Is Crowdfunding Right for Your Nonprofit?

For this month’s Connect theme, a number of speakers are previewing the great breakout sessions they are preparing for the 2015 Nonprofit Technology Conference in Austin, TX March 4-6. Following is a preview of one of over 100 breakout sessions.

Nonprofit organizations are always looking to find new and exciting ways to engage past and potential donors, especially considering how important multi-channel fundraising is becoming.

One of the most exciting but misunderstood ways to raise money is crowdfunding, defined by Wikipedia as “the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations.”  In anticipation of the 15NTC panel “Beyond The Finish Line: Integrated Social Fundraising” that I’ll be presenting alongside some other wonderful nonprofits, I wanted to flesh out how crowdfunding compares to the overall idea of social fundraising.

Before you join the crowdfunding frenzy, it is important to ask yourself the following question: Is crowdfunding right for your nonprofit?

The answer is: it depends. As part of an organization that initiated one of the most successfully-funded comic book campaigns in Kickstarter history, I understand the allure of crowdfunding for your nonprofit. Yet many factors need to be taken into account before initiating a campaign.

Will crowdfunding help your mission?

The most important factor when evaluating any fundraising strategy is how it articulates and connects to your mission. The core idea behind crowdfunding campaigns is that they are stand-alone and have a defined end to their “ask” period. Some great ways that crowdfunding might work for your organization are:

  • Project- or program-specific campaigns
  • Capital campaigns
  • Peer-to-peer fundraising campaigns tied to an event

Crowdfunding platforms, like IndieGogo and Kickstarter, can be useful for these types of defined campaigns but should be viewed as part of a larger strategy of fundraising. Nonprofits should not “make the mistake of thinking that these sites are magical cures for all of their revenue woes” (“How to Use Crowd-Funding Sites to Raise Money for Your Non-Profit,” The Fundraising Authority) 

A great stewardship program that rewards donors with direct communication, updates on the organization’s progress, and makes donors feel like they are part of your mission should be the foundational goal of any fundraising effort, crowdfunded or not.

Have you weighed the costs and benefits?

The obvious costs and benefits when evaluating crowdfunding as an option are the fees associated with any service that you choose and the potential income. Some crowdfunding services actually have plans built for nonprofits, but do the research into the realities of what payment processing fees will be applied if you succeed – or fail!

However, the cost/benefit analysis needs to go further than just how much money you may receive after processing fees are taken out. To successfully run a crowdfunded campaign, your organization will need to invest time, energy, and social capital to reach out to your network. Some great questions to ask when considering crowdfunding are:

  • What is your organization’s staff and volunteer capacity for marketing a crowdfunded campaign?
  • Will your donors understand the crowdfunded program’s place in your overall fundraising strategy?
  • How much time will your organization need to spend on fulfilling pledged benefits after the campaign is completed?

Furthermore, what about the data from your campaign? Your organization should make sure that you have a strategy to not only get any data from a crowdfunded platform into your CRM, but also steward your new donors as part of your overall fundraising strategy.

Is crowdfunding the same as social fundraising?

In many ways, crowdfunding is closely connected to social fundraising. However, the idea of social fundraising is more focused on empowerment of constituents to raise money for you as opposed to “buying” a stake in your project or mission’s success, like crowdfunding.

With social fundraising, the reward is more focused on raising the most money for the organization.  With crowdfunding, there may be actual physical items associated with a pledge level.

The real point of either crowdfunding or social fundraising is ensuring that your message is always rooted in the core of your mission. If it becomes transactional in nature, then there is a very high chance that your campaign has lost its way.

How can I best leverage social media for crowdfunding?

This is perhaps the toughest thing to ensure an accurate answer for, since the idea of something being “viral” is not something that can easily be “bottled” and shared.

What will make something easily shareable across social networks will be a combination of three basics:

  • Easy to understand
  • Easy to identify with
  • Easy to quantify success

What this means is that your potential donors should be able to pick up on the message, think it applies to their lives, and understand that it will make an impact as soon as possible.

Different social media networks will showcase your mission in different ways, so ensure that the proper ROI is being invested in each.

So is crowdfunding right for your organization?

Crowdfunding is potentially a unique and exciting way to engage new and existing donors to your organization, but it should never take the place of good old-fashioned stewardship. The best crowdfunding campaigns will articulate your mission, engage your donors, and invest them in your organization’s success well beyond the end of the campaign.

Tim Sarrantonio
Tim Sarrantonio is Director of Business Development for z2systems. He has over ten years of experience working for and volunteering with nonprofits. He has raised over $3 million for various causes, created and overseen exciting events like the Half Acre Charitable Chili Cook-Off for The Arts of Life, engaged and enhanced databases of all sizes, procured multiple successful grants, and formulated engaging communications and fundraising campaigns for several nonprofits. He currently serves on the board of directors of both the award-winning theater The Neo-Futurists and the internationally-recognized comic books and literacy nonprofit Reading With Pictures.