What’s the deal with crowd-funding?

14 Aug

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Today, let me channel my inner Jerry Seinfeld and make some fairly obvious and perhaps not-too-humorous observations about the phenomenon, the hype and the reality of crowd-funding.

Unless you’ve been in the basement on your Xbox for the last 18 months, crowd-funding has exploded to the point where the feds now feel compelled to step in. This has always been an indicator I’ve used as to the status of a new industry-how long until the feds step in and want to start picking winners and losers.

The reality is crowd-funding has done some good things (sending a berated bus driver on a vacation and then some) and some folks are less than thrilled with it (any of the many still waiting for their mix tape).

For nonprofits the results are mixed and the downsides need to be looked at before diving in. Let me share with you the 3 things I see wrong with crowd-funding as it pertains to raising money for nonprofits.

Are you really building a relationship with the donor for the long-term? New donors are always needed to grow your mission and acquisition can be expensive and time consuming. Depending on which crowd-funding service you use, donors to your crowd-funding campaign may very well be solicited by the crowd-funding site for donations to other causes. This can erode or eliminate the opportunity to create high lifetime value donors. Not good.

Is raising money all about campaigns? This one always makes me scratch my head. Some of the crowd-funding services will let you have your money but take a higher percentage of the donations if you don’t meet your campaign goal on their platform. I’ve spoken to many, many nonprofits who say the need is ongoing and not just a campaign to to do one thing or another. With the PC internet in decline in favor of the mobile internet, new and existing supporters are constantly looking for your presence through a Google search or on social media and typically they’re not headed to the crowd-funding sites to learn more about your mission. This is a persistent and ongoing occurrence and not a campaign. Most nonprofits should want donors to come to them whether there is a campaign or not.

They get your money first. While you are campaigning on a crowd-funding site they hold onto the donors pledge and/or the donation money while you drive folks to their platform to make a donation to your campaign. To me, it’s a bit odd to be driving money and new and existing donors to a 3rd party while the money is not in your hands while the campaign is going on.

Don’t get me wrong. In our multi-channel world today it’s right to look at all the options as a fundraiser. You have to do what makes sense for your organization.

I guess it comes down to one thing and it’s enough of a downside for me to not recommend using one-they’re relying on you to drive the growth of their email list and this will be used to solicit donations on a regular basis from your new and existing supporters for other causes. I have seen donor comments like “I got too many solicitations after I made my donation” and some platforms are trying to calm fears of nonprofits by saying they provide donor data to the nonprofits that use their platform. This is fine but the other solicitations from other causes won’t stop since this is how their business model works.

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