Should Charities Commit to Crowdfunding?

3 August 2016 | By Cause4 staff

A recent report by Nesta seeks to understand the opportunities and challenges in crowdfunding for good causes. The research surveyed more than 450 charities, community groups and social entrepreneurs on their perceptions, awareness and usage of crowdfunding.1

Crowdfunding projects can be hugely popular, giving power to the people. Even apparently niche campaigns, such as a recent one to republish a book by a British electronic music pioneer and inventor Daphne Oram, can achieve success. Despite a low average donation, the final total was well over £15,000 with 515 people from 24 countries engaging with the project and wanting to contribute to the cause.2

Utilising crowdfunding however, requires careful consideration and planning. Important questions to consider are whether charities are missing out on opportunities by conforming to traditional fundraising models - and thereby shying away from crowdfunding - and what approach charities should take to crowdfunding.

According to the report, small charities and very specific causes can largely benefit from crowdfunding, as with this inspiring example about a crowdfunding campaign to build a school in Bangladesh. “Organisations for which single funding awards can be the difference between survival and closure” are more vulnerable to “reductions in public spending” and “decreases in income”1. With public trust and confidence in charities falling, charities must engage others with their causes. Crowdfunding projects can only succeed if they reach their fundraising target, i.e. by receiving sufficient public support. However, crowdfunding success can also be measured in other ways; the democratic aspect of crowdfunding can build trust between charities and the public, and show potential funders the significance of that charity’s work to the public.

There are challenges; the report suggests inherent limitations in crowdfunding, including;

(1) its design allowing only for providing or not providing support for a cause, as opposed to a more open discussion;

(2) excluding people who can’t understand, access, or donate to projects;

(3) charities and the public disagreeing about social priorities;

(4) false assumption that long-term finance or government funding is less of a priority.

When approaching crowdfunding, awareness of possible limitations is as important as awareness of its benefits, as this helps to inform crowdfunding strategy. Charities can, for instance, use the platform together with other inclusive strategies to raise awareness about issues, redirect to resources for open discussion, and understand how to appeal to the public (as Nesta puts it, “unsuccessful campaigns can be a good indication of what projects hold little value to people”3).

Successful crowdfunding can further act as a selling point to long-term funders, and encourage funders to support issues the public are passionate about. Challenging discussions with the public are to be encouraged, and social media and crowdfunding are ideal channels for discussion and growth. They should be used by charities to break through social barriers, rather than be seen as a barrier to progress.

Nesta discovered a general high awareness yet low use of crowdfunding due to lack of skills, knowledge about benefits, and capacity – including a lack of knowledge about different models such as community shares (a way to raise money by offering your community a chance to own shares in your organisation).4 It’s therefore vital for charities and other bodies that have crowdfunded for social reasons to share their experiences. Jonathan May from Hubbub argues “[charities] currently don’t have the setup to combine the teams that they have to do campaigning, with the teams that do fundraising. They are currently distinct teams and until they pull those things together they’re going to find it very hard to leverage crowdfunding”.5

Nesta suggests charities not be afraid of going down the crowdfunding route. More of these projects in charity will mean bigger opportunity to evaluate its effectiveness, to provide a foundation and guide future crowdfunding and capacity-building. If there’s one thing to take away from the report, it’s that charities should take initiative, give crowdfunding a go (JustGiving have a platform that is dedicated to charitable causes), communicate with other charities, and build up experience and knowledge. The norms of traditional fundraising are changing, and charities may benefit greatly by investing in new methods.

1 https://www.nesta.org.uk/sites/default/files/crowdfunding_good_causes-2016.pdf, p7

2 http://artsfundraising.org.uk/successful-crowdfunding-a-demonstration-of-people-power/

3 http://www.nesta.org.uk/blog/crowdfunding-public-services-tapping-crowd-finance-public-projects

4 http://www.crowdfunder.co.uk/community-shares/what-are-community-shares/

5 https://www.nesta.org.uk/sites/default/files/crowdfunding_good_causes-2016.pdf, p22

What are your views about crowdfunding? Does it seem like too much hassle, or would you use it to fund a project? Comment below or tweet us at @OfficialCause4, we welcome your thoughts.

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