August 22, 2014

Crowdfunding: From Threat to Friend

You could be forgiven for thinking that the world has gone crowdfunding mad.

From bison ranches (USA) to soccer players (Italy) and – believe it or not – a giant inflatable sculpture of Lionel Richie’s head, it seems that there’s nothing that can’t be resourced through the wisdom and wallets of the crowd.

However, all of the examples above are for, or were initiated by, individuals. So what about nonprofits – how can they use the crowdfunding revolution to aid organisational resilience?

A little over 18 months ago, I wrote an article highlighting how the rapid emergence of crowdfunding sites – that allow individuals to request financial assistance for any number of causes – could potentially be a threat to nonprofits who don’t engage (a concern re-voiced in a recent New York Times article).

It’s pleasing to note that a lot has changed since then, and nonprofits are truly beginning to harness the power of crowdfunding in innovative ways.

The Pioneers

It was fantastic to see educational crowdfunding pioneer DonorsChoose coming in at number 9 on Fast Company’s list of the World’s 50 Most Innovative Companies 2014 – worthy recognition for an organization that has now raised a fantastic $225m for school-based projects.

In the United Kingdom, Cancer Research UK cleverly adopted associated principles within their MyProjects site – a crowdfunding microsite that allows supporters to choose a specific type of cancer research to support.

Many larger nonprofits could choose to do the same, adding an extra layer of choice and emotional return for potential donors.

Getting Started

So what can other nonprofits do?

The first option is obviously to try to seek resources via your own crowdfunding campaign, making the most of one of the many sites who specifically support nonprofits.

Crowdcrux suggests their top ten nonprofit crowdfunding sites here, and the web is awash with advice and guidance on how to start a campaign (here’s Start Some Good’s advice).

Don’t overlook the fact that this could involve something of a shift in thinking for smaller nonprofits tackling online engagement seriously for the first time, and perhaps looking to establish an approach to social media (a great way to start thinking about this is to read Beth Kanter’s book The Networked Nonprofit).

It’s best to start with small aspirations, learn as you go along, and keep on trying.

Strategic Seeding

There are other useful tactics.

In the crowdfunding world, getting off the ground with the first few dollars can be the hardest part. Nobody wants to back a loser, so having your donation total languishing at the zero mark can kill the campaign before it’s begun. With this in mind, some canny nonprofits are utilising any unrestricted donations in the pipeline to kick things off.

For those lucky enough to have a potential donor ready to give them a check, consider this: rather than just thanking them for their largesse, some nonprofits now explore the possibility of using a donor’s gift to seed their next crowdfunding campaign. Even having a few hundred dollars showing on the total makes it look loved, which could attract significantly more.

The Funders’ Tale

It’s not just nonprofits that are thinking through how to make the most of this phenomenon. Funders and foundations are always looking for ways to augment their own investments, and several are considering how they can support and encourage recipients of their grants to make the most of crowdfunding opportunities.

This recent PBS article highlights a potential new trend: The Kansas City Community Capital Fund conducted a pilot whereby six grantees were requested to crowdfund 10 per cent of their total budget of $20,000. All six succeeded.

Not only did a leveraging crowd-fund effort add an additional 10 percent of resource to the Fund’s investment, it also nudged the grantees into experimenting with crowdfunding. Buoyed by their success, no doubt they will try again.  And watch out for more funders adopting this approach to leverage their own assets.

Thinking Sideways

Finally, nonprofits should also start to consider how crowdfunding could be used to further their missions without channelling any money to themselves or their bottom line.

For example, Hopemob features many individuals in need – looking for assistance with basic needs, education, or medical bills.

So, if you work for a nonprofit that directly looks to support people in need financially, you could assist them to set up their own individual crowdfunding campaign. If successful, you would have helped meet their need without impacting your own organization’s scarce resources. In doing so, you may also have spread awareness of the organization and the types of causes you support.

New Networks

If you are part of a broader network or coalition of organizations looking to support front-line causes, you could even establish and run your own site.

A collection of churches in the UK set up Acts 435, a site that allows individuals in need to ask for help. Established in 2009, Acts 435 originally served two local areas, but is now nationwide and has facilitated the donation of over £265,000 to individuals in need of financial assistance. Successful case studies include everything from helping to clear debts to providing much-needed domestic appliances.

These types of request happen day in and day out at churches, that often struggle for funds themselves. By initially investing in a site that enables them to take appeals to the crowd, this collection of churches has helped people in need without troubling their own resources.

For organizations or networks of a certain size, the technology to set up such sites is not expensive, and can both be supported by – and provide significant added value to – offline efforts through existing front-line networks.

Early days

All of these examples point to a growing creativity from nonprofits as to how to make the most of the burgeoning crowdfunding sector.

You get the feeling that this is just the beginning, with much more creativity to come.

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Andy Hamflett
I co-run an independent agency focusing on the practical application of digital technology to support positive social impact. I've published a number of reports focusing on the use of digital technology within the social sector, and I'm fascinated by the potential impact of this area of work. A
Interest Categories: Fundraising
Tags: crowdfunding, fundraising campaign