Fundraising Goes Digital—Why Nonprofits Are Adding Crowdfunding Platforms to Their Giving Strategies
By 2025, the crowdfunding industry is expected to grow to more than $300 billion. In a nutshell, crowdfunding is raising money through many relatively small donations during a set period of time, typically for a specific campaign or goal, through an online platform.
The tactics behind crowdsourcing are certainly nothing new for nonprofit organizations. But thanks to websites and apps, like Kickstarter, Indiegogo and a host of smaller and more specialized providers, crowdfunding has never been more popular. It’s shaking up the entire fundraising and donation process—from who’s asking for money, who’s giving it and what they expect in return. Crowdfunding may offer rewards or incentives connected to the campaign based on the amount donated.
For nonprofits that ignore this growing influence, crowdfunding could serve as a major disruptor as more would-be donors seek out new ways to give. But for nonprofits tuned in to harnessing the power of crowdfunding to increase donations, the fast-growing sector represents a huge opportunity.
Here’s a closer look at four ways crowdfunding is creating better fundraising opportunities for nonprofits and how organizations can best take advantage of these prospects.
1. Maximize the Impact of Advocates—and Their Networks
Crowdfunding is built on people who believe in your cause. For nonprofits, getting advocates to share the campaign with their networks is crucial. Every share is like a personal endorsement of the cause and campaign. Of course, social media is the key medium for spreading the word. These shares can have a compounding effect as friends and family share with their networks, increasing exposure and the number of potential givers.
Nonprofits should prioritize making their campaigns easy to share and compelling. Creating a call-to-action that makes it easy for others to communicate the importance of the campaign is crucial. What’s more, research shows adding personal videos and stories to your campaign can considerably increase the amount raised. Organizations should look to their most vocal supporters and “digitally deputize” them to take ownership over a campaign. In these cases, make sure the crowdfunding campaign is structured so donations go directly to the nonprofit, not any intermediary. This ensures the tax deduction goes to the actual donors.
2. Eliminate Barriers Between Donors and Your Cause
With a compelling message and a team of committed advocates, a nonprofit’s giving request can spread far and wide—using the right platform. It’s important to take a look at the fine print when choosing between services. Some platforms, like Kickstarter, utilize “all-or-nothing” funding, meaning a project is only funded (and donors are only charged) when a project meets a funding goal established at the outset of the campaign. Others, like Indiegogo, can be structured so an organization keeps the money it raises whether it meets its goal or not.
Virtually all platforms take a cut of the money raised. Nonprofits need to look at the tradeoffs of working with specific sites. Defined platforms make creating, maintaining and sharing the campaign easier. Kickstarter has a built-in audience—it’s hosted more than 400,000 campaigns as of April 2018. On the other hand, nonprofits that put the work into creating their own customized campaigns keep 100 percent of the amount they raise.
3. Create a Direct Call-to-Action With Clear Benefits
In many cases, effective crowdfunding creates a specific ask that’s a subset of the organization’s overall mission. Defining the scope of the campaign is important. Fundraisers and supporters should be able to state the goal of the campaign in 10 words or less.
Nonprofit organizations should put some strategy behind the donation levels they ask for and the incentives they might provide. These statistics uncover some clear best practices:
- The average successful crowdfunding campaign raises around $7,000.
- The average campaign lasts around 9 weeks.
- Campaigns that can gain 30 percent of their goal within the first week are more likely to succeed.
4. Supplement Traditional Fundraising Strategies
Nonprofits shouldn’t rush out to cancel their annual black tie gala or direct mail campaign and push all their efforts toward crowdfunding. A so-called “old-school” fundraising mentality should still be the central strategy behind many initiatives.
But nonprofits need to recognize that donor demographics are changing. More and more Millennials are finding themselves at a point in their careers and their lives where they’re able to give. They have different expectations around technology and don’t want to donate like their parents did. With the right preparation and execution, crowdfunding can be an excellent way to reach these would-be donors and round out an effective fundraising strategy.
Matthew G. McCrosson is a Partner of the Firm and has more than 20 years of experience in public accounting. He provides a broad scope of management advisory services to a diverse range of clients, including business finance, operations, technology and performance improvement. Matt has significant experience in planning for organizational change, helping his clients remain on track in a rapidly-changing corporate environment.
Prior to joining PKF O’Connor Davies, Matt held a senior position at a Big Four accounting firm and focused on clients in the not-for-profit, higher education and government sectors. Earlier in his career, Matt served as the Chief Operating Officer or Chief Financial Officer for several national and regional not-for-profit organizations, including the March of Dimes Birth Defects Foundation and the New York Urban Coalition.
Matt regularly speaks on the topics of financial reporting, organizational efficiency and operations management. He is a dedicated volunteer and sits on numerous not-for-profit organization Boards.
Elizabeth Gousse is a Consulting Services Senior Manager with the firm. Liz has more than 15 years of operational and organizational consulting and management experience. Liz specializes in developing & performing grant compliance reviews, new business initiatives, internal control reviews and mergers and acquisitions implementation. She has experience in federal grant compliance, benefits analysis, financial analysis and research. Prior to joining PKF O’Connor Davies, Liz was associated with a consulting firm in Boston, Ma., where she served as Vice President of consulting services.
Liz is an active member of the consulting industry, combining the areas of finance and compensation and benefits. Her engagements have required her to perform internal control reviews, operational assessments and grant compliance monitoring. Liz has specifically been involved with engagements that review the processes and controls of the following areas:
* Organization and Operational Reviews
* Grant monitoring and administration
* Due diligence reviews
* Cash management
* Payroll and time reporting
* Accounts payable
* Financial reporting