Crowdfunding…Is It Right For Your Nonprofit?

As if things weren’t already challenging enough for most nonprofit organizations, what with government funds being cut off in midstream in desperate budget-balancing attempts, and increased competition for grant dollars, there are also recent reports that revenues from “big events” like golf tournaments and galas are slipping. Even some of the biggest, most venerable efforts like the American Cancer Society’s Relay for Life (- 12%) and the Susan G. Komen Race/Walk for the Cure (-38%) recording distinctive funding drop-offs.

It is becoming clear that a nonprofit interested in sustained progress in mission fulfillment must invest some time and talent in determining ways to diversify their funding sources, and pursuing new pathways to finding the money needed for the future.

With the continuing trend of online Social Media related tools seemingly eating everything alive, it is not unexpected to find that various online tools are moving into the forefront of many organizations’ fundraising methodology. One idea that is being seriously considered and increasingly utilized by nonprofits is crowdfunding. It may be time to consider if this strategy is right for your organization.

In case you have been living in a digital “safe house” for the last few years, here is a short primer on crowdfunding.  In simplest terms, crowdfunding refers to the practice of soliciting, usually via the Internet, smaller donations from large numbers of people, as opposed to looking for “big hitters” who can write fat checks to support or invest in a venture. The principles are generally the same for any effort, and may seem deceptively simple. Have a good idea, determine what type of effort you will mount (examples include reward/premium based campaigns, equity projects, and charity efforts), tell a good story, get people to share the message online, and rake in the cash! Of course, it is far from that easy. Each of the steps just listed has its own challenges and putting them all together may not bring the hoped for results. Kickstarter (see below for more information) notes that about 12% of projects never raise a penny, and most of their successful efforts have brought in under $10,000 – usually by design. The company also notes that nearly 80% of their hosted projects raise more than 20% of their goal amounts.

These concerns aside, crowdfunding has been used successfully by artists, filmmakers, and entrepreneurs of all stripes. A few campaigns have been singularly successful. In 2012, the Pebble Watch attracted more than $10 million in donations, and an online game development company is currently continuing to attract crowdfunded investments which are reportedly in excess of $70 million as of last report.

It does appear that crowdfunding is becoming a well-established means of raising money, and because of this, it is important that nonprofit organizations consider this tool as one which might belong in their toolbox for now and the future. Before you jump in with both feet, here are some considerations.

Evaluate crowdfunding platforms

There are a variety of platforms available for nonprofits to consider using the “host” their fundraising event. The best known of these is probably Kickstarter, which has been the destination for over 80,000 campaigns and has helped raise over $1.6 billion dollars since its establishment in 2009. Other notable platforms include Fundable, Indiegogo, Fundrazr, and SeedInvest, and more platforms are appearing all of the time. Deciding which is right for your nonprofit may require you to do some investigative work, evaluating things like ease of use (for you and your donors), cost, visual appeal, integration with other Social Media platforms and so forth.

Learn the Tricks of Successful Crowdfunding

Telling a good story is crucial to successful crowdfunding, as you may only have one shot at convincing a viewer that your effort is worthy of their contribution. The visitor will want to know what your organization stands for, whether you are viable or not, what you intend to do with the money, and how you will assess and report your successes. Deciding whether, and what you might give out as a premium or reward in exchange for contributions can also be important. Some groups will offer giveaways like t-shirts or ball caps, or written acknowledgment of the contributor, while others rely on the “good feeling” approach that often accompanies charitable donations – the giving of the gift is reward in and of itself.

The biggest contributor to success is attracting eyeballs, since the more visitors to your crowdfunding site, the more likely it is that you will reap rewards. Most organizations will be well advised to insure that they already have an established Social Media plan and presence, including a Twitter account, Facebook page, and LinkedIn presence. Robust email campaigning is also valuable in attracting visitors and ultimately, donors.

If you have access to traditional local media, such as newspapers,  or radio and television outlets, use these as well to announce your fundraising efforts and provide the information consumers need to link to your crowdfunding site. The vast majority of fundraising for most nonprofits is still local despite the ubiquity and universality of the Internet.

Consider Using External Resources

A crowdfunding effort requires a certain level of investment of time, and some funding. One thing many organizations will need to consider is the available resources, particularly human capital, they currently dedicate to fundraising. If you choose to try crowdfunding, who is going to do the work and – more importantly – what will they NOT be doing because of the time commitment to the crowdfunding effort. It might be in a nonprofit’s best interests to outsource the work to a consulting organization rather than divert their in-house experts from other critical tasks.

Of course, nonprofits should stay alert to the seductiveness of fundraising fads. One-off ideas like the “ice bucket challenge” or the Livestrong rubber bracelets are fun and can even make some significant revenue, but these strategies – and crowdfunding may be one of them – do not result in a sustainable funding strategy – and sustainability is a very important part of any nonprofits strategic planning.

If you need to know more, please contact us at Innovaision, and we will be happy to talk to you about the “fitness” of crowdfunding for your nonprofit.