Crowdfunding for Nonprofits: Expand Your Digital Reach

December 19, 2017

With mobile devices and easy-to-use apps expanding how organizations and people raise awareness of their causes, many nonprofits have come to rely less on traditional fundraising methods.

The upshot? Crowdfunding for nonprofits has become an innovative way to spur interest and donations. It also helps nonprofits appeal to the millennial generation.

Crowdfunding takes advantage of the speed with which information travels digitally, enabling nonprofits to better shape fundraising messages for targeted donors.

More than $738 billion was raised through crowdfunding in 2016, according to statistical research service Statista. While there are no recent estimates on how much money nonprofits have raised through crowdfunding, crowdfunding site Fundly says nonprofits raise an average of $568 per campaign.

For as long as people and organizations have accessed the Internet, they’ve reached out to friends and lists of donors to call attention to causes in need of support. But people consume more information than ever before, giving crowdfunding a powerful platform.

An organization needs only to enter a narrative, pertinent information and a call to action on a digital crowdfunding platform to reach audiences like never before.

Building Nonprofits, One Transaction at a Time

The selling point of crowdfunding is that people can donate small amounts of money, and the cause will still benefit as long as the appeal reaches a large number of donors. But some people hesitate or can’t afford to donate even small amounts.

Crowdfunding for nonprofits takes many forms, but two Atlanta tech entrepreneurs believe they’ve found a way to encourage people to overcome any hesitation about donating money. Eldredge Washington and Troy Wilson recently created Musterd with the goal of helping donors avoid the sting of giving.

Musterd lets people contribute to causes by donating the change that’s left over from their purchases. All they need to do is link a banking account to Musterd, and the platform will automatically withdraw the remaining pennies — from one cent to 99 cents — rounded up from any transaction. The change from the purchase of a daily coffee, a song on iTunes or a bag of groceries will be sent to the donor’s cause of choice.

“You don’t even feel it,” Wilson said of the penny effect. “It’s a little bit at a time, but it also eventually adds up.”

Musterd went live in June 2017 and is just getting off the ground. Twelve nonprofits use the platform, including the United Way and organizations as small as school parent-teacher organizations, Washington said. Fifty other nonprofits want to use Musterd, but Washington and Wilson first want to keep the number of users to 12 to work out system bugs before building out.

Dec. 14 was a big day for Washington and Wilson: They presented a $20,000 check to Appolition, a spare-change platform that is similar to Musterd but focuses on helping pay bail for incarcerated people. Appolition wanted to extend crowdfunding beyond its own offering, so it used Musterd. The $20,000 marked the conclusion of Musterd’s first full crowdfunding campaign.

Wilson and Washington believe traditional fundraising still has its place. Many donors will want to write a $1,000 check, they said. But mobile shopping and banking have conditioned many other people, including younger generations, to eschew traditional transactions. Whether for the sake of convenience or budgetary reasons, digitally-driven people prefer crowdfunding.

Nonprofits shouldn’t hesitate to take advantage of crowdfunding, Washington and Wilson explained. It’s not a passing fancy, nor is it something an organization should view as antithetical to its longstanding practices.

“We’re asking nonprofits to move forward and not get left behind,” said Washington, who also co-founded Spendefy, a platform that supports and promotes African American-owned businesses.

“Look at Uber,” he said. “Taxis had no reason to upgrade and use technology, and then Uber came along and forced them to change. Airbnb did that to hotels. As millennials get older, they’ll spend more money digitally. They’re not in the habit of writing checks.”

Some Things to Remember

If your organization is ready to try crowdfunding, consider online platforms that accommodate nonprofits, such as StartSomeGood, CrowdRise, Indiegogo, FirstGiving and Causes. Adult literacy programs, child abuse prevention agencies and known causes like UNICEF and the American Red Cross are just some of the many nonprofits that take advantage of crowdfunding.

Many crowdfunding sites charge a fee, which usually runs between 3 and 5 percent of funds raised. Credit card processors ask for an additional fee as well. Some online platforms will charge a higher fee if you don’t reach your goal, and others won’t allow you to collect any donations if your goal is not met, according to the National Council of Nonprofits. Note that donors’ debit and credit accounts are not charged if this happens.

Keep in mind that charitable solicitation laws do not specifically address crowdfunding in most states. The National Council of Nonprofits recommends organizations of all sizes handle crowdfunding like any other fundraising activity and register with a state before soliciting its residents.

Aim Small — and Win Big

Washington suggested tying a fundraising appeal to the message of your organization combined with a specific goal. In other words? Make the most of the segmented targeting capability of crowdfunding by segmenting the appeal itself. Don’t fundraise with a large sweep, he said. Run each campaign for a specific cause, and once that campaign is successful, find another focus.

Crowdfunding experts recommend incorporating a video into your campaign. This video should highlight the cause in a compelling way and detail where the money will go. Then, promote the campaign on your social media channels. (Think of how often you’ve discovered a fundraising campaign on your Facebook feed.) Few will know about your crowdfunding appeal if it’s not promoted like any other marketable event.

By keeping crowdfunding simple and clear, your nonprofit will discover its message has another outlet beyond its usual targeted list of donors. Washington said, “People will be confident they’re giving directly to a great cause.”

Also, crowdfunding can be used as a tool when creating separate fundraising strategies for multiple generations, like the increasingly sought-after millennials.

And remember to start small. Ask your board members to participate in campaigns. Each of them already has a list of potential donors to engage.

A CPA-led advisory firm could review your operation and offer guidance for future fundraising efforts. Understanding the fundamentals of crowdfunding will give your cause the edge it needs to get the support it deserves.