Quick guide to crowdfunding for charities

  • Crowdfunding can offer excellent fundraising opportunities for both new and established organisations
  • The crowdfunding sector has more than doubled year-on-year, and social causes are the second most funded category
  • We look at what crowdfunding is and offer our top tips on what to consider before starting your own campaign

Voluntary sector income has fallen year-on-year since 2009/10. Tough economic times, and vast reductions in available grant funding has left the sector anxiously looking for new ways to raise funds.

Crowdfunding has recently been thrust into the limelight as a potential solution. We look at what crowdfunding is, and how charities can benefit from its growing popularity.

What is crowdfunding?

Crowdfunding is an alternative form of raising money, created by a network of people who collectively fund someone else’s project or venture. This can range from raising the start-up capital for a new business, to developing an innovative product or funding a charitable project.

Unlike funding via traditional routes, such as bank loans or venture capital, crowdfunding relies on a large number of people pledging small amounts.

There are many different types of crowdfunding, including models to source loans or offer equity in companies. However, for charitable organisations, the most relevant types are likely to be:

  • Rewards-based – a range of rewards are offered depending on the size of contribution. For example, a musician could fund the recording of their new album and as rewards, they might offer small contributors a copy of the album, and large contributors a concert ticket with backstage pass
  • Donation-based – typically raises money for non-profit causes. There isn’t always a reward beyond the gratitude of the project creator, but there can be for certain levels of donation

Today’s crowdfunding is usually undertaken via dedicated websites. An individual or team will post a project on one of these websites and invite people to pledge money, or other resources, to enable it to be realised. Many platforms have an all-or-nothing approach, where your funding target must be reached within a specified time to receive any donations.

If this all sounds very familiar, that’s because it is. Crowdfunding isn’t a new concept – in principle, it is no different from a church asking for donations to fix its roof.

However, the reduction in available credit following the global financial crisis, and advances in internet technology, have allowed the concept to be re-scaled and brought to a mass audience.

Crowdfunding for non-profits

The global crowdfunding industry is more than doubling year-on-year, with social causes being the second most funded category, after business and entrepreneurship.

As crowdfunding is modelled on funding specific projects or ventures, donors know exactly where their money will be going. This offers a level of transparency that is difficult to achieve with conventional donations. Donors will also have a deeper connection to their chosen charity and be more likely to promote projects across their social networks.

A variety of crowdfunding platforms have been created specifically for charities and social enterprises. Buzzbnk, for example, helps social ventures source start-up or growth capital for a wide range of projects. Spacehive focuses specifically on civic ventures, from saving a local community centre, to revamping a dilapidated playground.

Cancer Research UK has taken the concept one step further and created its own crowdfunding-style hub. MyProjects gives donors greater flexibility, allowing them to either broadly specify what they want to donate towards, such as ‘breast cancer’ or ‘cancer nurses’, or choose from a range a specific research projects.

Key considerations

While crowdfunding offers exciting new funding opportunities, as well as the chance to reach new audiences and develop stronger connections with donors, it should not be seen as a panacea for current funding shortfalls.

Just as applying for grants, crowdfunding demands significant skill and effort to be successful.

Here are three key points to consider before launching your crowdfunding campaign:

1. Choose the right platform

No two platforms are the same. Before jumping in, take your time to look carefully at the platforms available and the type of projects that are successful on them.

Be sure to analyse things such as funding models, fee structures, ease-of-use and the projects they cater for. Some sites may also have useful features, such as allowing individual supporters to set up their own sub-projects that feed back into your own funding target.

Crowdfunding platforms with the black UK Crowdfunding Association’s logo have signed up to its code of practice.

2. Create a successful campaign

Do some research into what helps a campaign be successful. Find similar projects that managed to reach their targets and consider what they did right and how you can replicate it.

From analysing 100,000 of its campaigns, leading crowdfunding platform Indiegogo gained some helpful insights, such as the benefits of working with a team, the impact of making a pitch video and the importance of having a mid-campaign strategy.

Make sure you dedicate enough people and resources to ensure your campaign remains strong from pre-launch through to its conclusion.

3. Get the word out

Start generating interest long before launch. Successful crowdfunders are very good at leveraging their existing support to reach new audiences. Engage your current supporters early on and consider incentivising them to make early donations to attain momentum.

Communicate with your followers and backers throughout the campaign, update them on the progress and encourage them to spread the word throughout their social networks.

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With over 20 years’ experience and a dedicated team of consultants, we can offer your organisation tailored services and products to protect and grow your organisation.