowdfunding campaign tends to be female, younger, higher income and well-educated, according to Pew. Crowdfunding could be an effective way to engage those donors that might not otherwise be easy to reach.
Crowdfunding is generally straightforward and short term, and can help raise money quickly. According to Fundly, which itself is a crowdfunding platform, the average campaign is 9 weeks. Most successful campaigns reach their goal in 40 days.
- Clear goal: Successful crowdfunding campaigns have clear and achievable goals. For example, a goal of raising $4,500 for a new piece of equipment for a hospital NICU is more compelling than a general message of “donate to help premature babies.” Crowdfunding is about measurable impact.
- Strong online presence: The power of social media is the engine for crowdfunding.
- Strong base of supporters: Crowdfunding works by having supporters share the campaign and making the cause simple to understand, and the appeal personal. To start, therefore, nonprofits need a base of supporters who are willing and responsive. These supporters must agree to share the campaign and ask friends and family for support.
- Campaign Manager: A dedicated person must manage this campaign, be it an outside consultant or someone within the organization. Frequent updates and progress towards the goal should be lauded on social media and through emails. Also, this person needs to give gentle reminders for supporters to share this campaign on their own pages.
Other Helpful Resources:
- Dedicated donation pages: Many companies offer crowdfunding software that works with your existing website and donation platforms. This software can help to simplify the process and often offers features designed to help build the campaign, such as photos, video and progress visualizations.
- Content explaining the campaign: This can be a video, photos or simply text. Videos are easily sharable and are effective in getting the message across. According to MobileCause, using a video in a campaign have resulted in a fourfold increase in donations.
- Incentives: Many crowdfunding campaigns offer incentives for support. This can be a branded t-shirt or water bottle or hand written thank you from a celebrity endorser at a higher level. While not necessary, incentives have proven to push the donation amounts slightly higher.
Crowdfunding is a platform that is generating much buzz in the philanthropic community, as fundraisers are always looking for the fresh new trend, or perhaps the “magic pill” that will make the process of raising money easier. Used properly, crowdfunding can indeed be a component to a development plan. If the goal is to raise millions, then crowdfunding is not the best option. However, using crowdfunding for discrete smaller projects as a tool to raise awareness and build a donor pool can yield great results.
Our colleagues welcome your comments and emails. Let us know what you think. Please feel free to contact us at The Lapin Group at 215-885-1550 or Avrum Lapin at firstname.lastname@example.org to discuss this further.
Avrum Lapin is President and Andrea Otto is Marketing Coordinator at The Lapin Group, LLC, a full-service fundraising and management consulting firm for nonprofits based in Jenkintown, Pennsylvania. The Lapin Group inspires and leads US-based and international nonprofits seeking fund, organizational, leadership, and business development solutions, offering contemporary and leading-edge approaches and strategies. A Board member of the Giving Institute and a member of the Editorial Review Board of Giving USA, Avrum is a frequent contributor to eJewishPhilanthropy.com and speaker in the US and in Israel on opportunities and challenges in today’s nonprofit marketplace.
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