Crowdfund | Crowdfunding As a Capital Solution for Nonprofits
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Crowdfunding As a Capital Solution for Nonprofits

When crowdfunding began years ago, those who used it were primarily creatives looking for funding. Musicians needed to record an album; filmmakers needed to fund their next project; artists saw a new opportunity to get paid for their work.

Through the years, as its users expanded into other sectors, crowdfunding began to refine itself and evolve. Two specific factions emerged:

1. Rewards-based crowdfunding – This is designed to promote projects and offer donors certain rewards in exchange for financial support
2. Donation-based crowdfunding – This is a model used by charitable organizations, which, like rewards-based crowdfunding, offers rewards and challenges in exchange for support.

Enter a third model into the mix – Public Crowdfunding

A new type of crowdfunding – public crowdfunding – now offers yet another route for organizations to pursue in the hopes of gaining support, backing, and funding. Rather than being a targeted charity campaign to a select list (such as former donors or website visitors), public crowdfunding allows organizations to reach out to everyone and anyone on the web.

Public crowdfunding also shifts focus away from the organization itself, and makes the campaign more about the actual public-good product or service. This is more likely to encourage donations, as people like to support causes and actions, not an entity.

Why crowdfunding is an effective method for gathering donations

Crowdfunding gives your potential backers the opportunity to support a cause by donating virtually any amount they can (and are willing to) part ways with. And, by the very nature of crowdfunding campaigns, the entire process is extremely transparent.

Your donors know exactly how and where their money is spent, making them more likely to support your cause and become evangelists on your behalf.

Inversely, organizations can leverage crowdfunding platforms by offering unique gifts and rewards (based on the amount pledged/donated) to encourage conversions.

The democratization of support and funding

But perhaps the most alluring and effective component of crowdfunding is its ability to demonstrate real-time support and data to organizations.

Because donors can easily choose which projects they support – via donations – nonprofit managers and organization heads can identify which projects and campaigns are most effective, simply by monitoring their crowdfunding projects. Think of it like voting – each donation is like another vote in support of one campaign over another. As a nonprofit manager, having access to data demonstrating the effectiveness of one campaign over another – in real time – is like gold. Since most campaigns last around a month (and charities can run multiple campaigns at the same time), this real-time data access makes it possible for even more the most complex organizations to “clean house,” so to speak and reconsider their campaigns on an ongoing basis.

Will this democratization of support find its way into the government sector one day? Perhaps. Imagine a municipality taking to crowdfunding to find support for the repaving of city streets, rather than taking to the campaign t rail.

The benefit here is voters – or backers – will be able to see how their support (or lack there of) impacts projects, in real time. The municipality could then monitor these results and adapt its campaign in the hopes of winning over more support.

What once began as a place for creatives and small startups to find funding, has now become a valid space for large organizations, including nonprofits, to turn to not only for funding, but to gain valuable insight and real-time data to refine and redefine marketing strategies.

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