Thinking About Crowdfunding? 4 Things to Know First

While nonprofits can and should buck the overhead myth, there’s still some logic in it. After all, what charitable organization doesn’t want to minimize costs and devote more resources to its mission? Your fundraisers should strive to make this happen, even when it comes to gaining revenue for major projects. 

One short-term, low-cost fundraiser is a crowdfunding campaign. These campaigns provide a brief burst of funding for a specific initiative, such as launching a program or constructing a new facility. However, these fundraisers are also a major commitment for your nonprofit, and you shouldn’t host one without understanding why and how these campaigns function. 

To decide if now’s the right time for your nonprofit to launch a crowdfunding campaign, here are four things to know about this type of fundraiser. 

1. Be familiar with different types of crowdfunding.

Double the Donation’s guide to crowdfunding provides this definition: “Crowdfunding is a type of crowdsourcing that collects goods or services from a large group for an individual or organization. In terms of nonprofit fundraising, crowdfunding is a unique method that typically collects small (or mid-sized) donations from a large group of people, usually over the internet.”

Most commonly, crowdfunding campaigns differ from traditional fundraising by having a large project they are funding and a dedicated fundraising page for that campaign. For example, a nonprofit raising money to construct a new building might launch a crowdfunding campaign for that project. The nonprofit would still accept donations to its annual fund through its main fundraising page on its website, but it would also have a new fundraising page specifically for donations for the new building project.

To incentivize both donors and the nonprofits running a crowdfunding campaign, these fundraisers can be hosted in several different ways:

• Reward-based: In a rewards-based crowdfunding campaign, donors receive a perk or gift in exchange for their donations. These campaigns usually operate on a tier model, providing supporters who give more with increasingly high-value rewards. For instance, you might reward supporters who give $15 with a t-shirt, whereas donors who give $1,000 get a year-long membership at your nonprofit.

• Donation-based: Donation-based crowd fundraisers are like any other donation to your nonprofit: supporters give and expect nothing in return. Some donation-based campaigns may give rewards of negligible value, but these benefits are not on the same level as rewards-based campaigns. 

• Equity crowdfunding: Startup businesses sometimes launch equity crowdfundraisers, where backers receive shares of the business in exchange for investments. 

• All-or-nothing: To provide backers with security, many crowdfunding platforms operate an all-or-nothing model, wherein the person or organization raising funds only receives the donations if they hit their funding goal. Otherwise, all gifts are returned to the donors. 
• Flexible funding: In contrast to all-or-nothing campaigns, a flexible funding crowd fundraiser provides the organization raising money with all collected funds, regardless of whether its goal was reached. 

While these variations might seem overwhelming, most nonprofits choose to run donation or reward-based campaigns. Whether the campaign will then be all-or-nothing or flexible funding depends on your goals. For instance, if you need funding to complete a specific project, like the example of constructing a new building, an all-or-nothing model may make sense. On the other hand, a flexible funding model can be useful for initiatives where every donation counts. 

2. Understand goal-setting and impact measurement.

Goals and metrics are closely intertwined. Your campaign goal is what you hope to accomplish, and metrics help you assess how successful you are in achieving that goal. For example, a nonprofit hosting a read-a-thon fundraiser might have an end goal of raising $5,000 and measure the number of participants, number of donors, and average donation amount to determine whether they will hit that goal.

For crowdfunding, you will likely focus on a few core metrics, which include:

• Number of donors
• Number of donors in each donation tier for rewards-based campaigns
• Average donation size
• Total funding raised

Successful crowdfunding campaigns tend to create a lot of data due to having many small-dollar contributors. To successfully record each individual donation and connect with supporters, be sure to choose a crowdfunding platform designed to handle this influx of data. 

3. Use the right tools.

There are a range of crowdfunding platforms, with GoFundMe and Kickstarter being the most well-known. However, these popular websites are not designed with nonprofits in mind, and charitable organizations should look for tools built to accommodate their unique needs. 

To help assess crowdfunding software, 99Pledges suggests looking for these features in fundraising software: 

• Quick and easy setup. Most crowdfunding sites provide templates that allow nonprofits to customize campaign pages to their brands without requiring coding.

• Simple, secure, and flexible payment options. To maximize support, your crowdfunding tools should support a number of payment options, including credit and debit cards, PayPal, and ApplePay.

• Accurate data tracking tools. Stay on top of relevant metrics by using a crowdfunding site that lets you know the details of your campaign. 

• Communication capabilities. Keep the momentum going throughout your entire campaign by sending thank-you messages, campaign updates, and reminders. 

• Organization-specific. When possible, look for software designed for your specific type of organization. For instance, nonprofits, schools, teams, churches, and individuals can use the same general platforms but often benefit from specialized tools built for their unique needs.

Outside of technology, your team is your greatest resource for running a successful crowdfunding campaign. A strong team with donor cultivation, communication, and marketing skills can help expand your reach and inspire increased support. 

Ahead of a major crowdfunding campaign, consider investing in your team through additional training, such as enrolling them in online courses related to nonprofit professional skills. By doing so, you can ensure your team has the abilities needed to run a successful campaign.

4. Don’t neglect donor appreciation.

Given the influx of small-dollar donors, it can be easy to neglect donor appreciation during a crowdfunding campaign. However, proper donor stewardship not only helps you secure more donations during your campaign but can also lead to continued supporter relationships afterward.

You can show all of your crowdfunding donors appreciation by sending thank-you messages for every gift, no matter its size. Consider creating a thank you message template for various donation thresholds. For instance, if you have rewards-based tiers, your messages might reference each reward as well as how and when supporters can claim it.

Regularly make public posts thanking all supporters for their participation. This can help draw attention to your ongoing campaign and encourage supporters who made small donations to come back and give again. 

Crowdfunding campaigns are an opportunity to quickly secure funding for a major new initiative at your nonprofit. However, they’re also a test of your organization’s management abilities, marketing capabilities, and technology. Before starting a crowdfunding campaign, assess whether doing so is the right move for your nonprofit at this time, research platforms for hosting your campaign, and ensure your staff is ready to cultivate the donor relationship you need to find success. 

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