Kellogg School of Management at Northwestern University

Crowdfunding sites like Crowdrise or Indiegogo allow nonprofits to reach beyond their traditional donor base, helping them promote causes faster and cheaper than ever before. Still, crowdfunding is not a magic cure for budgetary woes. According to Liz Howard, a professor of nonprofit management at the Kellogg School, a successful campaign is one that takes a clear-eyed view of crowdfunding’s value—and also its limitations.

How can nonprofits best make use of crowdfunding?

Tell a good story. “The most valuable aspect of crowdfunding is actually getting the story out there,” Howard says. “I think this is something that is often overlooked. Narrative is critically important, because the story is what differentiates one initiative from another.” Sending enthusiastic appeals across the social media landscape is not a comprehensive strategy. For people to donate or spread the word, the story behind the campaign has to resonate immediately. “A compelling story, when it’s shared, has the potential to have a tremendous impact.”

Be Specific. Crowdfunding tends to work best when there is a particular project or cause at stake. Howard points to the growing success of Benevolent.net (founded by Megan Kashner ’03), which seeks to address poverty by focusing on one person at a time. “They offer very specific support that was not coming from social service agencies,” she says. “Maybe someone gets a job and needs a uniform—the social service agency isn’t going to pay for that uniform. Or maybe someone needs help paying the security deposit on an apartment. People like the immediacy of giving five, ten, or twenty-five dollars to one specific need.”

Build Momentum. Use crowdfunding to mobilize a larger crowd of support, which, in turn, can broaden awareness and build momentum for a particular cause. The Allstate Foundation Purple Purse Initiative, a campaign by the Allstate Foundation to bring domestic violence and financial abuse out of the shadows, is one recent example. The initiative launched a nationwide campaign on Crowdrise during a single month as a way to encourage organizations to extend their reach and to bring greater attention to the movement to end domestic violence.

Look Beyond Crowdfunding. The key to building a strong network of consistent financial support, according to Howard, is to use the advantages of crowdfunding to reinforce traditional fundraising. “Crowdfunding tends to be transactional,” she says, “whereas traditional fundraising is relationship oriented.” The goal is to make good use of these transactions in order to build relationships—to convert small-scale, one-off donors into larger, more consistent donors. “Most people who give through crowdfunding give small amounts to very specific causes or projects,” Howard says. “The next step is to build relationships with these donors, to sustain their interest and commitment.” Viral campaigns like the Ice Bucket Challenge—the fundraising effort for ALS that took Facebook by storm last year—are no guarantee of long-term support. “The challenge is to keep those donors.”

Of course, the great advantage of crowdfunding is also its limitation. “Your campaign will only be as good as your social network,” Howard says. “If you don’t have a robust and diverse social network—in other words, if you don’t have a fair number of ‘mavens’—your initiative will not be successful.” Too many organizations believe that by launching a crowdfunding campaign, they are guaranteed to grow.

For Howard, that is why it is important to focus beyond crowdfunding’s viral videos and Facebook likes and diversify one’s fundraising tools. “Successful nonprofit organizations use a diverse toolkit when soliciting donors and engaging their stakeholders,” she says. “They do not just rely on proficiency at a particular tool.”

Photo credit belongs to Sebastiaan ter Burg. Published under a Creative Commons license.

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