Crowdfunding as a funding tool is gaining popularity among nonprofits. Crowdfunding refers to individuals pooling their money in small contributions to fund large projects, products or causes. Take a walk down memory lane. Remember how volunteers from nonprofit associations used to go door-to-door to collect donations and pool those individual contributions to fund socially relevant projects? Crowdfunding is sort of like that.
Thus, the origin of crowdfunding could be traced to nonprofits and their traditional methods of collecting funds in person. But in modern parlance, crowdfunding usually refers to doing the same thing via the internet. Though the traditional ways still prevail, the online funding route has the most momentum.
Code.org, a Seattle-based nonprofit organisation, demonstrated how nonprofits can effectively use crowdfunding to support their cause. The organisation was founded by Hadi Partovi with the vision that every student in every school should have an opportunity to learn computer science. In 2014, Code.org launched the ‘Hour of code for every student’ campaign through Indiegogo with a target of imparting ’an hour of computer science education’ to 100 million students around the world. With support from dignitaries and executives like the U.S. President and officials from technology companies like Microsoft and Apple, the campaign was a massive hit. With an ambitious target of USD $5 million, the campaign is considered a trailblazer in non-profit crowdfunding.
Why should nonprofits try crowdfunding?
- Operational Cost: Apart from raising funds for their initiatives, nonprofits also need funds to manage their operational expenses. Crowdfunding could be a solution. ‘Start from Seed’ is a nonprofit organisation that provides maternity care services and education. They approached donors through Rally, a crowdfunding platform, and successfully raised enough to pay rent one year in advance. This meant a lot to the small non-profit.
- Simple: Isn’t it great to know you can generate money with the click of your mouse? Though in truth it’s not quite this simple, many platforms are very user-friendly. With proper planning, crowdfunding can turn out to be simpler than many other alternatives.
- Inexpensive: For cash-strapped nonprofits, crowdfunding platforms are a great relief, as they can save the costs of hosting major events. Moreover, many sites have recently reduced their platform fees for nonprofits, which will bring down your operational cost and optimise your cost-benefit ratio.
- Publicity: Crowdfunding is also a convenient way to create media buzz. This publicity increases awareness of your campaign and helps you attract volunteers more easily. Also, the media attention for your new initiative will benefit your organization.
- Tracking funding patterns: Many platforms offer extended services like analytics to track fundraising patterns. These can be used in upcoming projects.
- Reach: Crowdfunding enables you to reach out to a wider group of people who share similar values.
- Objective: having an objective is vital. See to it that you don’t deviate from your organisation’s goals. Launch only those campaigns that are connected to your organisation’s vision and aim.
- Right platform: Once you decide to go for crowdfunding, choosing a crowdfunding platform is the crucial next step. There are different platforms, like traditional ones or peer to peer. You may even host a site of your own and use that for crowdfunding.
- Plan well in advance: If you start off with proper planning, crowdfunding can help raise funds faster than traditional methods. As with all crowdfunding, publicity is critical. ‘An Hour of Code’ was announced two months in advance.
- Developing the Storyboard: Storytelling is crucial. Make videos and update at regular frequencies. While making videos, let it be more about the beneficiaries or donors than about the organisation, as this strategy evokes a better response.
- Prelaunch: Start off by launching your campaign with your existing donors. You may even try a soft launch before the actual launch, as this can help you gain some traction.
- Rewards: Remember that donors play a vital role in nonprofit funding. You can differentiate your campaign from the typical ones by offering rewards that are different from the usual tax receipts. If you’ve been on the scene for a long time, make use of the brand value of your non-profit. ‘Hour of code for every student’ mentioned ‘the ability to make a huge impact’ as one of their perks and highlighted that contributing USD $10 would educate 300 students.
- Keep track of the funds: Nonprofits need to maintain transparency. So account for each penny and communicate this information to the donor. Donors may use evaluators like Charity Navigator, which provides ratings of charity organisations. Your reputation as a nonprofit matters a lot, and slight harm to your reputation can wash away the purpose of the entire exercise.
Rome wasn’t built in a day…
When all is said and done, never believe anyone who tells you that crowdfunding is a bed of roses. It’s not so!
Volunteer support: Success in crowdfunding is always hard-earned. It comes only when you put in considerable hours of planning, developing and implementing an excellent PR strategy. It‘s not only the expenses – many volunteers must put in a lot of time and effort to make the campaign a success. So opt for this route only if you’re prepared for hard work and have supportive volunteers.
Legal Issues: Also remember that, by opting for crowdfunding, you’re not fleeing red tape. Though charitable solicitation laws in most countries do not yet address crowdfunding, nonprofits are obliged to look upon this in the same way as any other fundraising activity and ensure they act within their legal limits.
The Bottom Line
More than any other organisation, nonprofits have realised the advantage of pooling funds. Despite this, many nonprofits across the world are hesitant to extend their boundaries and are reluctant to explore new avenues of funding. Explore, differentiate, use technology – and make sure you realise your dreams and those of your beneficiaries!