Crowdfunding for charities: friend or foe?

Crowdfunding and charities: friend or foe?

I am an independent crowdfunding adviser. When I started my business to inform, advise and support people and organisations using crowdfunding I found a lot of valuable transferable knowledge and techniques from charity and compassionate/social cause fundraising. Three years on I had anticipated that I would have worked by now with a charity or two, but it hasn’t panned out that way. I had a few ideas why, and I was also very curious about what I might learn at Fundraising Live 2018, a conference primarily for charity and nfp fundraisers organised by Civil Society Media.

Finding it tough
It was apparent from on-stage speakers and anecdotes at networking breaks that many charities found 2017 to be challenging. 10 years of economic austerity,  Brexit concerns and prices rising faster than incomes have reduced the UK public’s willingness (or is it simply ability?) to support charities and compassionate causes to the extent they had in previous years. There are several outcomes from this.

One is a natural response to avoid risk and focus on areas of proven abilities and previous success. It encourages people to play it safe within a comfort zone.

A second one is to find some other external scapegoats, and crowdfunding is a candidate. Several charities and the fundraisers within them are aware that crowdfunding has become more widely established as a direct means for people to donate to help other people (or dogs, donkeys, whatever) without using an intermediary charity or other organisation, and have suggested that it is cannibalising their income streams. I will return to this theme.

So what is crowdfunding?
It’s nothing new. Church collection plates are a form of crowdfunding. Nelson’s Column in Trafalgar Square was paid for by public donations – crowdfunding. What is new is that it’s 10 years since Apple launched the iPhone, heralding an era of mobile, mass connectivity that many visionary entrepreneurs have taken advantage of to disrupt traditional ways of doing business in many sectors.

It is online crowdfunding that is new, and it has become a recognised means for anyone to launch a new product, fund an arts project, launch or expand a business, or raise money for compassionate causes. It enables anyone to try and make a difference to their own lives or to others’ without having to rely on support from the previous gatekeepers who controlled access to being heard about – the media, and access to money – including banks, grant providers, government startup loans, high net worth individuals and venture capitalists. Crowdfunding is thus often described as having democratised access to financial resources, it’s no longer so much about who you know to go to.

The usual crowdfunding process is for individuals or organisations to create a project with a timeline and fixed purpose rather than open-ended generic fundraising, with a written ‘sales pitch’ and usually an encouraging video, hosted on a crowdfunding platform (a website). A platform is an online marketplace that enables potential backers to contact the project owner and handles all the transactions. The platforms bring together people who seek money with people who are looking for causes, projects or new businesses to support, in a trusted environment.

A very important aspect is to recognise that successful projects have access to a crowd of people to drive to their project on a crowdfunding platform. This can be achieved by various means, such as traditional press releases, publicity stunts and other types of events to achieve media coverage, though the make-or-break is usually successful use of digital marketing and social media. And when I use the word ‘drive’ that’s exactly what I mean: co-ordinated, continuous and persistent efforts through a variety of communication channels that actively encourage, cajole and hustle busy people who have many other priorities to visit your crowdfunding project.

Are charities equipped to exploit crowdfunding opportunities?
Forgive me if you operate at or for a charity that doesn’t fit what I’m going to say, but I do have to speak in general terms.

Crowdfunding for charities: friend or foe?My own experience is that small charities rely on part-time and volunteer staff, who are often using dated IT equipment. Amanda Bringans, director of fundraising at the British Heart Foundation and chair of the Institute of Fundraising, mentioned at Fundraising Live 2018 the importance of keeping such volunteers enthused so they keep turning up. To me, this suggests it could be risky to ask them to leave the comfort zone of what they know how to do and set themselves on a learning curve to master new skills and techniques. Whilst I already believed this applied to smaller charities, I learned at #fundraisinglive that this can equally apply to some larger ones as well.

Nina Saffuri, director of fundraising at War Child, said that research had found 50% of UK charities do not have a digital strategy. This piece of research also found 57% of respondents said their charity suffered from a lack of skills, and 52% said there was a lack of budget to do anything about it. 50% said other challenges are considered more important.

Source: Charity Digital Skills Report 2017

A situation exists where in many charities the leadership focus is elsewhere, there is a low level of expectation in part-time volunteer staff, a low level of investment in them, and thus a continued low level of delivery. It’s a conspiracy of under-achievement which leaves many charities and other fundraisers for compassionate causes unable to take advantage of the growing acceptance of online crowdfunding, or even feel confident about testing it.

Further evidence of keeping the internet and digital marketing at arm’s length comes from an analysis by nfpSynergy of a breakdown of advertising expenditure by media type by charities in 2016. It showed that compared to an overall average of 46% of all advertising budgets being spent online, the corresponding figure for charities was just 5% of their total spend.

Crowdfunding for charities: friend or foe?

The implications of low-level IT skills and a relative unfamiliarity with online advertising and marketing will go further and impede the charity sector’s take up of using machine learning and the application of artificial intelligence.

Is crowdfunding really cannibalising traditional fundraising?
Crowdfunding and charities: friend or foe?
Charles Wells, CMO of JustGiving, presented the results of some personal research he had undertaken. Yes, it was true that crowdfunding initiatives can be up and running in response to a disaster faster than established charities. This does not surprise me. Any well-meaning individual can launch a crowdfunding project, whereas any organised charity or similar organisation has a set of procedures that require authorisation to be sought, considered and given. It becomes a slower B2B-like process that has to consider several people’s input before going ahead, or not.

However, Charles also found that crowdfunding draws in new people to support a charity or cause. “Crowdfunding can teach the joy of generosity,” he said. Beyond their initial donation, new donors can of course be followed up, bedded in more closely, and converted to a regular supporter, perhaps in more ways than simply giving money.

So there is evidence that greater use of crowdfunding would be beneficial. More on what he said at the conference is here.

How to go forward
Crowdfunding platforms and crowdfunding advisers, like me, recognise the dilemma facing many charities over staff availability and social media and IT skill levels for driving a crowdfunding campaign. There is plenty of free advice available, with case studies, best practice guides, online webinars, and introductions to like-minded people who have “cracked” crowdfunding. The crowdfunding platforms JustGiving and Hubbub particularly stand out in this respect, though others are also very helpful including Spacehive at a local community level.

After Fundraising Live 2018 I raised the issue of possible low IT skills through Twitter. It was spotted by the free-to-use crowdfunding platform CrowdPatch who said they were aware of this as a possible concern, and they provide social media and digital marketing training courses.

Crowdfunding and charities: friend or foe?I spotted in a Google Alert that Crowdfund360 and had teamed up to provide an 8 week, one morning a week course in London during April and May for charity and compassionate cause fundraisers on how to use crowdfunding successfully. I tweeted about this, and as a result that they were contacted by people in the north of England asking for a course to be held for them in Greater Manchester.

For anyone reading who doesn’t use social media much or at all, are you beginning to see how it informs, connects and opens new opportunities, sometimes quite far afield?

What next?

  1. Crowdfunding is far from being the foe of charity fundraisers, though in many cases it’s going to take some internal investment and perhaps a change of mindset before it can be a friend.
  2. Crowdfunding can reach new donors and respond faster to events.
  3. There are many providers of free advice and low-cost training on how to use it successfully, and a number of potential ad hoc campaign managers to create an overall framework and keep a crowdfunding project on track.
  4. What are you waiting for?

If you’d like to discuss your own views on this issue, or maybe you’d like advice on your own possible crowdfunding project, then please email me at [email protected].


Crowdfunding’s role for worthy causes

Crowdfunding goes from strength to strength. And for social community projects and worthy causes, crowdfunding provides new and exciting opportunities for fundraisers to exceed previous levels of expectations, perhaps by up to three-fold.

Here’s how it works. Like most other disruptive changes to established ways of doing things, it is based on the internet. Crowdfunding delivers an innovative way to generate an investment budget to finance a business start-up, expand an existing organisation, or achieve a worthy aim in the community. The crowdfunding process makes your funding requirement public on a dedicated website platform, and you need to drive a big enough crowd of people to it and convince a high enough proportion of them to give just a little bit each towards what you need.

There are four broad types of crowdfunding. For businesses it includes money on loan with pre-set repayment terms, or in exchange for some company equity. For social community projects or worthy causes there are direct appeals for donations (with or without reward incentives) that do not incur any responsibility of repayment.

Donations campaigns are often built around a donations-for-rewards model. Donors not only feel a rosy glow from supporting a cause they empathise with, they are also encouraged to give by the range of perks and incentives offered in recognition of their support. This reduces the net income a crowdfunding project generates by the amount it costs to source and distribute the perks. Though if the perks include merchandise material that promotes the cause or the project then they can deliver valuable longer-term visibility. Perks may also include reduced rates to buy products or use a facility or venue, encouraging a level of habit-forming patronage.

Here is what makes crowdfunding particularly effective for worthy causes. The money raised through donations campaigns tends to come in three roughly equal parts. The first third is donations from your closest contacts and you need to personally secure their support. In the past this may often have been the extent of the fundraising for a particular cause or project. However, crowdfunding now provides effective leverage to use this income as a base upon which to achieve even more, perhaps double the initial amount again. Do the personal selling in time to refine an effective pitch for your important crowdfunding video.

The donations from the key personal contacts should appear quickly in your online crowdfunding project, certainly in the first few days because they will inspire and encourage other donors to follow them. The next third of donations are likely to come from other contacts in your e-mail database and various social media networks who are not close enough for you to have reasonably approached on a personal basis. It is thus vital to have an organised e-mail database and sufficiently sized social media networks for this to be viable, and some prepared content to quickly distribute. You may want to consider an e-mail automation programme. Independent crowdfunding advice on several of these issues could be very worthwhile.

The average UK crowdfunding donation is around £35, and – again on average – one in twenty people who visit an online crowdfunding project will make a donation. Depending on your target amount you can start doing the sums to estimate the size of crowd you need to drive to your crowdfunding project.

And finally, there are many, many people out there who are open to contributing to good causes. Up to a final third of your  income can come from people outside of your networks, people you have never been in touch with before, but who are encouraged by the quality of your project and reassured by the fact that so many people who do know you are prepared to contribute. It gives them confidence they are making the right decision. Traditional media coverage generated through PR and Twitter hashtagging can usefully extend awareness of your crowdfunding project beyond your known contacts. This needs to be put in hand perhaps months before your crowdfunding goes live. You can of course then add these new people to your database to maintain regular contact and develop a deeper relationship with them.

PrintClive Reffell established Comanche Communications & Marketing in 2014 to provide independent crowdfunding advice to SMEs. He brings a wide range of problem-solving experience from a 30-plus year career in results-focused marketing. His formal qualifications include post-graduate diplomas in direct and digital marketing from the IDM and business management from the Open University Business School.

W: E: [email protected]. M: 07788 784373. T: @Cliveref