Crowdfunding finance

The crowdfunding market is a busy one, helped first by the appearance of Kickstarter in the US and then its launch in the UK. However, Kickstarter isn’t really there for charities as it’s mainly designed for business projects, so where do charities go and should they bother?

The way crowdfunding usually works is that the organisation that wants the cash will usually set a target and the money will have to be raised over a short period of weeks or months. If the target amount is raised from backers the crowdfunding platform will take a cut.

If the target is not reached then the organisation will either not receive any funds at all, or with some crowdfunding platforms, they will get what amount is raised but will have to pay a higher amount to the crowdfunding company.

Charities entering the crowdfunding market will have to decide whether this type of money raising sits easily with their backers, who may not be happy to donate and then see a percentage of that cash go to commercial interests.

They will also have to take into account money raising “fatigue” among donors, through using a limited number of crowdfunding platforms that are often designed to raise only relatively small amounts.

Putting the effort in

But while charities may not want to look a gift horse in the mouth, the amount of work that has to be put into a specific crowdfunding campaign means charities will have to be strategic about their efforts.

Not only must charities have a good cause that can be set out from the other thousands of causes that appear on these platforms, they must also have the time to bring good design to their campaign and good pictures and video clips to stand out too.

After all, the crowdfunding space is, well, crowded, and is also very quirky. One only has to look at one recent campaign on leading platform

The #SaveJan campaign sounds very personal, but in fact is an attempt to renovate an ice cream van used to sell food and drinks around the streets of Belfast.

The campaign page reads: “Jan, our beloved 1972 Bedford van has been vandalised. With your help, we can get her windscreen replaced, cleaned up and back on the road, good as new!”

The heart strings are further pulled: “Sadly, within a week of Jan’s arrival, she was vandalised. I was utterly heartbroken, as I had invested all my savings in bringing her over from London. I have been told there’s only a handful of this particular model of ice cream van knocking about, so finding a second-hand windscreen has been almost impossible.”

Now, who is to say that Jan shouldn’t get the £2,000 renovation being asked for, but that’s £2,000 that could have gone to the cause of a registered charity instead of someone who already owns a Belfast cafe.

As of writing this though, the #SaveJan campaign hadn’t reached its target, although it still had time. Under the Crowdfunder rules, if it doesn’t, it gets zero funding. Crowdfunder only offers “fixed” funding, not “flexible” funding — whereby you get what is raised short of the target but with a higher percentage taken by the crowdfunding platform.

Viral marketing

Charities considering crowdfunding though may also view the overall benefits that don’t include the direct funding. As crowdfunding is relatively new, any big success stories are often highlighted across the internet, on trade and technology news websites and “virally” across social media channels.

Those giving to crowdfunding campaigns often tweet about it and post it on channels such as Facebook and Google+. This means that the charity gets valuable publicity and indirect advertising, which may well lead to additional funding from other sources outside the crowdfunding platform.

Charities may therefore see crowdfunding as an essential part of their holistic approach to fundraising, instead of one that is ignored or put on the backburner. Perhaps now is the time for charities that have not already done so to enter the fray while the market is “hot” in marketing terms.

Those that don’t, might be seen by their regular donors as staid and old fashioned, which is a trap easy to fall into in our rapidly developing digital world.

No silver bullet

That said, Joe Garecht, of the US-based Fundraising Authority, which helps the third sector boost its marketing campaigns, warns: “Many non-profits that find out about crowdfunding websites get very excited and make the mistake of thinking these sites are magical cures for all their revenue woes. Crowdfunding sites can be a huge help but they are not a fundraising panacea.”

He says: “Don’t expect to slap up a fundraising campaign, go away for three weeks, then come back to find that you’ve raised a fortune. It doesn’t work that way. You’ll need to get the word out first, get some traction from your own established supporters, and then you may get some unexpected help.”

Usually the most successful crowdfunding campaigns are those where charities fundraise for a specific project, as potential backers want to see where their money is going.

Once the project has been chosen charities have to budget for the final fees they have to pay to the crowdfunding platform. In addition, they also have to consider what “rewards”, if any, they give to their backers.

It is the custom on crowdfunding platforms to reward backers. In the case of commercial deals it could be a sample of the product, shares, or closer access to the company. Some charities may want to consider sending out a free gift, depending on the amounts being donated. In the case of #SaveJan it was a free breakfast to groups of people donating £100 or more.

After writing the pitch, photos and videos should be prepared, and those preparing the marketing will have to plan a social media blitz via Twitter, Facebook and all the other social media channels out there.

Those involved also need to refresh the campaign before the end to give it a kick and add extra impetus to the fundraising. So the pitch will have to be updated with new photos or video clips or extra information to rally the troops.

Whether the crowdfunding campaign is a financial success or not, charities can learn more about their marketing strategies and skills, and perhaps discover how they can be improved.

Corporate carrots

In addition, they can also learn whether certain projects have the ability to gain traction among other backers, including in the much valued corporate world.

When it comes to corporate fundraising, the charity will find it very helpful if it can show, let’s say, that it quickly raised £5,000 or £10,000 on a crowdfunding site well before the target date to fund a project. A corporate sponsor will be impressed at such firm backing among the public, and it may well tip the balance in your favour when that potential wealthy backer has many other charitable projects to consider.

The crowdfunding market for charities therefore is not only a test bed for fundraising skills but also a potential shoe horn into much larger revenue streams.

Antony Savvas is a freelance journalist

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