THE PROBLEM WITH CROWDFUNDING

Crowdfunding has experienced a meteoric rise in popularity over the last couple of years. Both individuals and businesses have begun to turn to crowdfunding to pay their way out of misfortune, generate donations and fund startups. But there’s a problem with crowdfunding.

At face value, it can be an appealing option for nonprofits. Putting your cause on one of many crowdfunding sites gets it in front of a new audience. Some causes take off and might even receive double or triple of what they were asking. But the grass isn’t always greener on the side of crowdfunding; less than half of campaigns reach their goal, and two-thirds of those unsuccessful campaigns get less than 20 percent of their goals.

Here are the issues with using crowdfunding platforms:

People Look to Go Viral

Visit one of the larger crowdfunding sites and you’ll find thousands of different active campaigns, and that’s just one site. Huffington Post estimated there would be over 2,000 crowdfunding options by 2016. Putting your cause on Kickstarter or GoFundMe is like shouting in a loud room. Making something with the intent of it going viral is almost always destined to fail, as Jeremy Vest mentioned in one of our recent webinars.

Why waste time trying to get attention in this crowded environment when you can talk directly to the people you know are already invested in your cause? You should focus on your existing donor base and work on potential leads you may already have. A smaller, more concentrated campaign has a much higher likelihood to be successful than a larger, less focused one.

“Making something with the intent of it going viral is almost always destined to fail”

It’s Impersonal

How likely are you to give a stranger money? When you break it down, that’s essentially what you’re asking for on a crowdfunding site. While you do have an opportunity to “pitch” your cause and explain your organization, at the end of the day you’re hoping that enough strangers:

  1. Find your cause (either organically or virally)
  2. Spend the time to research and read about your organization
  3. Believe in your cause enough to attach themselves to it
  4. Donate

Even for campaigns with smaller goals, that’s a pretty lofty expectation, as many have come to realize. Not to mention, a loyal donor wants 100% of their donation to go to your cause, not 95% due to the fees of crowdfunding platforms.

“A loyal donor wants 100% of their donation to go to your cause, not 95% due to the fees of crowdfunding platforms.”

People Ask for Trust

One of the biggest challenges of crowdfunding is getting people to trust you, as the majority of these sites offer little credibility. People fear the money they give won’t end up going where they intended. GoFundMe and Kickstarter put the responsibility on the donor to make sure the fundraiser is trustworthy, and refunds are very rarely granted.

I’m not suggesting that your organization would be dishonest to donors, but others in the past have been (seehere, here and here). To some degree, this has tainted crowdfunding for many.

People that you personally know will trust you, but will they donate sitting behind a computer screen? They’re more likely to give – and more – if you personally meet with them. Trying to reach the masses and fundraise thousands of dollars in a viral crowdfunding campaign, instead of meeting with people or sending personalized messages, is idealistic – if not unrealistic.

“People that you personally know will trust you, but will they donate sitting behind a computer screen?”

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Crowdfunding offers the promise of huge returns without much effort; just put your cause on a site, people will share it a few times on social media and boom – a fully funded campaign. But it rarely works that way. It’s a microcosm for the societal shift to digital solutions to problems.

Talk to any Baby Boomer and they’ll tell you that nothing works as good as the “old-fashioned way.” In this instance, they’re probably right. Go to the people that already believe in you and your cause, and lean on them instead of hoping for support from the masses.

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