Crowdfunding for Nonprofits: Experimentation Mandatory

 

Crowdfunding

May 13, 2013; TechCrunch.com

It’s getting crowded in the crowdfunding field. That’s according to TechCrunch.com, which reports that the British nonprofit Nesta has included thirty-one different crowd-funding websites in its newly published directory. The Nesta sites are oriented toward funding nonprofit innovations in the United Kingdom. Whether thirty-one is too many or not enough, these websites represent only the tip of the iceberg in terms of the exponential global growth of crowdsourced funding mechanisms.

The sharp upswing in crowdfunding, which is nothing more than old-fashioned networking to attract resources amped up by the Internet, is fueled by the poor economy and credit crunch. In 2011, over 450 crowdfunding websites generated $1.5 billion in wide-ranging investments from private business equity to arts patronage and charitable donations. Last year, crowdfunding websites raised $2.7 billion worldwide from individuals—an 81% increase in one year. And that amount is expected to nearly double again, growing to $5.1 million in 2013. North America is currently the epicenter of crowdfunding, accounting for over 60% of global activity.

Nonprofits and other creative projects with non-financial rewards for investors are prominent on the crowd-funding marketplace. NPQ recently covered two Chicago based nonprofit crowdfunding projects, here and here. At the global scale, over half of the funds raised globally in 2012 were invested in charitable organizations or other projects with non-financial rewards. Nesta, the U.K. based charity, estimates that crowdfunding in that nation has the potential to meet 50% of the charitable sector’s needs (and 20% of the arts funding needs as well).

As crowdfunding grows, and especially as it grows into such mainline business financing activities as secured lending and equity investments, it’s becoming subject to increased regulatory scrutiny. In the U.S., for example, the Securities and Exchange Commission is now establishing regulations to govern crowdfunded equity investing, as stipulated in the 2012 JOBS Act. From a policy standpoint, nonprofits interested in economic development and asset building especially in poor and remote communities may want to track these developments and their potential for increasing capital access.

From a charity standpoint, the crowdfunding phenomenon bears investigation by all nonprofits. The experience of early adopters from both commercial and nonprofit sectors suggests that web-based crowdfunding solicitation provides rapid, useful feedback about the soundness of an idea. It can reach niche markets and special interest groups efficiently across wide geography. Through interactive messaging and video updates, it helps project sponsors and investors to build strong connections to a shared vision over time that can result in longer term funding partnerships.

Crowdfunding won’t fit all needs, of course. But if you aren’t looking into its potential yet, what are you waiting for?—Kathi Jaworski

  • MARGOT S SWANN

    Crowd Funding is very excited for a nonprofit like ours that has limited appeal for grantors. We have been educating, supporting and connecting divorcing families with information, resources, and each other for 15 years through our programing. As we expand and our infrastructure grows we seek to be less dependent on confliciting fund sources like divorce attorneys.

    We do need help in orchestrating this, however.

    Margot Swann
    CEO
    Visions Anew Institute, the Divorce Resource for Families

  • Kathi Jaworski

    There are lots of great web-based resources to get started: Here’s one that I came across in writing this article, from U.K. based Nesta. The examples are U.K. based, but the tips are universal. Good luck!
    Kathi

    http://www.scribd.com/doc/142720716/Working-the-Crowd

  • Alex Feldman

    To see crowdfunding sites that are in USA and the rest of Europe check out http://crowdsunite.com . If you filter by donations it will show you all donation site, going into their profile will tell you if they are aimed only at the non-profits. If you are a non-profit you should use a crowdfunding site aimed at non-profits because all donations through those sites will be tax deductible in the USA.

  • Jeffrey Rodman

    Crowdfunding for nonprofits is not new… but it is fresh! It is not unique… but it is different! It may be more the latest fundraising transformation than the latest innovation… but still, we ignore it at our peril. We have all seen the fundraising waves come in and go out. Some waves we watched and others we rode and held on for the ride. I intend to keep a pretty sharp eye on the crowdfunding wave and I think it will be one worth riding.

    We have started running campaigns, designing effective campaign models, and analyzing and testing the multitude of platforms. In particular I work with Christian ministries and churches which are usually years behind on utilizing current techniques and models. If you want to follow what we are doing in this space follow us on Facebook https://www.facebook.com/Here4YouConsulting or at our website http://www.npfunds.com.

  • Rob Wu

    Crowdfunding is booming for industries all around, and it is making nonprofit fundraising an interesting place these days.

    If you’re looking to get started, we recommend that nonprofits follow four tips:

    1. Have a narrow scope (be specific in what you are crowdfunding for)
    2. Have a fixed duration campaign
    3. Target a specific audience that will resonate with the campaign
    4. Be able to quantify your impact via impact units — this also drives tiers of giving

    If you’re looking for more tips on nonprofit crowdfunding, check out our crowdfunding blog (http://www.causevox.com/blog)