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Jastine Lumbres
by Jastine Lumbres

What Is Crowdfunding?

Funding to make a difference.

The expansion of the online world continues to present opportunities for nonprofits to further their cause around the world. When it comes to putting together a funding campaign for the cause, however, crowdfunding has been at the forefront as one of the most popular and accessible ways to drum up support. Let's learn about why that is and how crowdfunding can be the right fit for your organization.

What Is Crowdfunding?

What is Crowdfunding? 

First thing's first, definitions. A quick search on crowdfunding shows it being "the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet." This may sound familiar, as it is the main framework that pretty much makes up fundraising plans for today's nonprofits. It may also sound familiar because it is also closely related to peer-to-peer fundraising, or P2P. But there are key differences to the two have to be understood before moving forward.

How is Crowdfunding different from Peer-to-Peer Fundraising?

We understand your confusion. The two are always used interchangeably, but peer-to-peer fundraising (though very similar in its own right), falls under the general umbrella of crowdfunding. Crowdfunding is more of a direct form of fundraising as it is your nonprofit itself that has complete control over the campaign, as opposed to peer-to-peer, where donors are the ones who are creating pages but working under your banner. With crowdfunding, your nonprofit has to have an established community and donor list with whom you have successfully connected with directly and have a relationship of trust that will encourage them to contribute to your campaign.

Although crowdfunding has arguably been around since before the Internet through telethons, it only began to really pick up in the nonprofit world in recent years, with $5.1 billion raised worldwide in 2013 alone. The stats, according to MobileCause via Entrepreneur.com, show that with:

• $66 on average donated by a single donor

• $568 average raised by an individual fundraiser

• 62% of new donors gained through a single campaign, with 28% of them more likely to become repeat donors

• 71% of Millennials have participated in raising money for a nonprofit

Before you get started...

By now you've read the stats and probably did your fair share of homework on the subject, as you always should. The numbers don't lie and give us good references, but there are still two important things you must be reminded of before moving forward with crowdfunding: budget and time.

Unlike peer-to-peer fundraising where most resources (both monetary and time) are taken on by the individual donor manning their donation page, crowdfunding requires that your nonprofit be mindful of your budget. Transaction fees and other hidden fee will take up some of your revenue depending on which platform your nonprofit decides to use. Be diligent in browsing through these platforms as your revenue could be drained by those kinds of fees alone if you're not careful. That kind of due diligence takes time, which is something that cannot be skimped on when putting together a crowdfunding campaign. Decide if your organization has the time to invest in planning a campaign, getting it off the ground, managing it, wrapping it up, and accessing it's success. It will be a lengthy process no matter how long the campaign lasts and your nonprofit should be aware of that and ready for it.

So, how does it work?

1. Hone in on and create a very specific, time sensitive goal.

What is it that your campaign is trying to achieve? Don't be vague and generalize when answering that question and creating that goal like "collecting funds to feed the homeless in downtown L.A.," but instead inject it with detail and a time frame, "collecting funds to feed the homeless Christmas dinner in downtown L.A.". As said by Shane Barker to About.com,“short projects consistently raise more capital because the deadline encourages lenders to pledge quickly. In fact, those that last 90 days or more notice a 30 percent drop in success rates.Therefore, make sure that the project length is around 20 to 30 days, so that you can realize the average success rate of 60 percent." Keep those numbers in mind as your construct your campaign.

2. Start small.

If this is your first time trying out crowdfunding or if you are only able to put together a smaller campaign, be realistic about your goal but don't settle. Find the happy medium between the based on your general success rate in collecting donations. Monitor and see how your campaigns works (or doesn't work) out.

3. Up your storytelling game...with video.

What is at the center of your story? Who is the center of your story? What kind of story are your trying to tell? Find ways to draw out emotions and give your audience (after you have done the work of defining who they are) the whole picture. Don’t let your organization’s voice be the only voice, have a mix of testimonials from staff, volunteers, and most especially, from those your nonprofit has helped in the past or are continuing to help.

The best way to successfully do all this and tell your story is through video. According to MobileCause "individuals raise 4 times as much when crowdfunding campaigns are promoted by video." We've already highlighted why video is important to nonprofits, but working within that 2 to 3 minute space can make the difference between a campaign that is able to reach its goal or one that falls short. As with all nonprofit and visual content, don't forget to tailor your campaign and your story so that it is shareable across all social media channels.

4. Get your feet off the ground before the bell sounds.

Before making your campaign public, get in touch with some of your most loyal and/or longest standing donors to let them know about the upcoming campaign and ask them if they would like to jump start the campaign by giving early. If your campaign already hits the web with even a few dollars under its belt, it will give a boost in the campaign's early stages and people will be more likely to give than if your campaign was released with $0.

5. Keep promoting.

Don't forget to promote your campaign throughout the entire process, from the beginning to the end of your campaign. Individualize contact with supporters. Communication is key, as made clear by Slava Rubin, CEO of Indiegogo who highlighted for About.com “that campaigns that communicate more frequently (say, every 5 days or less) raise 4 times the amount of money than those that communicate less frequently (like every 20 days or so).”

6. Stay strong.

Don’t discouraged if the campaign doesn’t take off immediately, it takes time. Some people need constant reminders, others wait until the very end to contribute. That's why the previous point, promotion, is key.

A few things to remember...

1. Encourage newcomers and potential donors.

One of the biggest aspects of crowdfunding is providing incentives for others to donate, such as rewards programs or physical products. Online campaigns (no matter if they are for profit or nonprofit) have already conditioned contributors to expect something in return for their efforts.

But nonprofits toe a fine line in terms of incentives, as highlighted by Robert Wu, Founder and CEO of CauseVox, “The Yale researchers George Newman and Jeremy Shen, found that contrary to expectations, rewarding donors cut donations in most situations. In a nutshell, donors that received a gift, felt selfish, which in turn reduced the motivation for giving." Wu suggests that you think of something only your nonprofit can offer, "impact-focused rewards," such as a handwritten Thank You letter from a child helped by the campaign, or scarf knitted by the needy.

2. Crowdfunding is supplemental, not central.

Crowdfunding is meant to raise money and fundraise for a single project or campaign. It is not going to be the main source of funding for your nonprofit. However, it may lead to annual giving if you are able to gain enough exposure to secure new donors and supporters.

Side note: Ever heard of Google's nonprofit program?

Did you know Google provides nonprofits with $10,000 per month in free advertising credit? This program is known as Google Grants and it's available to almost every 501c3 nonprofit organization. Learn how we can help you get the most out of the Google Grant program. Click below to get started!
There's a smarter way to do Google Grants.

Jastine Lumbres

Jastine Lumbres
Jastine is Elevate Click's first content writer. She received her BA in English from UC Riverside and Master's in English degree from Claremont Graduate University. She currently lives in Rosemead, CA with her family.

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