Before you get started, it’s important to have a good understanding on what crowdfunding is. If you need to review, please read over our blog on Introduction to Crowdfunding.
The crowdfunding market primarily took off with start-up businesses using platforms (like Kickstarter or Indiegogo) to create their product and/or services. Essentially a cost-effective method to test market and product research. However, that doesn’t mean that nonprofits or charities do not have place in the crowdfunding market. In fact, in 2014 it was reported that social causes (including charities, nonprofits, foundations) represented $3.06B USD in the global crowdfunding market ($16B USD).
Current State of Giving for Charities/Non-profits.
Both USA and Canada reported a healthy trend for giving in 2017.
USA donations had an all time high of $390.05B of donations (Giving USA, 2017). However, much of those donations came from high income donors, commonly referred to as mega donors (Metcalf, Witzig, 2017). The main methods of donating for USA was; online 29% and check donations 27% (CAF, 2017).
In 2017, it was reported that 64% of Canadians gave money in the past 12 months (CAF, 2017). The most popular methods for Canadians are; online 34% and donation boxes 25% (CAF, 2017).
USA and Canadian donors, who did give in 2017, reported they would donate more for two main reasons. One if they had more money to spare (48% roughly) and knowledge on how their donations would be spent (35% roughly).
Main issues Charities/Nonprofits Encounter.
One of the main issues that both countries encounter, is a lack of trust of the charities or lack of knowledge for donors on how the funds are used. More than a third of Americans distrust charities (Paynter, 2017), which is quite significant. For Canadians, three quarters of them are confident on how charities spend money (Brownell, 2017). However, they are unsure how much of their donation goes to the causes they supported (Brownell, 2017). Quarter of Canadians believe only 30-60% of donations directly go to the needy (Brownell, 2017). Some donors criticize charities, that too much of donations go to overhead, administration and salary.
However, there are a few important key aspects to consider:
- Charities/Foundations suffer from a lack of funding, staff, time to create campaigns and increase public awareness (Charity Bank, 2024).
- Reality is charities are similar to a businesses. Admin cost are crucial to maximizing the charities’ output. Some charities have very low admin/overhead cost because either most (if not all members) are volunteers. How charities cover admin or fundraising cost differs but generally will range from using 20%-25% of donations (Fish, 2016).
“They should be donating because the charity is changing lives,” Thomson said. “And you can’t tell whether they’re changing lives just by looking at the overhead ratio.”
Greg Thomson, director of research at the charity watchdog Charity Intelligence Canada (Delp, 2017).
That being said donors need to take into consideration that money for admin cost, are essential for charities to function effectively.
However, charities and nonprofits need to be aware that donors want to know exactly where their dollar is going and the impact. It’s not enough to say, we are a good charity doing good work. In particular, younger donors (next generations of donors), want to feel connected to the cause. In order for them to be connected, they want to know and understand your charity more.
Crowdfunding makes donors feel connected to your campaign, with focusing their dollar to causes they care about. It allows supporters to easily share the campaign with their own network. Which brings the cost of administration down, increases your awareness and supporters. As your supporters will being doing much of the work for you (win = win).
Tips for Crowdfunding Campaigns.
- Estimate a reasonable goal:
This important regardless of your industry but calculating a reasonable goal requires your main attention.
- Social media plan
Creating a social media plan is imperative to help you keep consistent engagement and grow your network. However, make sure not to post only about your campaigns.
- Engage and empower.
Crowdfunding is also a method of marketing and social networking. So, it’s important to keep connected and engaged with those who share, email, comment, like and more. The key is to build relationships so that they may become monthly donors.
- Reach out to your campions.
Campaigns that start with donations early tend to generate more donations. So, reach out to your supporters prior to launching your campaign so that they can donate as soon as it’s live.
- Consider peer to peer (P2P)
Peer to peer fundraising is a great method to generate donations, particularly for charities. This allows supporters to create campaigns for you and become the project owner. Other crowdfunding sites may allow P2P, but do not give the charity the ability to control the campaigns prior to supporters launching. Luckily here at Make Giving Happen, we allow you to review the campaign prior to launching. Ensuring you are controlling your brand and the fundraising missions.
- Connect emotionally:
For charities/nonprofits to be successful they should connect with donors emotionally. However, avoid using too much negative wording and tone. Concentrate on the donor and their efforts, what their dollar goes to and how that can help the cause.
If you want further information on how a crowdfunding platform can help build your brand and increase capital, don’t hesitate to reach out at LetsGetStarted@makegivinghappen.com. We are always looking to engage and expand our current network.
Resources.
https://www.councilofnonprofits.org/tools-resources/crowdfunding-nonprofits
https://nonprofithub.org/fundraising/3-mistakes-nonprofits-make-crowdfunding/
https://www.classy.org/blog/crowdfunding-what-you-need-to-know-without-the-hype/
https://www.cafonline.org/docs/default-source/about-us-publications/caf-canada-report-masteruk19.pdf