Crowdfunding: When and How to Use It

Picture 3One of the hot new topics around fundraising in 2012 was the idea of crowdfunding.  Over a billion dollars was raised worldwide through crowdfunding in 2011 and those numbers were expected to nearly double in 2012, with nearly half the total going to nonprofits.  That’s a huge amount of money, making it hard to deny the fact that crowdfunding has become an important fundraising channel.

So, should your nonprofit use crowdfunding?  Well, maybe.  Don’t get me wrong; I’m pretty excited about the possibilities of crowdfunding.  Its online and viral nature make it a potentially very effective way to fundraise raise in our social media driven world.  But it’s no silver bullet as I’ve discovered myself through crowdfunding campaigns that I personally have been involved with and those of people I know and work with.  Below are some quick tips on how and when to use crowdfunding effectively.

  1. If you build it they will NOT come –  I find that there is always the temptation and belief in the online world that if you start a blog, a website, podcast, etc. that subscribers will appear all on their own.  I think most of us realize by now that this is not the case and the same holds true for a crowdfunding campaign.  Simply starting a campaign and hoping it will magically go viral is the recipe for failure.  Like everything in fundraising, you must get the campaign in front of the right people.
  2. The normal rules apply –  It feels like every year in fundraising there is a “new” way of doing things.  But I find that fundraising is based on some firm rules that rarely change.  As in all fundraising, crowdfunding is most effective when your volunteers have active involvement and ownership of your campaign.  The most successful crowdfunding campaigns start with friends, family and colleagues donating and spreading the word; it goes viral from there.
  3. Clear impact and outcomes matter – The most effective campaigns pick a clear project and clearly express the difference it will make.  Campaigns that focus on general support have a much harder time of being successful.  Many campaigns have giveaways based on a donation level; it’s more important to communicate the impact that donations will have.
  4. Big money is hard to raise – Yes, there are many stories out there of very successful crowdfunding campaigns that raise into six figures, the most famous of which is probably Mathew Inman’s (of the Oatmeal fame) campaign for a Tesla Museum.  But this the exception.  A quick scan of charitable projects will show you that $25,000 or less is far more common and realistic.

So, given the above facts, when should you use crowdfunding?

  • When you have a clear and specific project
  • When you have volunteers that are willing to support it through email, social media, etc.
  • When you have the time and resources to regularly post progress updates, video, etc.
  • When you only need a modest amount of money

OK, lets say you meet the above criteria.  Which platform should you use for your campaign.  Here are a few to consider:

  • Kickstarter – The most famous; more geared toward tech and project start ups than nonprofits but certainly charitable causes can be done.  You must reach your goal or the money is returned to investors.
  • Indiegogo – My personal favorite, this site is well set up for charitable causes and well integrated into social media.  You have an option of whether to make the project “all or nothing” or if you can keep the money even if you don’t hit your goal.
  • StartSomeGood – uses a “tipping point” model where your project can be partially funded if it reaches a threshold where you can minimally proceed.
  • Crowdrise – Volunteers can fundraising on their own for any charity already registered on the site.
  • GlobalGiving – worldwide crowdfunding.

Once you’ve selected a site, here are some tips to make your campaign successful:

  1.  Get volunteers – Before you launch, make sure that you have a number of volunteers that are willing to personally give and promote the campaign via face to face and their own social media.  Volunteers will get your campaign out there and give it some momentum.
  2. Pick a clear project and a realistic goal – Pick a project that is concrete with easy to understand outcomes and pick a goal that is realistic.  Remember, people aren’t going to give you $1,000 (probably) because of an email request.  Crowdfunding is mostly “small ball” with two and three figure donations, so plan accordingly.
  3. Give Personally – I always check to see if the campaign sponsors have personally given.  If you haven’t, why should I?
  4. Communicate – Communicate to your donors and potential donors on a regular basis.  Update them on the progress of the campaign and demonstrate impact through words, pictures and videos.

We are sure to see a lot about crowdfunding in the coming year.  Experiment and see how your nonprofit might use this new channel for fundraising effectively.

You can follow me on twitter @bobosborne17

Capitalize Your Development Operation!

by Robert Osborne

Every organization wants more money for its programs but I am constantly surprised at how few organizations are actually willing to spend money to make money. I know of organizations that have cut back their development staff even as they have raised their fundraising goals. I know of organizations that refuse to do stewardship because they think it is too expensive. And I know of “national” organizations that wish to fundraise across the United States but have no travel budget.

The problem becomes even larger when we talk about capital campaigns. Organizations that wish to raise 10x or more of their annual operating budget and tens of millions of dollars often balk at spending even a $100K to do so!

Your development office is a “profit center”, another way of saying that your development office makes you money. But only if it is properly capitalized. While different types of fundraising have different costs associated with them, a good rule of thumb is anticipating spending somewhere between $.15-$.20 for every dollar you want to raise. Events have the highest costs associated with them with a cost of roughly $.30 on the dollar and major gifts have the least with a cost of roughly $.12 on the dollar. But there is no such thing as free fundraising.

Every organization should ask itself what it needs to be successful to meet its fundraising goals. Do you have enough personnel, not just “front line” fundraisers but also administrative support? Do you have the proper technology to operate efficiently and effectively? Do you have the marketing pieces you need including video? Do you have a budget for any necessary travel? Have you built in contingency?

My suspicion is that organization try to do fundraising on the cheap because they do not have the cash on hand when they begin their fundraising. They realize that they are undercapitalizing the effort but are unsure what to do. Ideally, our supporters would help us in this area as Dan Pallotta discuss in this post in the Harvard Business Review and truly leverage their investment, but lamentably capacity building tends to be way down on investors lists of things to fund.

Sadly, there are no short cuts. An undercapitalized effort may even cost you more than not doing it at all. If you don’t have the cash on hand to properly capitalizing a fundraising effort you need to make raising the necessary capital part of your plan. This may take longer but it will be worth it. To not do so is to spend money on what is likely to be an unsuccessful effort. But the right investment can go a long way.

You can follow me on twitter:  @bobosborne17