This article was originally published on the Funding Centre site please check the source for updates.
THE TAKEAWAY: Crowdfunding is a great way to get funding for a specific project. It takes energy and creativity, but it can bring in much-needed funding and attract a whole new audience of supporters.
What is crowdfunding?
Crowdfunding is an online fundraising campaign for a specific project. It differs from traditional fundraising in a number of ways, but the most significant is the importance of setting a target: the fundraiser sets a target, people pledge an amount – usually in exchange for some form of reward, but sometimes just as a straight donation – and the amount pledged/donated is remitted to the fundraiser.
How does it work?
Crowdfunding offers individuals, groups and organisations a way to raise funds via an online crowdfunding platform. A project must have a funding goal and a time limit set by you, the project creator. During this time you spread the word about your amazing idea to your fans, friends, family, and any strangers and sponsors you can wow with your pitch. Supporters simply register and help fund the project.
What is a project deadline?
You’re required to set a specific funding goal for your project and a time limit for meeting this goal. Your timeframe can be as short as one day, and up to 6 months, although the majority of organisations opt for a 30 day campaign. The project deadline is the date until which supporters can contribute funds toward your target.
Do crowdfunding services collect fees?
Yes, they do. No crowdfunding service is fee-free, but fees do vary from one service to the next. Make sure you have a good look at the terms and conditions and fee structure of your chosen crowdfunding service before you commit. You want the maximum amount of donated funding to reach your project, so shop around.
Can projects raise more money than their goal?
Projects can gain support right until the project deadline. Even if you achieve your target, don’t stop spreading the word!
What are rewards?
Rewards are designed by you to both (a) encourage your supporters to fund your project and (b) thank them for their support. Get creative with your rewards! They represent a powerful opportunity to express yourself and differentiate your project from others, as well as to offer something unique that supporters can obtain only by supporting you. Most crowdfunding platforms specifically don’t allow you to offer certain things as rewards. Check the guidelines of your service.
I’m a not-for-profit with DGR status. Can I fundraise by crowdfunding?
Yes! But there are some important things to remember.
If you have DGR status, you can provide a tax-deductible receipt in return for a pledge of the same amount. You can’t, however, provide a tax-deductible receipt in return for a pledge associated with a reward. For example, let’s say one of your supporters wants to pledge $100 towards your project in return for a reward of entry to your next gala ball, and also wants to pledge $50 as a donation towards your project. They’ll need to make two separate pledges, and you’ll need to issue two separate receipts. The receipt for $50 will be tax deductible, and the receipt for $100 won’t be tax deductible.
It’s your responsibility to issue correct receipts and to ensure that you’re operating within all applicable laws and regulations. If you’re unsure, we recommend you speak to a fundraising expert, lawyer or tax adviser.
Reasons to run a crowdfunding campaign
THE TAKEAWAY: Crowdfunding can seem daunting, but there are lots of good reasons to give it a go. There are only a few times when crowdfunding might not be right for you.
You’ve got a specific thing you need to fundraise for
Crowdfunding campaigns work best when your supporters and donors exactly what they’re donating to. This could be something small, like a new laptop or car, or something huge like your organisations entire funding allocation for the year (it’s been done!) It means you have a specific target to work towards, so you and your supporters can create a strategy around the campaign .
It also gives your supporters something to say when they ask people to donate to them: “I like the work this organisation does, they need this thing, so please donate this much.” Your crowdfunder doesn’t always have to be something concrete, like a car or an office. It can be a staff member’s wages, or your insurance.
You’ll reach new audiences
Unlike a normal donations campaign, crowdfunding doesn’t require you to ask your supporters for money. Instead, you’re asking your supporters to ask others for money on your behalf. This means that news of your organisation’s work will reach people who you may not otherwise reach. Once they’ve donated to your cause, you may take the opportunity to connect them to your cause more directly.
Your supporters can engage with you in a new way
Your supporter base will be made p of individuals who have different capacities to give time and money. Crowdfunding opens up the opportunity for individuals to contribute to your organisation, without needing to commit a lot of money, with flexibility in when they spend their time fundraising. Crowdfunders can be particularly engaging if you coordinate teams, or host a challenge for your supporters to undertake.
You’ve got a good challenge idea
If your organisation or cause lends itself to a great challenge theme, bringing that challenge to life in the form of a crowdfunder can see a lot of engagement and awareness building. A challenge can be something which targets empathy, like Live Below the Line, or something which is physically demanding, like Oxfam’s Trailwalker, or something simple, like the Ice Bucket Challenge. For more information see our article on hosting a challenge.
You’ll have lots of fun
Whilst they’re hard work, crowdfunding campaigns pay off ten fold in the amount of fun they are. Unlike most other forms of fundraising, crowdfunding is a social activity, with multiple lines of communication running at the same time.
When not to run a crowdfunding campaign
Whilst we encourage any organisation to give crowdfunding a go if they’re eager, there are times when crowdfunding might not work in your favour.
- When you’re resource poor
As we said, crowdfunders require a lot of time and effort. If you don’t have one or two people who can commit themselves to ensuring your crowdfunder runs smoothly, you risk a very public fizzer, which isn’t good for morale or publicity.
- When you’ve just started acquiring supporters
Crowdfunders require at least a few committed supporters to get off the ground, so if you’re a new organisation which doesn’t have a committed supporter base, you’ll probably struggle to get people to fundraise.
- If you haven’t figured out something specific or tangible to raise towards
If you don’t decide on a specific goal for your crowdfunder, it might fizzle. It helps to give your supporters a tangible fundraising target (not just the number) to help inform their fundraising efforts with people who don’t know your organisation well.
CHECKLIST: How to set up a crowdfunding project
THE TAKEAWAY: Before you launch your project upon the world, think it through, from how you’ll tell your story, to how you’ll persuade people to support you. And note: video is non-negotiable.
- Make sure you understand how crowdfunding with your chosen crowdfunding platform works. Before you start, check out the FAQs, project guidelines, terms and conditions and fee structure.
- Many crowdfunding services offer the opportunity to discuss your idea with them. It’s a golden opportunity to get advice from the experts. They can answer any questions you have and also offer advice and feedback on your project. A good crowdfunding service will let you know if your project idea has a good chance of success or is bound to fail.
- Research at least 10 projects similar to your own. Get a sense of the kinds of rewards, descriptions and promotions that work well. Look at the projects that have reached their targets and see what methods they used to succeed. Don’t reinvent the wheel – use what works!
- Attend crowdfunding training. Our Community offers crowdfunding training – check out the calendar. Some other services offer their own workshops and training, so research what’s on offer.
- Devise a narrative and infuse it throughout your campaign. Why are you doing this project? Why is it important? Where did the idea come from? What does it mean to you? People want to support you and your story as much as they want to support your idea.
Setting targets and timeframes
- Consider how big your networks are. If you have few social media followers and a short email list, it’s probably not worth setting a big target. It’s not impossible to be successful without networks in place when you start, but it sure is trickier.
- Don’t run a campaign for less than 20 days unless you have a good reason or are super confident. You need time to disseminate your marketing material.
- Be realistic: don’t overstretch your target. Crowdfund what you actually need to make the project happen. There’s every chance you could raise more than the target, but you won’t raise anything at all if you don’t reach your target in the first place.
- Factor in the cost of delivering your rewards and the crowdfunding service fees when setting your target. It won’t all be net income; there are costs involved.
- Consider how much time you have on your hands. A crowdfunding campaign is a lot of work. On average, a project creator spends one hour every day on the campaign.
- Be clear about what you are crowdfunding for and where the money will be spent. It may be for part of a project or it may be for the whole thing; just make sure it’s clearly defined.
Describing your project
- Be succinct, be clear, be entertaining, be emotive and tell a story.
- Use lots of visuals and don’t write an essay. Most people won’t read your description in its entirety. Images and videos work best to get your message across.
- Get the critical information across early – what you’re raising funds for and why it’s important. People will often just scan the first paragraph or two.
- Include a basic budget. It will give potential supporters confidence you’ll spend the money responsibly
- Come up with a memorable title. It should be clear, simple and short
- If the platform you choose offers the opportunity to add your bio – do it. It will help build trust between you and potential supporters. Make sure your photo, username and bio paint a picture of you as professional, creative and motivated.
- Offering six to eight rewards is about right. Make sure there are distinct differences in price and in what’s on offer. People will tune out if your rewards aren’t easy to understand or if there are too many of them.
- Get creative. The uniqueness, quirkiness and diversity of your rewards make up an important part of your project’s narrative and marketability.
- Offer people experiences they can’t get anywhere else. Involve them in your project and offer them the opportunity to meet the people running it. Make them extras in your film, name characters in your book after them, or play a gig in a supporter’s backyard. Make your supporters feel special. See our ideas for rewards.
- People like it when you acknowledge them publicly. Thank them on Facebook. Put their name in your book. Credit them as an executive producer. Acknowledgements are easy to deliver and usually come at no financial cost.
- Use crowdfunding as a preselling mechanism. It’s a way for you to sell your album, tickets to your show, your new gadget or whatever else might be the result of your project.
- Star in your own video. People want to support you as much as they want to support your idea. They want to connect and hear your story. Yes, we know it’s scary. Doing things that scare you is a good thing.
- Be emotive. Make people laugh. Tug on heartstrings. Excite. Inspire. Fascinate. Just make them feel something!
- Tell a story. We really can’t stress this enough. If you take people on a journey there is every chance they will share in your excitement and enthusiasm for the project.
- Keep it under three minutes. Preferably two. You need enough time to get your message across, but you don’t want to harp on. You will lose people’s attention.
- Annotate your video (if you’re using Youtube, this means using one of those little links that pops up during playback) so that your video connects directly to your crowdfunding project.
- You don’t need to be Scorsese. There are plenty of good videos shot on phones or laptops. If you have a friend who’s a filmmaker, great, but don’t worry too much if you don’t. What’s important is that you achieve all of the above.
More Crowdfunding Resources
- CHECKLIST: Promoting your crowdfunding campaign
- OVERVIEW: Good reasons for people to crowdfund
- OVERVIEW: The good and the bad of hosting a challenge
- HELP SHEET: How to thank your supporters
- HELP SHEET: Finishing up your crowdfunding campaign
- HELP SHEET: How to motivate your supporters
- HELP SHEET: How to find supporters for your crowdfunder
- HELP SHEET: Crowdfunding formulas
- HELP SHEET: How to help your crowdfunding supporters succeed
- HELP SHEET: Ten tips for a successful crowdfunding campaign
More Fundraising Resources
- Fundraising Strategy and Planning
- Fundraising Checklist – How to win grants funding
- How to organise a special fundraising event