donation-based-crowdfunding

Donation-Based Crowdfunding: Your Questions Answered

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Briana

As all nonprofits know, growth often depends on finding the money to support your cause. Whether through grants, corporate sponsorships, or individual donations, fundraising is essential. The great news is that in today’s global society, another major source of income is available: crowdfunding. Crowdfunding for nonprofits is a new yet effective way to fundraise for specific projects. 

In this comprehensive guide, we explore one type of crowdfunding: donation-based. We explain how donation-based crowdfunding works and how to run a successful donation-based campaign.

Let’s go! 

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Traditional vs. Donation-Based Crowdfunding

When most people think of crowdfunding, they tend to picture the traditional method — entrepreneurs reaching out through social media for funds to launch a new product or service. However, in recent years, donation-based crowdfunding has gained a lot of traction. Today, you can find nonprofits all over the world using crowdfunding to make their fundraiser successful. 

The roots of crowdfunding can be traced to Kickstarter, a platform that allowed inventors and entrepreneurs to share new product ideas and then fundraise to actually create those products. Instead of approaching wealthy individuals or banks for backing, crowdfunding allowed them to receive small amounts of financial support from thousands of strangers.

donation-based-crowdfunding-types-of-crowdfundingNancy is ready to learn all about donation-based crowdfunding!

Today, you can find any number of crowdfunding websites: Crowdfunder, Indiegogo, Rockethub, etc. Furthermore, crowdfunding has moved away from the entrepreneur space. There are now crowdfunding platforms that cater specifically to charitable fundraising: GoFundMe, YouCaring, GiveForward, and FirstGiving. With donation-based crowdfunding, you create your campaign on one of these sites, and the platform typically takes a service fee of 5-10% from the total amount you raise. 

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Types of Crowdfunding

You can choose from a number of different crowdfunding models. Only the first two types in the list below are used for charitable crowdfunding, but it is helpful to know how all of them work. Here is a brief description of each model:

  • Donation-based: Individuals can use this model to fundraise for personal needs, but organizations can also use it for community projects. The organizer usually launches the crowdfunding campaign on the platform and then uses social media to garner more donations. This is the type most nonprofits use — and the one we are focusing on today.

  • Reward-based: Startups were the first to use reward-based crowdfunding. However, a nonprofit can use this approach as well. You offer rewards for various levels of giving. These rewards can even be themed to match the cause. For example, if you are raising funds to get your community center sports equipment, you can offer free or discounted access to personal training sessions or sports leagues for certain donation amounts. 

  • Equity: A small or midsize company typically uses equity crowdfunding to grow. In return for donations, large investors receive a percentage ownership in the company.

  • Debt: Businesses that are looking to pay off a loan or another type of financial obligation use this type of fundraising. They take donations with the intention of repaying the donors. They do not give out equity in the company.

  • Real estate: Finally, we have real estate crowdfunding. Real estate investors who do not want to apply for a traditional loan use this model. In this type of crowdfunding, investors put a certain amount of money toward a property (typically starting around $5,000). They then receive quarterly revenue payouts based on how much of the property they own and how much revenue it generates. 

Pro Tip: One of the pros of crowdfunding is that it is a simple setup that can reach a lot of people. However, do not overuse this type of donor campaign. Or, your message could get stale to potential donors. 

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Before Launching a Donation Campaign

Before you move forward with a donation-based crowdfunding campaign, there are a few important questions to consider:

  • Who is in charge? The best approach is to make your campaign a team effort to employ different talents and specialities. However, you still need to have a point person to run the campaign. This individual will do the high-level strategy and planning and be the go-to person for any questions. 

  • Do we have an elevator speech? Be sure that you can explain your campaign in just a few sentences. You want to engage your audience quickly and effectively. If you are unable to articulate your goals, social media users will move on. 

  • What are our visuals? Have several high-quality and evocative photos that encapsulate your cause. If you include at least one with every social media post, you can draw a user’s attention, stopping their scrolling. 

  • How do we best communicate with our base? Think about what your target audience wants to see. Are they data-driven? Convinced by strong storytelling? Do they use social media the most when they wake up in the morning? Midday during their lunch break? Use these types of questions to tailor how, when, and where you communicate with them.

Planning your crowdfunding campaign is key. It is a fairly simple fundraiser to run, but that does not mean that you can dive in head first with no strategy. In the next section, we share our step-by-step guide on how to manage a crowdfunding campaign from start to finish. 

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Setting Up a Donation Campaign

With the preliminaries out of the way, it is time to get your crowdfunding campaign off of the ground! Here are the next steps to take once you have your initial plan in place. 

donation-based-crowdfunding-setting-upMatt is checking out some potential crowdfunding platforms for his nonprofit!

Choose a Crowdfunding Platform

First of all, you want to select the crowdfunding platform that best matches your message and strategy. Some questions to ask yourself include:

  • Is your mission better suited to pictures or words? 

  • Does the platform have strong recognizability with your target audience? 

  • How do other organizations rate the platform’s functionality? 

  • Which platform offers the features you need at a reasonable price? 

Remember that some platforms are specifically designed for charitable crowdfunding. They can offer more targeted assistance and better pricing than other entrepreneur-focused platforms. Take some time to research these platforms. You can also check out our list of the best crowdfunding sites for nonprofits as a starting point. 

Prepare the Campaign 

Now, take your basic concept, and expand it into a full-on campaign. No matter the size of your fundraising team, you can easily launch your campaign by using your chosen platform’s templates. 

Here are some additional strategies on how to crowdfund successfully:

  • Have a clear goal: Whether you are trying to raise a specific amount for a program or reach a new donor base, you need to have a clear idea of what you want to achieve. Be sure to communicate this goal to your target audience so that they know exactly what they are supporting.

  • Create a deadline: You need a concrete deadline to create a sense of urgency for most donors. This can also help your staff stay on track.

  • Share updates: Keep your supporters excited by keeping them up to date on campaign milestones. For example, you can send out a notification when you are 50% to your goal or when there is only a week left until the deadline.

  • Offer various donation levels: Have a brief description of what each donation level will fund. For example, "$20 provides three meals to a family of four." Like knowing your goal, getting a sense of exactly how potential backers can help can motivate them to donate. 

Pro Tip: Remember to have fun with your crowdfunding campaign — a personal touch is what really gets clicks, views, and donations. Use behind-the-scenes videos of your staff out in the community. Share stories from your beneficiaries. There are so many ways to deliver your message in a unique way!

Run a Test

Before you launch, do a soft rollout. Share your campaign with a core group of your supporters to get their feedback. Since these individuals are a part of your target audience, they are the best judges of whether your content has the right messaging. 

Prepare a few questions to ask them after they review your campaign. For example, you can ask:

  • Do you want to donate after seeing the campaign’s messaging?

  • What would make you more likely to donate to the campaign?

  • Does the message need more or less words or pictures?

  • On a scale of 1 to 10, how likely are you to share this campaign on social media?

With their reactions, you can identify any problems and refine your process before pushing the campaign live. 

Launch the Campaign

Now that you have your content ready to go, it is time to launch your campaign. Crowdfunding was built for social media, so be sure to promote your campaign on the platform itself as well as through the social media channels that your target audience uses. 

In addition, you can try the following strategies to amplify your reach: 

  • Flyers

  • Word-of-mouth

  • Local events

  • Press releases

  • Press interviews

Meet Mid-Campaign

This is where planning those goals and deadlines comes in handy. When you have reached the halfway point of your campaign, meet with your fundraising team to assess your progress so far. Ask yourself and your team the following questions: 

  • What has the campaign accomplished so far?

  • Are we on schedule to meet our overall goals?

  • Where are you underperforming or overperforming? 

  • Are we reaching our target demographics?

Your midpoint meeting is your opportunity to get your campaign back on track if it is not going as anticipated. 

donation-based-crowdfunding-final-thoughtsAnthony is feeling strong about his newly-minted crowdfunding campaign!

Follow Up With Donors

As with any fundraising campaign, you must thank your donors. After the deadline, take a day or two to assess the results. That way, when you send your thank you email, you can also include information on:

  • How much was raised total

  • How much was raised per donation tier

  • How the campaign compared to past crowdfunding or general fundraising efforts

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Final Thoughts 

Like with any fundraising effort, there are pros and cons to nonprofit crowdfunding. However, with the right planning, you can bring in more donations to add to your revenue stream. Just gather a team of your best writers, graphic designers, and social media promoters to get started!

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FAQ

💡What are the five types of crowdfunding?

The five main types of crowdfunding include reward-based, donation-based, equity, debt, and real estate. Nonprofits only use reward-based and donation-based crowdfunding, though. Find out more. 

🔑 What is charitable crowdfunding?

Charitable crowdfunding involves using a platform and social media to solicit online donations. You often see individuals run these types of campaigns to pay their medical bills. However, nonprofits can also use them to fund specific projects. Find out more. 

📝 Which crowdfunding donation platform is best?

Not every platform works well for every nonprofit. However, your best bet is to start by researching charitable-specific platforms, such as GoFundMe and YouCaring. Find out more.  

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Briana
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