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Crowdfunding: The New, Old Way to Raise Money

April 24, 2014

Social media and the Internet have changed the way many organizations raise money. Sure, the tried and true fundraising methods such as holding large gala events and courting major donors are still used and for the most part still work. But as more of our everyday lives move into the digital world, it only makes sense that fundraising would follow suit.

One of the most rapidly growing forms of digital fundraising is crowdfunding. Crowdfunding is when individuals work collectively or act in a collective manner to pool their money and support organizations or causes they believe in. This probably sounds a lot like individual donor campaigns right? It’s similar but crowdfunding is done ONLINE and the timeframe to raise the money is usually pretty short, generally a couple of months, to add to the sense of urgency.

What we know today as crowdfunding is actually not a new idea. Praenumeration was the early precursor to the crowdfunding business model. It was a subscription business model used in the 17th century to finance book prints. The Statue of Liberty pedestal was also funded through an early form of crowdfunding. The American Committee for the Statue of Liberty ran out of funds for the pedestal in the mid-1880’s and more than 125,000 people contributed funds and raised over $100,000 in six months to finish the project at the urging of Joseph Pulitzer in his New York World newspaper.

The online aspect of today’s crowdfunding means that it’s accessible to virtually everyone. As of 2012 there were over 400 crowdfunding platforms and that number continues to grow. Adopt-A-Classroom, started in 1998, is often sited as one of the first crowdfunding websites. Other popular sites include Indiegogo, Kickstarter, RocketHub and Kiva. Causes and campaigns vary widely with the primary uses including funding for creative work such as blogging and journalism, music, independent films, and funding startup companies.

New initiatives are making their way into the crowdfunding world and have made headlines in recent years. In 2012, the New Era Colorado Foundation raised over $170,000 on Indiegogo to fund a campaign against a debt-limit ballot measure that they said was misleading and really just an attempt by Xcel Energy to kill efforts to create a local electric utility based on renewable energy. Their initial fundraising goal of $40,000 was quickly met and they raised it to $75,000 then $150,000. Their compelling story and creative use of social media and multi-media sources led to a hugely successful fundraising effort. Even “Main Street” has seen success with crowdfunding. Windom Minnesota, a small town with 4,500 residents in the southwest corner of the state, recently raised over $80,000 through Kickstarter for a new digital projector they needed to keep their Main Street movie theatre in business.

The accessibility of today’s online crowdfunding makes it an attractive option for organizations and causes of all sorts and sizes. But just like any other fundraising tool, if you’re going to do it, make sure you do it right. Take the time to research the various websites and platforms that offer crowdfunding services. Some charge flat rates, others charge base rates plus transaction fees and some are even all or nothing meaning that if you don’t meet your fundraising goal, then you don’t get any of the funds.

It’s a good time to add a new fundraising technique to your tool belt. Crowdfunding raised $2.66 billion in 2012 (up from $0.89 billion in 2010) and continues to grow. Now is the time to jump into the digital fundraising world – with your eyes open of course!