The advantages of crowdfunding for nonprofits

Crowdfunding offers a major boost to the fundraising efforts of many charitable organizations.
Date Published
09/05/2014

Many 501(c)(3) organizations constantly look for ways to improve their nonprofit fundraising efforts. Encouraging supporters to give more while trying to open new donor pipelines is a daily challenge that many charitable organizations struggle to find solutions for. This has caused many charities to get creative and turn to alternative methods of generating money to help achieve its organizational mission.

One of these new and ground breaking ideas is crowdfunding, or the idea of using the Internet to rake in small donation amounts from vast numbers of people. Typically, people are encouraged to help an organization or individual reach a set financial goal in a fixed amount of time in support of a particular cause or movement.

The success of crowdfunding has caused many nonprofits to add the strategy to their fundraising cache. The ease in which it can be implemented and the relative speed in which financial contributions come in make it an attractive option. Additionally, it also requires much less of a financial investment on the front end which helps to maximize the total giving amount.

How traditional fundraising and crowdfunding differs
CauseVox, a company that has developed a crowdfunding platform, highlighted the primary differences between a standard giving campaign and one that relies on donations from online supporters. One of the biggest is related to cost.

Traditional nonprofit fundraising efforts require an investment to be made in advertising. Many times this may include the use of a radio or TV commercial to raise awareness, or direct mail efforts that include the printing of materials and the purchase of postage to mail information to donors. Additionally, if a nonprofit will use the U.S. Postal Service to send materials to individuals who aren’t already supporters, than many times they’ll incur additional costs purchasing mailing lists.

It’s easy to see the financial investments that need to be made with respect to traditional nonprofit fundraising campaigns and how much money needs to be raised to offset what can amount to exorbitant costs.

However, crowdfunding is a much more efficient way to go. A CauseVox notes, 501(c)(3) groups can use free services like social media to get the word out regarding the need for donations while at the same time, directing potential contributors to the website where they can accomplish this task. In addition, as opposed to contacting contributors using the USPS, email marketing efforts can be used to reach supporters at a relatively low cost.

Also, when using a crowdfunding site, many charge only a small fee for every transaction or a monthly subscription amount which is much less expensive than traditional marketing methods. Additionally, a charitable organization can leverage the immense power of the internet to help it raise money to support worthy causes.

Implementing a sound crowdfunding strategy
As with most fundraising efforts, a solid strategy must be implemented in order to reap the best results. John Haydon, who specializes in nonprofit marketing, offers a few tips on his blog on how 501(c)(3) organizations can effectively strategize on how to make crowdfunding work.

The most important suggestion is to make the story behind the campaign strong. Many times, donors will be compelled to offer financial support if they are touched emotionally. The storyline appearing on the donation page must clearly state why their help is needed and it must be crafted in such a way that it pulls at the heart strings of potential contributors.

Crowdfunding, when added to the overall fundraising strategy of a charity, can greatly help it achieve its organizational goals and foundational mission, in addition to increasing its reach and raising more awareness.

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