What Is Crowdfunding, and How Can It Benefit Your Nonprofit?

Your nonprofit can raise funds in many different ways to meet a goal. Outside of your annual plans for programs and events, crowdfunding may help fill the gaps in a low-risk, high-gain opportunity.?

Crowdfunding for nonprofits is generally where they collect small or mid-sized donations from a large group of people to fund a specific project or cause. Crowdfunding typically consists of an online campaign with a limited time frame to reach the goal. This fundraising tactic allows nonprofits to raise large amounts of money and expand support in a short amount of time.?

Crowdfunding is so popular because it is an easy way to share your fundraising efforts, collect data and feedback quickly, and be cost-effective. Its momentum comes from the donors, whose support typically generates a snowball effect via social media and other organic media.

The Benefits of Crowdfunding

Crowdfunding falls into two categories, donation-based funding, and debt-based funding. Within those two categories, the most applicable campaigns for nonprofits are donation crowdfunding and reward crowdfunding. However, the benefits of both types of campaigns remain the same. Crowdfunding brings the opportunity to expand brand awareness, build social proof, and collect smaller donations to increase the sum of your donation goals. Determining which type of crowdfunding your nonprofit will use depends on your end goal and if you want to devote some of your budget to rewarding donors.

Donation Crowdfunding

Donation crowdfunding is when people donate money without expecting anything in return. Instead, they donate money because they believe in the cause or project. Nonprofit organizations, charities, disaster relief, or individual emergencies or hardships typically utilize this crowdfunding type.

Reward Crowdfunding

When individuals donate to reward-based crowdfunding, they do so because they believe in the cause or project and reap some benefit, such as a reward or incentive.

Organizations that run reward crowdfunding campaigns offer a return on investment, such as a first-edition product or branded items like stickers or T-shirts. In addition, reward-based crowdfunding allows your organization to create different reward levels depending on the amount of money a donor makes.

Equity Crowdfunding

Contributors of equity crowdfunding invest in the project or business with their dollars. Because of their investment, they have a stake in the company. Typically, startups and entrepreneurs use this crowdfunding type as an alternative to venture capital.?

Debt Crowdfunding

Debt crowdfunding is an alternative to equity crowdfunding. This type of crowdfunding is when a business or organization borrows money from contributors with the agreement of repaying the loans.

How to Choose a Crowdfunding Platform

Crowdfunding is a great way to expand your reach and attract new donors to your nonprofit’s mission and initiatives. Because you are appealing to a large crowd, crowdfunding casts a broader net than some of the methods you may have previously tried. In addition, adding crowdfunding to your outreach channels increases your chances of capturing essential data for future fundraising efforts. Since there are multiple crowdfunding platforms, one must consider which will best support your nonprofit. Some things to consider before choosing your crowdfunding platform include the following:

Create a Plan

A clear business plan is essential before you begin crowdfunding. For example, will you require the ability to upload videos and photos? Some platforms may not allow you to add additional supportive content. How will you share your crowdfunding campaign? How will you implement a strategy behind your goals?

Define Your Campaign Goals

Of course, you have a financial goal your nonprofit hopes to achieve; however, researching and developing your goals through a strategic plan can aid your campaign results and determine which platform helps support those goals. What do you hope to accomplish? Look at similar nonprofits or campaigns to see what platforms they have used.?

Not All Platforms Are Created Equal

Crowdfunding platforms support two types of crowdfunding: debt versus donation-based. Because of this, it is crucial to research which platforms may best support your goals.

Supporting Your Campaign

Customer support for the organization and the donor is crucial when deciding which crowdfunding platform will work the best. Finding a platform with excellent customer support and resources may mean the difference between a donor following through with their donation or giving up. Additionally, some platforms have business tool integrations that can help support your goals through social media, CRM tools, and Google.?

Payment Methods

Many donors will find donating through a credit card easy. However, some banks hold the funds for an extended time to ensure that the funds go through. Make sure you research the payment method policies of the different platforms you are considering before you make your decision.

Take a Look at Fees

One thing to consider when using any crowdfunding platform is the associated fees. So, when creating your annual fundraising goals and budget, research which platform will work the best for your organization and have the lowest fees to maximize your gains; this way, your annual budget planning is predictable.

Crowdfunding Best Practices

Establish Clear Goals

The first step to a successful fundraising campaign is to define clear objectives. For example, you want to be able to tell donors how much you want to raise, by when, and for what reason. You can establish these objectives by asking:?

• What are your overall fundraising goals??
• Are you hoping to turn one-time donors into recurring donations??
• Are you hoping to gain more donor information to make informed decisions about future fundraising campaigns??
• Is there a number of donations or an amount your organization needs??

Questions like these will inform your goals and empower you to create replicable processes for the best results.?

Share Firsthand Accounts

Sharing testimonials, stories, and statistics about the community or cause your organization is raising funds for will help your crowdfunding campaign. In addition, new donors have the opportunity to understand how your organization makes a difference.

Plan Your Communication

Most donors expect updates to appear only on the fundraising page. However, after capturing their information, you can keep them engaged in the campaign by sending email updates, posting on social media, and including information on your organization’s website. Additionally, personalized emails may turn these one-time donors into recurring donors.

Content Calendar

Decide ahead of time how, when, and who will help promote your crowdfunding campaign. Create a content calendar for social media that is easy for all employees and volunteers to follow. Promote your campaign regularly with updates on how much money you need to reach your goal, what percentage you have so far, what that may look like for your cause or community on a tangible level, and how much time is left for your campaign.

Crowdfunding is an opportunity to reach your fundraising goals with minimal effort. By promoting your campaign online, you have the chance to capture a large crowd's attention and expand your capture of new donors to support your cause and help in future fundraising efforts. Schedule a call today for more tips and assistance on your next campaign!