What is Crowdfunding, and how can NGOs use it to their advantage?

By Raevyn Goates

When running a non-profit organization, one can use any funding they can find. There are the traditional methods of finding money: government and corporate grants, campaigning, courting major donors, canvassing, event and product fundraising, and many others. One of the most promising methods is Crowdfunding. Crowdfunding is a fairly new method, and while still relatively overlooked or unknown, it is rapidly growing.

Before talking about the benefits and drawbacks of Crowdfunding, we must first understand what it is. Crowdfunding is a collective effort of individuals to raise money for a cause they believe is worthy. Instead of one person or group funding a project, as with grants, a number of individuals donate money. This method is often done online, and is dependent on social media. There are a number of websites devoted to Crowdfunding, including the popular and successful Kickstarter website. There are over 450 Crowdfunding websites. Looking through that many websites can be intimidating, so Forbes created a list of what it considers to be the 10 best crowdfunding websites at their website. Crowdfunding can be used to raise number for any number of projects, from making a video game to helping provide food and other resources to disadvantaged communities. Crowdfunding is rapidly becoming a popular way to raise money. According to the Crowdfunding Industry Report, crowdfunding globally raised over $2.7 billion for projects. The official numbers on 2013 have not been released, but it was expected to increase by 81% that year, up to $5.1 billion globally.

Why is Crowdfunding becoming so popular? Crowdfunding particularly benefits non-profit organizations, small businesses, and independent entrepreneurs. People in these groups are finding it harder and harder to find funding through more traditional means, such as grants. Grants are difficult because only a certain number of recipients will be awarded a specific amount of money. This limits prospects, and means that many promising ventures are never given a chance. With crowdfunding, people donate to the causes that they support, to make changes that they want to see.

Crowdfunding can be done globally, nationally, or locally. Depending on the project that needs funding, it may be better to look for local crowdfunding groups rather than global or national ones. One local Crowdfunding group for Colorado is Neighborhood Catalyst. There are advantages to local crowdfunding over more wide-spread campaigns. Neighborhood Catalyst points out that with local campaigns, a donor can actually see the changes that they supported and funded take place. This provides the donor with an opportunity to be actively involved with the project, should they choose to be so. However, it is important to remember that local crowdfunding will limit the size of the crowd you reach out too. The importance of the size of the donor pool depends on the project and is up to the people in charge of the project. Crowdfunding, particularly locally, can be used to create a community network and strengthen existing ties. Even if a project does not meet its funding goals, it can still benefit from the process, having created a community support network that they know they can turn to and ask for help the next time they try to fundraise. It allows people who do not have any extra money to give to still participate and support the project, and promotes skill sharing. Building this network may not be easy, but it is important to the success of the project meeting its funding goals. In fact, Neighborhood Catalyst claims there are two stages to Crowdfunding: the first is to build the network. This allows people to pitch their ideas to the community to see if it is something that they are interested in funding, and receive feedback. The second stage, actually raising the money, comes only after the network is created and the project has been carefully planned and revised based on community suggestions.

So, after reaching out to the community and building a network, how does one make sure that their Crowdfunding venture is successful? According to a webinar given by Neighborhood Catalyst on February 27, the main key to success is to make sure that you set clear, reasonable, and realistic goals. Explain exactly what the money will be used for: rather than same something vague, such as “I need the money to get my business started,” be specific, explaining that “I need the money to rent an office space.” You also need to be able to clearly and concisely answer questions about your project: what impact will the project have? What is the focus of the project? What is your plan for the project after you have funding? You can’t just wing it after you get your money, you have to have a plan of action outlined, so that donors know what your next steps will be. They want to know their money won’t be wasted, and providing a plan of action is a good way to assure them that it won’t be, to let them know that you are responsible and can be trusted to do what you say you will. Think about what resources you will need, and make sure to think out of the box. Resources are not just funding, a meeting space, and supplies, but can include other, less obvious things as well. For example, you may need volunteers to help distribute food or set up a community garden. Volunteers are invaluable, but may not be something that you think of when you hear the word “resources.” Choose your deadlines carefully: Neighborhood Catalyst claims that shorter fundraising periods have more success, and that donors are most interested in donating to the cause at the beginning and at the end of the fundraising period. Also of import, though perhaps so obvious it shouldn’t need to be mentioned, is to make sure you seek the right audience. Reach out to communities and networks that are already in place, and use electronic media and communication to find and research individuals and groups who are interested in the causes you are working on.

Crowdfunding is one of the newest and most promising methods of fundraising for non-profits and independent entrepreneurs. It allows donors to choose projects they support, and builds a community of supporters, creators, and donors. With careful planning and a strong support network, it can be a very successful fundraising method.

Works Cited

Crowdfunding Industry Report http://research.crowdsourcing.org/2013cf-crowdfunding-industry-report

Forbes http://www.forbes.com/sites/chancebarnett/2013/05/08/top-10-crowdfunding-sites-for-fundraising/

Neighborhood Catalyst http://neighborhoodcatalyst.org/en/projects

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