A Complete Guide to Crowdfunding: What, Why and How

The term ‘Crowdfunding’ is widely known today in the NGO world but finds its origin elsewhere. This means of acquiring funds come from the entrepreneurial world and was initially used to finance their ventures. Albeit used in the development sector now too, the aim remains the same, namely raising money for a project or an organization by drawing advantage from a large number of people reachable through different forms of media.

The use of this technique has become more relevant with the advent of social media and the associated increased use of the internet. Thus every social media user became a potential donor.

As a result of this increase in crowdfunding’s popularity, there is a multitude of examples to draw from to get an accurate overview of the dynamics of crowdfunding.

It is therefore relevant to look into what crowdfunding entails, why you would want to use it and how to implement it.

Defining Crowdfunding

The origin of crowdfunding can be related to that of crowdsourcing, the latter meaning “to outsource a particular task to a large number of individuals based on their capacities”. Rather than outsourcing tasks, however, crowdfunding outsources donorship. It uses its supporters to obtain the funds necessary for organizational operations. Simply put, crowdfunding is the means by which an organization raises funds through the crowd. It raises money from a large group of people.

The exact definition of crowdfunding as explained by Lambert/Schwienbacher (2010) stresses that “Crowdfunding involves an open call, essentially through the Internet, for the provision of financial resources either in form of donations (without rewards) or in exchange for some form of reward and/or voting rights in order to support initiatives for specific purposes”.

It is important to note that this definition deals with certain key elements briefly explained below:

Open call

It is necessary to announce as publicly as possible the desire for crowdfunding. An open call is, therefore, the most visible to a large audience. One way of sending out an open call is by appealing to your established audience in order to gain the necessary support for a specific project.

Using the internet

If the means of crowdfunding is by way of an open call, then the internet has to be the preferred means of propagation. Indeed the speed and ease of this platform are unparalleled and enable you to reach thousands with the simple click of a finger. Whether it be social media or bulk emails, the internet is one way to reach as many people as possible.

A cause

There is little use in crowdfunding a project without a viable cause. The cause needs to be relevant, feasible and, most importantly maybe, appealing to the targeted audience.

Recognition of support

Supporters of crowdfunding projects might do so from altruistic motivation, but a little recognition doesn’t hurt and might make them more willing to donate for your next initiative. A thank-you email can go a long way already and can be very appreciated.

Why Crowdfunding?

 Aside from its financial aspect, its public and open nature have the ability to generate a lot of positive media attention. By advertising your campaign in such a fashion, you also bring about an image of your organization for everyone.

Crowdfunding is today’s fad. The process of getting a grant, from finding a suitable one to applying for it, along with the constant uncertainty of the outcome, make it very tedious.o see. Given the importance of branding in today’s world, this is a huge added benefit.

Crowdfunding, therefore, establishes itself as a very viable alternative to the traditional reliance on donors for fundraising.

Below is a list of additional reasons for why you should consider crowdfunding:

Simple, Easy and Quick:

Crowdfunding saves any organization incredible amounts of time. Applying for traditional donorship is time-consuming due to the number of stages to go through and the need to appeal to the donor’s view rather than one’s own. Crowdfunding allows for a wider outreach within a shorter period of time.

Reach:

Trough the use of a single platform alone you can already grab the attention of a considerable amount of people. From there on interest can spread easily to other people and other platforms too. The one initial click can cause exponential growth in reach.

Visibility:

Crowdfunding, as mentioned before, is a great technique for branding because of the visibility that comes with it. Not only do your projects attract attention thanks to it, so does your organization. Similarly, support might not only be going out to the single project but to the organization as a whole too.

Alternative to donor agencies:

Donor agencies have existed for a while, and are there for a reason; they can contribute substantially to the realization of a project. However, you have to take into consideration the competition for donors’ funds. Indeed, the high demand for financing from a multitude of organizations has led donors to be very particular about who they dedicate their funds to. This means that you have to meet strict rules and criteria before you can even consider yourself eligible for that prize money. Crowdfunding is a great alternative to the more traditional method since the funds are sourced from willing individuals. This freeing yourself from constraining rules that might affect your project. The simple act of starting a fundraising campaign will already allow for donations to flow in.

Cost-effectiveness:

Crowdfunding is a relatively cheap endeavor. It tends to be limited to hosting fees and other platforms’ potential extra costs, but those are typically quite low, making it a very cheap alternative to traditional fundraising too.

No deadline:

You have complete agency in establishing your own crowdfunding campaign, meaning you can start it whenever you want, and determining the length of duration. This gives your organization more freedom than adhering to donor agencies’ strict deadlines.

Monitoring:

It is easy to keep an overview of the incoming funds and adjust the crowdfunding strategy according to the audience’s responses.

How to start a crowdfunding campaign?

Strategizing:

It is not because you don’t have to adhere to the donor agency’s strong rules and expectations that your plan shouldn’t be as thorough. Developing an appropriate fundraising strategy, along with a concrete implementation plan, is important to get a response through the fundraising campaign. Individual donors are just as likely to make an informed decision when it comes to spending their money, and a poorly developed plan does not bode well for your funding prospects. There are, therefore, several elements to take into account when developing your fundraising strategy:

Define your objective:

Your crowdfunding campaign should not just in response to the fad surrounding it. Opting for this method of fundraising is a choice, and needs to be weighed. For this, a clear understanding of your NGO’s objective is necessary to determine whether it is in line with the said objective. However, the financial part of your project does have an important place. Do not get too caught up in the finer details of your objective if that time is better-spent fundraising. A SMART objective, therefore, goes a long way.

Identify your audience:

Targeting the right audience is one of the most important considerations of crowdfunding. Rather than finding a donor agency that will be willing to fund your project, you have to determine what element of the said project is going to appeal to what audience, and how large that audience is. A good campaign is only good if the people interested in it see it. Research shows that it is oftentimes through pre-established relationships that most of the fundraising happens. It is, therefore, worth identifying which ones of those acquaintances would be interested in your current project and target them primarily. Aligning the campaign to likely donor’s interests is key to a successful fundraising strategy.

Develop your message:

On the same line of importance as identifying your audience is crafting the appropriate message. The message ought to be clear and inform your audience exactly what your project pertains to accomplish. Establish a relationship of trust through a compelling narrative. The nature of the platform’s crowdfunding happens on means it is necessary to keep it short and powerful while still relaying the desired message. A few guidelines to uphold are:

• • Simplicity
  • Short paragraphs
  • A bias against long sentences
  • Emotional appeal
  • Indicating your objective

Much like when applying for grants, being able to explain how the raised funds will be put to use can reassure a potential donor and builds trust.

Reviewing your message is key, and don’t hesitate to consult with people close to you; they are likely to be the type of person you can expect donations from.

Determine what platform to use:

The ease of crowdfunding by way of its reliance on the Internet does not mean that you should use all of the available platforms on it to spread your message. Make sure you’re not seen as spam since that negatively affects your campaign. Moreover, it will deteriorate your organization’s public image and brand. Make an informed decision about which platform(s) to adopt for your campaign, based on ease of use, targeted audience, web presence and guarantees of a safe transaction.

Be proactive:

Don’t limit yourself to online crowdfunding. People’s limited attention span online results in passively scrolling through their feeds and emails, and they might skim over your campaign. Address your contacts directly, and target potential donors directly by email or messages.

Acknowledge your donors:

As mentioned before, a little recognition goes a long way. Don’t forget to thank them for their donation and to regularly keep them informed of the progress of your project.