By Laura Newcomer

Crowdfunding is more popular than ever. In fact, research suggests this fundraising industry will grow to a whopping $300 billion by 2025.

If that number has your eyes jumping out of your head, you’re not alone.

A huge variety of nonprofits, startups, and even individual people tap into crowdfunding to advance their goals. Crowdfunding represents a seriously huge pie, and we think every organization working for good deserves to enjoy a piece of it.

Ready to give crowdfunding a try?

Let us take the intimidation out of it with this guide to what crowdfunding is and how it works. Learn about its perks and challenges, and strategies to launch a successful crowdfunding campaign and find crowdfunding platforms to help you get started.

what is crowdfunding?

What Is Crowdfunding?

Crowdfunding is a way to raise small amounts of money for a project or cause from a large group of donors. It’s called crowdfunding because it arises from the collective effort of a broad range of supporters.

Because most crowdfunding campaigns run online, they’re often shared via social media and dedicated crowdfunding platforms. This means there’s an opportunity for crowdfunding campaigns to reach a huge audience.

Even when they don’t go viral, these campaigns tap into a broad network of support. Rather than relying on large donations from a small number of supporters, crowdfunding draws on donations of all sizes from supporters from all walks of life.

The beauty of crowdfunding is that it democratizes the fundraising process. Instead of soliciting only the wealthiest donors, crowdfunding focuses on obtaining smaller donations from many more people who are excited about your project or cause. In the process, it helps grow your network of supporters and spread the word about your organization.

How Does Crowdfunding Work?

Now that you understand what crowdfunding is, let’s explore how crowdfunding works in a little more detail.

Crowdfunding can be used to raise funds for a variety of different organizations, projects, people, or causes. For instance, some startups rely on crowdfunding to raise capital for their budding businesses. Nonprofits might use crowdfunding to meet a particular fundraising goal. And individuals might crowdfund to survive financial setbacks (such as medical expenses) or support a personal project.

Many people or organizations use a dedicated crowdfunding platform. Individuals might choose YouCaring or GoFundMe; businesses tend to prefer Kickstarter or Indiegogo; and nonprofits often lean toward platforms such as Crowdrise, Fundly, and FundRazr. There are many other crowdfunding platforms out there, and it’s likely more will crop up as the practice grows in popularity.

If you’re wondering how crowdfunding platforms make money, the answer is actually pretty simple: They collect a portion of whatever the project raises. (The exact terms vary from site to site.)

Similarly, the process for crowdfunding varies a bit depending on the platform. But as a general rule, organizations set up a donations page and drive traffic to that page. There, supporters can pledge to back the organization or project at varying levels, which may have rewards attached to them.

Another form of crowdfunding is when donors themselves set up campaigns for a specific cause. This is often referred to as Peer-to-Peer fundraising, or P2P.

what are the pros and cons to crowdfunding?

How to Plan A Crowdfunding Campaign Strategy

Feeling like the benefits outweigh the potential risk of crowdfunding? Then it’s time to get serious about planning your crowdfunding campaign strategy.

Know the perks

If done correctly, crowdfunding can offer many advantages such as helping your organization or nonprofit expand its reach and connect with new supporters. It can also help you meet your fundraising goals without the need to court major donors for months on end.

Know the challenges

However there can be some challenges as well. Such as choosing the best platform that suits your needs. There are many to choose from and each one is tailored for different needs. In addition, if you don’t have a strategy in place or many followers, it can be hard to gain traction from the start.

While every campaign varies depending on the platform, organization, and cause, here are some best practices to get you started.

Clarify your goals

Before you start a crowdfunding campaign, get really clear about what you want to accomplish.Are you looking to raise funds for a specific project or program? Are you trying to increase your general budget? Are you hoping to enlarge your community of followers?

As you craft your goal(s), try to keep it SMART: Specific, Measurable, Achievable, Realistic, and Time-Based. Also keep in mind that compelling stories help drive crowdfunding campaigns. Raising money for a slush fund might be less attractive to donors than raising funds for a specific project.

As you move through the rest of the crowdfunding process, keep your goal(s) in mind at all times.

Choose your platform carefully

Don’t just use a crowdfunding platform because it’s well known.

Instead, take the time to research the terms and conditions of using the platform, whether campaigns like yours have performed successfully on that platform in the past, whether the platform’s functionality aligns with your needs, and so on.

Think through rewards

Offering rewards for different levels of support is an effective way to encourage donor participation.

If possible, plan to offer rewards for a variety of participation levels so the project is accessible to people with different financial means.

Also, make sure to price out what these rewards will cost in terms of money, time, and energy expenditure. Nothing angers backers faster than failing to live up to your side of the bargain, so make sure you can deliver on everything you promise.

Prepare before you launch

Long before you launch a crowdfunding campaign, make sure to:

  • Craft a timeline: Build out a calendar for when the campaign will start, when it will end, and important milestones or deadlines you plan to hit along the way.
  • Build a network of supporters: Advocates will drive word-of-mouth marketing for your campaign, which is essential for crowdfunding success. Start drumming up excitement for your campaign well before you launch.
  • Prep marketing materials: When it comes to advertising a crowdfunding campaign, you don’t want to be scrambling to produce content during the campaign. Instead, make sure to invest in cohesive copy, videos, and images, and develop a plan to release this content before you launch. Pay extra attention to the look, feel, and content of your crowdfunding site, since this is the primary place donors will interact with your organization.
  • Solicit media coverage: Engage with local, regional, and even national media outlets to solicit coverage for your campaign. When you pitch outlets, make sure to explain why your campaign is relevant to their audience.

Tell a story

As we’ve noted, storytelling is often the driving force behind successful crowdfunding initiatives. Make sure you devote lots of time to planning this aspect of the campaign.

When crafting your story, be sure to define the problem you’re trying to solve, the solution you’re presenting, the impact donors’ contributions can have, and why this campaign matters now. As you write this story, make sure you tell it in a way that is authentic to your brand and its voice.

Communicate with your supporters

The beauty of crowdfunding is that it lets many people get involved in supporting your project or cause. By making a donation, your supporters are telling you that they’re invested in your project’s success. And that means they want to hear how it’s going!

Take the time to update your supporters on a regular basis regarding the campaign’s progress, and note any milestones that have been achieved. Once the campaign has concluded, keep updating supporters with how their donations are being put to good use.

Generating an ongoing relationship with these supporters means you’ll also sustain ongoing support for your organization and its work.

Learn as you go

Throughout the campaign, make sure to track your progress, number of supporters, ebbs and flows in support, and social media engagement. This will help you learn what works (and what doesn’t) and allow you to course-correct if necessary.

As the campaign comes to a close, make sure to ask your supporters for feedback so you can learn what worked and what could be improved for future campaigns.

Crowdfunding Examples

Many nonprofits have used crowdfunding to successfully raise additional donations. With crowdfunding gaining in popularity as a reliable and effective fundraising tool, there are now many platforms to choose from.

Some popular crowdfunding websites you might be familiar with include:

  • GoFundMe: this site focuses more on charity and individual causes
  • StartSomeGood: many individuals use this to fund their startup or to raise money for their favorite nonprofit or cause
  • KickStarter: designed for bringing creative projects such as film, music, art and theater to life
  • CrowdCube: equity crowdfunding platform designed for entrepreneurs
  • Indiegogo: offers crowdfunding for people to raise funds for an idea, charity or start-up
  • Giving Assistant: this shopping platform raises small amounts from many online shoppers who donate their cash back to a nonprofit

Examples of Organizations and Nonprofits who have used crowdfunding to raise additional donations are endless but here are few:

what are some crowdfunding examples?

There’s no end to the ways crowdfunding can be used for good. Put together a thoughtfully designed campaign with a clear goal and a compelling story, and you’ll enhance your organization’s network of supporters and help get important projects funded. Power to the people!

What is Crowdfunding and How does it work  infographic

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