What can Fundraisers learn from Crowdfunding?

The internet has democratized funding in so many ways. Since the term was first coined in 2006, Crowdfunding has given people with even modest discretionary income the ability to invest in amazing entrepreneurial ventures or support family and friends in crisis. These options provide alternative ways of giving to and supporting worthy causes and individuals, in a way that differs from the experience of giving to a charitable organization. The growth of crowdfunding since 2009, when $530 million was raised by new kids on the block Indiegogo and Kickstarter, to $34B in 2020, shows that you can fund anything through the internet. Why is it so effective?

To start, consider the biggest player in the game: GoFundMe. Since 2010, it has raised over $10B with 150M individual donations. It offers an incredibly fast and efficient way to assist an individual in need, with just a 2.9% transaction fee. Contributions to individuals through GoFundMe are “personal gifts” and are not tax-deductible. However, that might not be important to most folks, since as many as 88% of households are now taking the standard deduction when they file their taxes. What matters is that anyone can log on and learn about someone who is fighting cancer, or starting a community garden, or lost everything in a house fire, or taking their rock band on tour...and they can support them. Donors receive regular updates (sometimes by video), share their gift on social media, and cross the goal line together. It is an incredibly empowering giving experience that resonates with people and will continue to flourish.

The other flavor of crowdfunding is less charitable and more business-savvy. Entrepreneurs have historically needed to fight for the support of wealthy venture capitalists, as well as market their idea to a receptive audience. With Kickstarter or Indiegogo, a new venture can secure seed money and an eager customer base at the same time. Individuals back a product and their investment will ensure that it makes it to market, often with some special perks for them. The feeling of being a part of something important and innovative, and discussing these ideas with like-minded people, is an experience that potential donors are eager to put their dollars towards.

Amid this success, Crowdfunding and social media companies have edged into the nonprofit fundraising industry. GoFundMe Charity hosts nonprofit fundraisers, acting mainly as a transaction processor and promotional website. Since partnering with social media platforms has become an integral mechanic for promoting a crowdfunding campaign, Facebook launched its own fundraiser feature that has raised over $3B since 2015. There are no transaction fees, but this extra feature is good for ad business, and they have recently adapted this service to Instagram. Peer to peer fundraising via social media is becoming an accepted norm with younger users. The average age of a crowdfunding donor is between 24 and 35, and these established digital channels may be able to provide a giving experience that this generation prefers. 

What can fundraisers learn from crowdfunding?

Today it is easier than ever to give and there are so many worthy causes to support, which makes it extremely competitive for nonprofit organizations to get their message out and show impact. Nonprofit organizations can draw inspiration from the experiences that attract people to crowdfunding campaigns. Here are a few places to start:

Show the impact. The most successful crowdfunding campaigns update their supporters every five days, and posting videos is most effective. As venture crowdfunding like Kickstarter shows us, people consider their contribution to be a smart investment and they expect to see a return. One blindspot for crowdfunding campaigns is that they often address individual crises, rather than the root problem. The advantage that nonprofits have is their community partnerships, longevity, and professional expertise. Instead of helping one homeless person, showing that your organization is reducing homelessness city-wide addresses the root of the problem and sets your solicitation apart. 

Provide choices. Crowdfunding websites are appealing because of the amazing variety of stories and opportunities that you can explore. The tangible experience of knowing where your dollars are making a difference is even better if you can choose which priority resonates with you. While organizations won’t be able to offer the same granular variety of options, a breakdown of programs or service sites that need support is what crowdfunders are used to and will come to expect. 

Make an emotional appeal. The success of crowdfunding campaigns that “go viral” comes down to sharing a story that tugs on the heartstrings. These testimonials don’t make a rational appeal, but rather a sympathetic case for support that encourages people to act with compassion. Many nonprofit missions rely on this type of messaging, but for those with a more objective and statistic-based case for support, an emotional narrative can motivate individuals to give and spread the word.  

Leverage peer-to-peer solicitation. Single-tier fundraising appeals involve soliciting an organization’s network, using their donor database, social media followers, or newsletter listserv. Multi-tier campaigns enlist supporters to solicit their own social networks, and expand the reach of a charitable appeal. Crowdfunding is successful because it reaches a wider audience of first-time supporters - as many as 62% of those who give have never supported a crowdfunding campaign before. It’s also more effective to be asked by a friend: People are up to 300 times more likely to donate when a peer asks them, rather than a fundraising professional. Sponsored walks and rides have relied on peer-to-peer for many years, but any fundraising appeal can benefit from peer solicitation. 

Create community online. Fostering relationships between donors and your organization is paramount, but it’s also important to cultivate relationships among supporters. There is community and a sense of belonging to something bigger when people meet others who believe in supporting the same things. The fact that crowdfunding has been able to create a community exclusively online is remarkable. Nonprofit organizations have the ability to host events and in-person experiences, but they also have a responsibility to create community among their online supporters if they want to succeed like crowdfunders have. This comes down to digital engagement, testimonials, and giving supporters a voice on your website and in your publications. 

It’s hard to predict how big the crowdfunding industry will be in ten years, but there is no contest when it comes to the pace of innovation in the past ten years compared to nonprofit fundraising. As crowdfunding becomes a ubiquitous and acceptable way to “give back,” nonprofit organizations must position themselves as contemporary alternatives to partner with when it comes to online charitable giving.