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What nonprofits need to know about crowdfunding

By Christopher Charlesworth,  HiveWire and CSI Catalyst cofounder, and CSI Member

With the recent introduction of US crowdfunding platforms Kickstarter and Indiegogo into the Canadian marketplace interest in the sector is higher than ever.  With an increasing number of organizations testing the waters, such as the ambitious Ubuntu ‘Edge’ campaign or community based efforts such as the Toronto Tool Library, there is a growing need for clear and practicable information on the space.  In this article I’ll cover some of the key information that nonprofits need to know about crowdfunding.

To begin it’s important to recognize that there is a wide array of available platforms, with over 800+ globally at last count.  With so many options it’s important to understand the value proposition that each platform is bringing to market.  

How is crowdfunding different from other types of fundraising?

Crowdfunding is fundamentally different from other methods of fundraising in that the campaigner has a direct requirement to create specific value for the contributors to the campaign.  With a regular request for donation the value that is created may be intangible, whereas with crowdfunding there is a much more direct exchange of value.  For example, most crowdfunding campaigns will create rewards that are either actual tangible products, offer specific recognition via social media, give access to a service or event, or even offer a unique experience.  The important aspect is that rewards must offer value to the campaign contributors.

In addition crowdfunding efforts will generally fall under the ‘SMART’ criteria, offering projects that are specific, measurable, attainable, relevant and time-bound.  Those that are contributing have a reasonable assurance that their dollars are being directed and applied immediately to the campaign goals, as described in the campaign’s video.  This focused application of funds is quite a departure from the generally more open-ended campaigns of many non-profits, where funds are requested in support of a general mission.

Benefits and Drawbacks of Crowdfunding

This focused approach of crowdfunding has allowed for millions of dollars to flow to individuals and organizations by dividing up the risk and spreading it amongst many donors.  In addition, by allowing for ‘all or nothing’ funding, risk to the donor can be further reduced with the assurance that if the target raise is not reached then funds will be returned.  Of course, crowdfunding is far from perfect and is by no means a panacea for the challenges of raising capital.  A successful crowdfunding effort requires a significant investment of time and energy, and takes an understanding of how to best leverage available resources.  

While most people recognize that crowdfunding conveys the ability to rapidly raise funds (unconstrained by grant applications and foundation special conditions), most overlook the huge marketing potential that a successful campaign can bring.  As crowdfunding campaigns are deeply integrated with the sharing function of social media, a campaign that gains traction can rapidly extend the reach of an organization to individuals and communities that they were previously invisible to.  Having said that, a failed campaign is an equally public affair - allowing anyone in the world to witness an absence of support with a simple google search.  The reputation economy is here, and a crowdfunding campaign can greatly contribute to, or detract from, your public scorecard.   

Tips for Crowdfunding Success

The four key factors of success that anyone running a crowdfunding should know are:

1) Have a high quality idea that you can deliver with a clear elevator pitch.

2) Create enticing rewards that are desirable.

3) Market your campaign! Without this no one will come (...honestly).

4) Have (or access) a strong network that will support your efforts.

Most first time campaigners struggle to turn the above tips into tangible campaign elements, that is until they embrace the opportunity for creativity that crowdfunding affords.  With no hard and fast rules to the composition of a campaign, the most noteworthy efforts have quickly garnered attention.  Truly a little bit of creativity can go a long way, as evidenced by the very successful “Who Gives a Crap” toilet paper campaign video on indiegogo (if you haven’t seen it yet it’s certainly worth a watch, if you don’t mind a bit of bathroom humour, that is).

Generating appropriate and engaging rewards can be particularly vexing, as it can seem as though all of the best rewards have already been done (and does anyone really need yet another t-shirt?).  We encourage the campaigns we work with to tie their rewards to the unique nature of their campaign.  For example, The Community Canoe project on CSI’s Catalyst was focused on building community gardens out of old (non-seaworthy) canoes, and repurpose them as bee-friendly garden planters.  Several of their rewards were connected to Canoe tours, including a “Canoe Lovers Package” that included all the essentials for a romantic picnic.  Another campaign, Not Far From The Tree, pulled some strings and secured Toronto’s very own former Mayor David Miller for a reward, allowing a few lucky donors to spend time picking fruit with a local crowd favourite.  The key with crowdfunding is to get creative!

If you’re looking for more information about crowdfunding please be sure to attend one of our free Crowdfunding 101 workshops - See the list of Catalyst events or contact us at info@csicatalyst.org.  

About:

Christopher Charlesworth is the Co-Founder of HiveWire Inc, and holds an MBA from the Rotman School of Management.  He previously worked as a management consultant in Indonesia, Canada, and the United States, where his work included complex financial modeling, pricing analysis, detailed market research and customer segmentation. He publicly advocates for the wider adoption of crowdfunding within the Canadian context. Follow him on twitter

HiveWire has partnered with the Centre for Social Innovation to bring the Catalyst platform to life. CSI’s Catalyst is focussed on supporting social innovation and social enterprise, and when campaigns are run on the platform a portion goes directly to supporting the space.  Importantly Catalyst has emphasized hands-on support for campaigns, with a free* included array of crowdfunding workshops to encourage campaign success.  Campaigns on the Catalyst platform have access to the most robust set of education tools currently on the market.