Crowdfunding 101: A Comparative Look at Kickstarter, Indiegogo and Razoo

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Buzzwords and catchphrases evolve when there is some cool opportunity for success. People get excited, and sometimes we realize that “easy” success actually only works in very specific circumstances. One of today’s buzzwords is crowdfunding.

First, some definitions. This isn’t crowdsourcing, which is another popular buzzword. Crowdsourcing is creating something by dispersing the task of creating it to many people. It’s possible to crowdsource writing a book, for example. However, when people fund the work of a single editor who turns that crowdsourced content into a coherent narrative, that is crowdfunding. Crowdfunding is not the same thing as fundraising for ongoing operating support. Building a base of small donors and trying to get large amounts of money is an important, ongoing operational goal, but that’s just fundraising. There may be some new tools to do it, but it is as old as the nonprofit sector itself.

The closest parallel to the 20th century nonprofit world would probably be the capital campaign. Here, nonprofits would make requests for large goals on a fixed timeline, often to buy a fixed asset like a building. The old-style capital campaign has taken a beating in the post-2007 economy, as the primary way this was done relied on large-scale donations from small numbers of well-off individuals and institutions. Many of these took large portfolio hits five years ago and aren’t recovered to the point where they will make big investments again.

In contrast, crowdfunding takes the small-donor base and adds the one-time effort emphasis for specific, defined purposes. This is only practical if the cost of reaching donors is practically nil (there are typically no in-person visits from the president with a $10 glossy for your capital campaign in crowdfunding), and if you can reach a lot of them. If your nonprofit is going to reach a large enough base, you’ll probably need to rent some infrastructure. The big players are Kickstarter, Indiegogo and Razoo.

Kickstarter

One often hears about the success of Kickstarter campaigns (for instance, see here and here). Kickstarter applies an “all or nothing” model, meaning you have to reach a minimum pledge level (you get to define that) or none of the pledges are collected. Persons who said they would kick in are off the hook and not charged a dime unless you get a big enough crowd (or a few very generous individuals).

Kickstarter takes a five percent processing fee, and their credit processor (Amazon—so you need an Amazon account to pledge) takes another three percent or so, but for the value of international reach, that’s not a bad fee. Kickstarter is great for smaller projects (average funded projects are only $5,500, but you can ask for more). Kickstarter refuses to fund general operations, so projects have to be unique. The most successful projects have donor rewards at different levels, but nonprofits are the masters of putting a name on a plaque or sending a tote bag, so probably no concern there.

Indiegogo

Indiegogo doesn’t have the same restrictions about project funding as Kickstarter, so you can be more flexible in defining your goals. You can also choose whether or not to use the “all or nothing” model or to keep any pledges whether or not you reach your goal. If you don’t reach your goal, the fees are higher than Kickstarter, but they’re lower than Kickstarter if you do. The best example of a nonprofit using this crowdfunded channel is the Tesla Museum, which raised $1.4 million against an $850,000 goal. The “Let’s Build a G–D— Tesla Museum” project, as NPQ recently noted, had Matthew “the Oatmeal” Inman supporting it. You want your crowdfunding to be successful? Get an Internet star to back it.

Razoo

Razoo has raised more money as a nonprofit platform than the other two combined, and it isn’t restricted to project-based funding. But it can certainly be used that way, as Razoo lets any nonprofit create project-specific fundraising widgets. You can offer rewards just like the other platforms and the costs are lower by half or more, but you do lose the visibility of being on the cool-kid-on-the-block site. If you have your own large-scale reach, this shouldn’t matter, but if you’re hoping for a bump from high traffic on one of these sites, you may want to pay extra to use one of the others.

None of these platforms are going to do what you need without a great strategy to spread the word. Crowdfunding succeeds with lots and lots of small donations. How you get beyond your traditional supporters is more critical here than ever. If you do succeed and your supporters give you their contact information, don’t forget that this is a great opportunity to begin a respectful conversation to help turn that one-time funder into a repeat customer. The three platforms discussed above aren’t the only ways to crowdfund a project. We welcome your comments below about your experiences with what works to engage a large number of donors and what challenges you see that aren’t being met just yet.


 

Steve Boland lives at the intersection of community, policy and technology. Steve holds a Master of Nonprofit Management from Hamline University, and is a regular contributor to Nonprofit Quarterly. He can be reached at steve@steveboland.com or twitter.com/steveboland.

  • Tom Dawkins

    Hi there, great overview of these three platforms. I wanted to let your readers know about a fourth site they may want to check out: http://www.StartSomeGood.com. StartSomeGood is much like kickstarter but where they focus on creative projects (and ban charity fundraising in their criteria) StartSomeGood is specifically for nonprofits, social enterprises and causes. We have a unique tipping point model designed to help social projects succeed and we’re international, with projects funded in 20 countries so far. Please give us a look if you’re a nonprofit looking to launch a crowdfunding campaign.

    Cheers!

    Tom
    Co-founder

  • David Hartstein

    Nice overview Steve. There’s definitely opportunity out there for crowdfunding success, especially for the organization that’s willing to get creative. We’re pretty big fans of using Razoo on an organization’s website to allow them to accept donations through their site (if they currently lack that functionality). We actually made a free WordPress plugin to make the process of embedding the Razoo Donation Widget a bit easier. If you’re interested, you can check out the plugin in the WordPress Repository: http://wordpress.org/extend/plugins/simple-razoo-donations/

    Again, thanks for sharing your post. It’ll be very interesting to see more and more success stories as crowdfunding becomes more integrated into the nonprofit landscape.

  • Barb

    How does Crowdriser compare to the three mentioned above?

  • Dr. Letitia Wright

    I think its sad that people only think of Kickstarter, Indiegogo and throw in some random third site. With over 500 websites to choose from, no non-profit is stuck using a website that does not fit their needs. They need to do some research and make sure the website fits their project and their financial needs. I encourage people to take some time to research before they choose a site.

    Dr. Letitia Wright
    Crowd Funding Strategist
    http://www.acflife.com

  • Lee Rose

    Steve, Thanks for this comparison. A lot of our readers have been looking for some credible insight on these various platforms and their benefits/drawbacks, and I’ll point them here as a starting point – recognizing that there are a lot more out there as well.

    From what I’ve seen (by reviewing some of the appeals and campaigns across the various crowd-funding platforms) over-the-top success is the exception rather than the rule. I think a lot of people might jump into a crowd-sourcing campaign and expect instant results. You’re spot on in your conclusion that without a great strategy your campaign isn’t going to get very far – and I’d add that your capacity (time, effort, energy and other resources) is also critical to achieving success.

    Lee Rose
    Editor – CharityVillage.com

  • Freeman White

    Many non-profits want more than a campaign on someone else’s website, they want their own platform. In other words, to have their own “Kickstarter” for themselves and their constituents to use to raise funds for their non-profit. In these cases, providers of web-based crowdfunding platform software like Launcht.com make sense.

  • Mike @ Ayudos

    Hey this is a great article and I would love to see an update on this. Is Razoo really the number 3 option after Indiegogo and Kickstarter?

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  • Peter Sanders

    Is it possible to do both KickStarter & Indiegogo? If all the funds sought are NOT raised on Indiegogo can the balance or shortfall be targeted towards Kickstarter?

    Thanks

  • cellurl

    I challenge you to list funders that cater to charities.
    (non 501c3)

  • Ron Gardner

    Excellent information. I’ve wished for exactly such a comparison many times. I have a young friend who is a Senior at the University of Idaho and needs help raising about $3.000 to finance an opportunity to spend a month working at an orphanage in Togo, Africa. Are the programs you’ve described above only for non-profits? If so, are you aware of a good approach this young lady might use to get the cash she needs. The trip takes place next spring. Thank you very much.

  • Ivan Pavlovic

    There are numerous other websites to consider in the industry apart from these three. One can also look at building their own white label site/platform when you think of crowdfunding. Kickstarter and Indiegogo are certainly the most famous in the industry. They attract the most traffic and have been used by many. It’s true that in reward and donation based types, its extremely important to collect a bunch of smaller donations. There are huge amounts of campaigns that fail however. It’s important to do a lot of research, planning and networking prior to launching any ideas.

    Business Developer at Thrinacia – White Label Crowdfunding