Is Crowdfunding the way forward for non-profits ?

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As the social landscape changes so does the need to find new and innovative ways for non-profits to raise their funds.  Here I take a look at Crowdfunding vs more traditional methods.

TRADITIONAL NON-PROFIT FUNDRAISING

Non-profit organizations income streams originate from a combination of sources such as:

  • Individual and small scale giving
  • philanthropy and major donors
  • fundraising events and challenges
  • grants, funds and corporate fundraising

According to Giving USA $358.38 billion was donated to US charitable causes with individual contributions accounting for 72% of all donations in 2014.

Traditionally, the majority of non-profit organizations have attempted to attract donations from individual donors through a combination of methods including direct marketing, newsletters, social networking (on and off line), community fundraising, special events and employee donations.

Blackbaud’s 2014 Charitable Giving Report analyzed trends from over $16.2 billion in fundraising revenue and found that in 2014 overall giving grew approximately 2.1% with online growing 8.9% and accounting for 6.7% of all fundraising with small organizations having the greatest increase overall.

The Nonprofit Research Collaborative 2014 fundraising study found that 62% of organizations reported growth in traditional methods such as major gifts, email requests, special events but also with more non-traditional “other online” methods.

Both credible studies suggest that although traditional fundraising methods remain an integral cog in the nonprofits fundraising wheel newer and innovative ways to raise money such as online and Crowdfunding are gaining substantial ground and will become an important part in any fundraising strategy.

CROWDFUNDING FOR NON-PROFITS

It is clear then that non-profits in search of funds and awareness are needing to move with the times and incorporate a crowdfunding campaign to compliment their existing efforts and increase their presence within the social media landscape.

According to Bob Mulholland modern non-profits are using crowdfunding to raise money and awareness for their causes as it offers greater exposure at a lower cost and tends to succeed because of incentives that organizations promise in exchange for donations.

A recent Crowdfunding Industry Report finds that 30% of the $5.1 billion raised in 2013 was for social causes with the average successful campaign raising approximately $7K over nine weeks.

Further research by MobileCause tells us that $568 is the average raised by Individuals crowdfunding and accounted for 18% of US giving in 2013, $66 is the average amount donated with 62% of people who give to crowdfunding campaigns are new donors.

Crowdfunding for social causes has evidently gained momentum over recent years as Craig Newmarks “Cracking the Crowdfunding Code” shows with some impressive statistics:

  • $88 is the average donation size,
  • $534 the average total amount raised by an individual
  • $9,237 is the average amount raised when groups are working on a team to raise funds
  • 28% of donors are repeat donors

Cracking The Crowdfunding Code

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crowdfunding nonprofit

Crowdfunded campaigns are largely based online so they are able reach much further than more traditional methods of fundraising but with the ever increasing number of online campaigns it important to differentiate to stand out from the crowd.

Donations to charitable causes may be at an all time high but so are the amount of causes attempting to attract new donors so the platform used and the tone of the campaign must be right to strike a chord with the public and generate some early momentum.  Research shows that campaigns that receive their first donations within the first three days are more likely to reach their goal than those that don’t.

As discussed in my previous blog Crowdfunding has a bright future and as early adopters non-profits have found themselves in an enviable position of being its biggest beneficiaries but will they be able to continue to innovate their strategies to stay ahead of  the crowd?

Can the Crowdfunding boom continue or is the bubble about to burst?

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Times have changed a lot over recent years; we no longer have to rely on the mood and generosity of our local bank manager for some much-needed money to establish an exciting new venture or develop creative ideas as, rather brilliantly, we now have Crowdfunding to rely on….. or do we?

Although the concept of using many sources of funding from a crowd to accomplish a goal has been around for centuries it is only recently, with the advent of new technology and ideologies, that the term Crowdfunding has been used and can be traced back to 2006 when Michael Sullivan, the creator of an early Crowdfunding website fundavlog, used it to describe their funding scheme.  It wasn’t until innovative Crowdfunding websites Indiegogo and Kickstarter were established in 2008 and 2009 respectively that the term was universally recognised.  Since then the Crowdfunding industry has grown exponentially with the emergence of specialised sites helping to raise $2.7 billion in funding in 2012 rising to a staggering $5.1 billion in 2013.  Moreover, it was estimated that in 2012 there were 536 online Crowdfunding platforms helping to achieve more than 1 million successful campaigns worldwide.

The growth is set to continue with Fundable predicting that crowdfunding was set to grow 94% in 2014 adding 270,000 jobs and $65B into the global economy.

https://www.fundable.com/learn/resources/infographics/economic-value-crowdfunding”>Economic Value Crowdfunding

Fundables projected 2020 growth figures, seen on their info-graphic above, assumes the exponential growth rate remains the same as it has been in the past five years, a high risk assumption that will face many obstacles to keep the bubble from bursting.  Much of this growth is predicted to come from developing nations as seen in The World Banks report, entitled “Crowdfunding’s Potential for the Developing World,”.  They predict that the so called Disparo dollar, which basically means money being earned by expatriates outside of their country of origins being sent home, will be the boom in developing countries that will provide the catalyst for continued and sustained growth in the crowdfunding industry.  Social networks will play a huge part in creating and sustaining the Crowdfunding movement with social media building global networks but, and it’s a big but, it relies heavily on these developing nations adopting the new culture and providing policy and amending regulations to allow new enterprises to flourish unhindered.

So back to today, where are we now?  Well, as Craig Arganoff points out, although the big figures and success stories we see publicised are encouraging the reality is that only 45% of campaigns meet their target and more-often than not they are sub $1,000 with a large social media outreach that allows them to stand out from the ever growing number of campaigns vying for our hard earnt cash. Mr Argonoff continues to offer a particularly apposite view likening the current deluge of Crowdfunding campaigns to that of the App Store with thousands of Apps not being found or used due to the sheer volume available.

Does this mean we are being miss-sold the future in terms of the importance and impact that Crowdfunding will have on our lives and take a step back or should we continue to embrace the innovation and entrepreneurship that has got it to where it is now and help guide the movement as it matures and finds its place in the world?