Yes, Crowdfunding is an Option for Your Nonprofit

May. 03, 2018

Fundraising is continually a significant concern for nonprofit organizations. Attracting and retaining donors can be difficult, requiring communication, trust, and a lot of hard work. Many individuals want to donate to causes that are important to them, but how do they find out about lesser-known options? What if your nonprofit operates on the other side of the country from an individual who would do anything to support your cause? How can your charitable organization connect with that individual and build a lasting relationship?

 

According to the National Council of Nonprofits crowdfunding can be a great way for nonprofit organizations to reach these individuals and raise funds. A crowdfunding campaign is a way to obtain funding from a variety of individuals, including those across the globe. It is typically centralized on an online platform and is marketed through social media and other online avenues.

 

There are four main types of crowdfunding:

 

  • Donation-based crowdfunding (such as the natural disaster relief noted above)

  • Equity crowdfunding (investors receive equity in exchange for their contribution)

  • Peer-to-peer lending (similar to a bank loan, but the borrower makes an interest payment to investors)

  • Rewards-based crowdfunding (some sort of incentive is given to contributors)

 

A nonprofit organization that wants to raise money through a crowdfunding campaign would use traditional donation-based crowdfunding through a portal that specifically facilitates nonprofit crowdfunding, such as Causes or StartSomeGood.  Its important to note the crowdfunding portals may be specialized their reach. 

 

An important aspect about crowdfunding that is often missed is that crowdfunding not only helps in raising funds for a nonprofit; it also spreads the word about the nonprofit and its work and mission. A nonprofit can leverage more support and more funds, and accordingly make a larger impact.

 

Many nonprofits chose to run a donation-based crowdfunding campaign, relying solely on the generosity of donations from individuals. But charitable organizations should also consider a rewards-based crowdfunding campaign to generate more interest and provide thank you gifts to contributors. Check out an overview of how rewards-based crowdfunding works http://nonprofithub.org/fundraising/5-ways-nonprofits-can-use-rewards-based-crowdfunding/here.

 

Running a crowdfunding campaign isn’t all sunshine and roses. It requires grit and determination in order to rake in the donations. Nonprofits have different goals from the average for-profit company; therefore, they have different needs in fundraising. Keep reading to learn what you need to know before running a crowdfunding campaign for your nonprofit.

 

 

 

How Does Your Organization Kickoff a Crowdfunding Campaign?

 

Before you can run a campaign, you need to get everyone on board. To gain momentum for success, the whole organization has to buy-in to the fundraising effort. How do you encourage this total buy-in? Make a plan. Set goals. Be informed. Get excited. Hard work starts prior to day one, before the campaign even gets up and running.

 

Once the whole organization supports the crowdfunding project, the fun really starts. Depending on the size of your nonprofit, appointing a host committee to be in charge of the project can create a sense of ownership over the campaign. This committee can take control of preparing for the campaign and should work to create a buzz for its future launch. Reaching out to current donors and others within the organization’s network and your personal network can help kick off the campaign with early support. A crowdfunding project that is backed by early support can drive outside donors to contribute, as the campaign looks successful.

 

While getting support from current donors might be easier, reaching out to new donors can prove challenging. It important to understand your target audience—who exactly are you trying to reach and what are they looking for? Once you determine who your audience is, your next step is finding out why they would contribute to a crowdfunding campaigns.

 

Generally, if we reimagine the classic marketing mix of -- product, price, promotion and place --  to a nonprofit crowdfunding campaign , contributors to crowdfunding campaigns do so for the Nonprofit Four P’s:  Purpose, Participation, People, and Perks.

 

Contributors donate first and foremost to a nonprofit organization because of the organization’s purpose; they believe in the nonprofit’s cause and want to help the organization reach its goals. In the social media era (and even before), people are motivated by the recognition that accompanies donating to a nonprofit. Contributors can share their participation in the campaign with their friends on social media, earning them public acknowledgment. But others participate because they want to be involved with a good cause or they care about the people who run the nonprofit or are being served by the nonprofit. Friends and family members want to support their loved ones and donate to the organization to show that support. Finally, some people contribute to crowdfunding campaigns for the perks; they receive an incentive for donating, such as a t-shirt. The Four P’s intermingle. Some people contribute for one reason; some contribute for multiple reasons. Understanding the different reasons people in your target audience will contribute can be vital to creating a successful campaign.

 

Once you’ve gained this knowledge, you need to consider how you will thank those who contribute to your campaign.

 

How Can Your Nonprofit Show its Appreciation to Contributors?

 

It’s common sense that people who donate deserve a thank you. There are many ways your nonprofit can go about showing its gratitude to crowdfunding donors.

 

First, a good old-fashioned, personalized thank-you can go a long way. This doesn’t necessarily mean a thank-you card–though, that isn’t a bad idea! Put on your creative pants and have a little fun with it. Try tying your thank you gift to your nonprofit. If you operate an opera group, you can thank donors by having members call and sing. Maybe your animal rescue sends a photo of a puppy that benefitted from the donor’s contribution. Sometimes, a simple shout-out on Facebook or Twitter can do the job. It’s the thought that counts here.

 

Another great option associated with rewards-based crowdfunding is providing a free gift to contributors. When deciding whether to donate or not, some people rest their decision on the fact that they will receive a free goodie. Others just consider the gift as a great perk when contributing to a cause they want to support. In creating your campaign, you can choose to design t-shirts, mugs, and calendars–basically anything you can think of–to send to contributors. If you include your nonprofit’s logo, the gifts will also be free advertising for your nonprofit. If your nonprofit has a product or service, you can also choose to provide that to donors.

 

One final option is to have measurable outcomes associated with your campaign. Donors feel appreciated when they see how their contribution made a difference. For example, make it clear to supporters that every $100 received by the campaign will provide a well to a community in Kenya. It’s easy for donors to see their individual impact with a measurable outcome like this.

 

Remember, this list is not exhaustive; there are a million ways you can thank your donors. Chose something that works best for your nonprofit, but remember, people are more likely to donate again when they felt their initial donation was acknowledged and appreciated.

 

Common Mistakes Nonprofits Make when Crowdfunding

 

As discussed above, a crowdfunding project is no simple task, and the last thing you want is to put in all that work and end up with a total flop. While no project is guaranteed to be successful, you can put yourself ahead of the game by avoiding the following common crowdfunding mistakes.

 

  • Unclear goals or no set goals.

  • An uneventful campaign (no video, same old media)

  • Avoiding social media.

  • Failing to get the whole organization on board.

 

These common mistakes can be addressed in the initial planning stage of a crowdfunding campaign. Creating realistic expectations and a viable plan–then sticking to that plan–can lead to a more successful campaign.

 

Social media is a great way to expand visibility and recognition of your crowdfunding efforts. You want to create positive interactions with your potential donors, and social media offers a stellar avenue to do so. Creativity is a major plus here. Contributors also appreciate a campaign that is backed by an entire organization. They want to see how much support the nonprofit has, and it doesn’t hurt to have more people engaging in the campaign.

 


Written By:
Kimberly Lowe

For almost 20 years Kim Lowe has lawyered from the trenches. Kim lawyers from experience, using her knowledge of the law and understanding of how both for-profit and nonprofit business enterprises operate.

Emilee Walters is a second year law student at the St. Thomas School of Law. Emilee is our first Avisen Fellow alum exploring a legal career in business law.

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