What is Crowdfunding?

What is Crowdfunding?

Crowdfunding is a method of gaining capital through the collective effort of raising many small amounts of money from a large number of people. This approach taps into the shared efforts of friends, family, and supporters, primarily online through social media, email outreach, and crowdfunding platforms and by leveraging these networks for greater reach and exposure.

Crowdfunding is a tool that nonprofits are just now starting to add to their fundraising strategy. In 2016, nonprofits raised thirty million dollars through crowdfunding. While crowdfunding has been around since the 1700s, modern day crowdfunding started in 1997 and really burst onto the scene in 2009 with the development of well-known sites, such as Kickstarter, GoFundMe, and Indiegogo. Websites like these are typically used to help fund a start-up concept or project. The most successful crowdfunding drive so far has been a Kickstarter idea for a smartwatch called Pebble Time. Although atypical of most crowdfunding campaigns, Pebble Time raised over $20 million in 32 days.

Nonprofit crowdfunding facts

  • 62% of individuals who give to a crowdfunding campaign are new donors

  • 28% of donors will give again

  • A study done at Yale University in 2012 found that offering a thank you gift in exchange for a crowdfunding donation decreases donations made

  • 46% of nonprofits are using Facebook to fundraise

  • Small organizations experienced a high level of growth (around 27%) once developing their online revenue

  • 68% of users will seek out information if a friend posts about it

Is crowdfunding right for my organization?

Crowdfunding takes a lot of time, staff, and resources to be successful. Campaigns aren’t guaranteed to reach their desired goal just because they were created. Leveraging your network, supporters, and friends is what will make your campaign a success. The importance of outreach is to persuade someone to support your cause by making a donation, whether that be big or small.

Components of a successful crowdfunding campaigns

  • video

  • compelling story

  • attainable goal

  • pledges secured

  • robust outreach

  • donor retention

Crowdfunding with ServiceYear.org is right for your organization if you have:

  • 1 month planning period

  • 30 days to run a campaign

  • 3+ staff members who are willing to aid in running the campaign

If crowdfunding with ServiceYear.org doesn’t feel like the right fit for your organization, you may want to consider focusing your time on developing your individual donor strategy or finding and writing grant proposals. Both of these are valid development strategies, and done well, can be a real asset to your organization.

Outcomes of crowdfunding that will benefit the organization besides reaching the financial goal include:

  • Gaining volunteers and supporters of your cause

  • Raising public visibility of your organization

  • Expanding your donor base

Questions to consider:

  • What are you trying to accomplish by crowdfunding?

  • How will you define success in this campaign?

  • Are you pursuing funds that are needed or desired? Or both?

  • If this campaign isn’t successful, what other funding options do you have?

  • Does your organization have the capacity to carry out a crowdfunding campaign?

 

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What is Crowdfunding?
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