Crowdfunding: What is it and how can it help my charity fundraising?

A definition, introduction and 101 for not-for-profits and charities

The traditional definition of crowdfunding goes something like this:

Crowdfunding is the process of funding a project online by collecting small amounts of money from a large volume of people

While there are a lot of flavours of crowdfunding the most important components are:

• A project that needs to be funded (not an organisation);
• A fixed goal that needs to be raised; and
• A timeframe that the fundraising campaign runs for

The problem with this definition is that it's misleading and makes people think that to access the crowd of funders out there, you just need to put your project online and do no work. That's why we came up with a better definition. One that reflects how you get to the crowdin crowdfunding.

Crowdfunding (verb): A marketing campaign targeted at people who love you... which if you do well, spreads from your friends to their friends and from them to the crowd

We like this definition of crowdfunding better, because it emphasises:

• That crowdfunding is all about marketing
• That crowdfunding is social i.e. you access the crowd via people you already know talking to their friends
• It makes it clearer what you need to do to succeed

So if I'm marketing to people I already know, how is this different to emailing my list a link to my website?

While it might not be immediately obvious, how you run a direct email campaign and the experience donors get is totally different to a crowdfunding campaign. Here's three differences:

1. A direct email campaign is designed to get a small percentage of people on a large list that you already own to donate. Crowdfunding is designed to get those people to donate AND to tell their friends about the campaign. That means that if you have a starting list of 1,000 people, a direct email campaign limits your maximum number of donors to 1,000, whereas a crowdfunding campaign could well attract donors that are not on your list.
2. The fixed goal, timeframe and project nature of crowdfunding means that donors get an engaging experience that they want to come back to to check the progress of the campaign.
3. A direct email campaign is about a charity (you) talking at a large volume of people (broadcast marketing). A crowdfunding campaign is about your supporters talking to their friends (social marketing).
4. (Bonus) You'll very rarely get press about your direct email campaign. Heaps of crowdfunding campaigns get written about - you can check out a few from Chuffed.org campaigns here.

Ok, got it. So where does crowdfunding fit into the charity fundraising landscape?

So roughly speaking, you can split charity fundraising into two buckets:

• Relational Fundraising: large value, low volume (Government, High Net Worth, Trusts/Foundations, Corporates)
• General Public Fundraising: low value, large volume (Face-to-face, Direct Mail, Direct Email, Telemarketing, Events, Peer-to-Peer)

Crowdfunding belongs squarely in the 'General Public Fundraising' bucket and in a non-profit, it's usually led by the same person/people who looks after other public fundraising campaigns.

While crowdfunding is heavily project focused, increasingly smart non-profits have found ways to running regular crowdfunding campaigns to fund their ongoing operational costs - but that's a whole other post.