By Erin Shaver, Senior Grantwriter for Joining Vision and Action

Crowdfunding

Crowdfunding continues to be among the most buzzworthy phrases in fundraising in the past few years. Eager entrepreneurs and young folks alike have been quick to jump onto its still trendy bandwagon, from the Kickstarter campaign for the Pebble Watch to the 2014 Ice Bucket Challenge.

Even my Gen-X husband has been pitching into campaigns to accumulate new schwag for our liquor cabinet (“Hey—it’s a growler that’s also a keg! And I have one from the first batch ever made!”). And we’ve likely all had a friend or acquaintance at this point who managed a personal fundraising saga on social media via GoFundMe, some for better and some for worse. Like it or not, it is a growing and very real way for us all to be philanthropists and venture capitalists, on a tiny scale, and help out causes and ideas that are timely and important to us and the people we love.

But what about nonprofits?

The debate continues to as to whether crowdfunding can make much of a difference in the traditional nonprofit sector. There is the doubter in me that wonders this, and Inside Philanthropy echoed the sentiment last week with a blog, “Much Ado: Does the Rise of Crowdfunding Actually Matter for Most Nonprofits?”, which leaned toward, nope, not really. Crowdfunding is timely, and often current-event based, and less able to support a nonprofit’s ongoing grind of less glamorous day-to-day work or its strategic planning initiatives.

Case closed? Not really. Should nonprofits, which have so long operated in the fundraising sphere, and are forced to prove their worth so meticulously, let such an opportunity pass them by? After all, the National Council of Nonprofits says crowdfunding is poised to become a $90 to $96 billion a year industry by 2025. Conventional wisdom says that while crowdfunding is no quick fix or easy answer, nonprofits should stay ahead of this trend and access their piece of the pie.

The lowdown

There are basically four types of crowdfunding:

• Donation-based, which is just regular charitable giving, but through an online platform and usually for a set period. Giving Tuesday and Colorado Gives Day are examples or any organization with a donor looking to match a certain amount of money raised in a particular amount of time.
• Rewards-based, which is where people who donate get a reward if the goal is met, and typically that means exclusive access to a product or service (like my husband’s bar schwag). These crowdfunds are popular on sites like Kickstarter and Indiegogo, but not out of the realm for a charity that has something fresh to offer, for free or reduced access to memberships or events.
• Crowdlending, which is where donors give someone an interest-free loan for a project. The most popular site for this kind of funding is Kiva, and nonprofits can link with causes here.
• Equity crowdfunding, which was somewhat new in 2016. Up until recently, only accredited investors could get equity returns on venture investments. SEC legislation changes last year made it so the general public can as well, and on much smaller scales (although the effectiveness of the new rules is still up for debate). And while this may not seem nonprofit-y, there are some social enterprises and triple-bottom-line companies using equity crowdfunding, and nonprofits should take note.

Next time… rating the crowdfunding sites for charities

Next time, I’ll blog about the many, many different options for nonprofit and charity-based crowdfunding campaigns in 2017, and offer some insight into which nonprofits were able to launch effective campaigns in the last couple years, and why they worked. We’ve only just scratched the surface. Stay tuned for part two.

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