Crowdfunding is not a new concept. It’s actually quite old.
Crowdfunding is not a new concept. It’s actually quite old. The crowdfunding campaign for the plinth that the Statue of Liberty still stands on today was launched in 1885 when Joseph Pulitzer asked the readers of his newspaper The New York World for donations.
In five months over 160,000 donors contributed $101,091. More than three-quarters of the donations were for less than a dollar.
Crowdfunding is simply raising small amounts of money from many people via a crowdfunding platform. And a crowdfunding platform is just an online marketplace that can facilitate and mobilise crowds to finance projects through small donations and investments.
Yet, sometime between 1885 and now, crowdfunding has turned into some activity shrouded with mystery and risk, only understood by digital natives and for many charities ‘not the way we do things here’
If you are a good fundraiser you already know how to crowdfund. The basic principles of good fundraising apply;
- Explain why your project is important – what is the impact that you hope to achieve?
- Engage and inspire supporters hearts and minds with real stories about the difference they will make if they get involved
- Tell people how they can help and make it easy for them to contribute
- Specific projects tend to be more successful – but that’s not to say you can’t raise funds for core costs if you get your ‘why’ and your story right.
- Offer incentives and rewards for different levels of support
- Thank supporters (or ‘backers’ in crowdfunding language)
- Continue to thank supporters and offer relevant updates and information if they would like them.
There are several different models of raising finance through crowdfunding;
- Donation-based; people make donations for no tangible benefit – think The Supporting Siblings Of Terminally Ill Children campaign from The Rainbow Trust Children’s Charity.
- Rewards-based; people contribute for a non financial reward – think Lab 13 Ghana a campaign to inspire young people, teachers and communities with hands on science education in Africa which offers a range of rewards, for example pledges over a certain amount get a virtual lab tour and a Q&A with scientists and residence.
- Equity-based; people invest in the hope of making a financial return – think Atlas wearables who raised $1.1 million for its smart fitness tracker in 2014.
- Community shares; people become share-holders and have a say in the projects aims – think Saving the Duke, a historic village pub that was saved from closure by the community that now own it.
- Lending based; people make loans that are repaid – think Lend with Care.
Why are more charities not testing crowdfunding?
In 2015 £3.2 billion of finance was raised through crowdfunding yet only 0.5% was raised for good causes. In the recent Nesta report ‘Crowdfunding good causes’ they found a high awareness of crowdfunding (74%) in the charity sector yet only 15% had tried it.
Given the current criticism of fundraising techniques, lack of public trust, a greater demand for transparency and changing supporter demographic, and the ability of individuals to circumnavigate charities to raise money quickly for things they care about, isn’t right now is the perfect opportunity for charities to test crowdfunding?
Please let me know if you have experience of crowdfunding – I’d love to know your story.
This blog is taken from a longer article ‘Why you should be testing crowdfunding’ over at The Fundraiser.