By Denise Archer
Crowdfunding provides a valuable alternative to traditional funding approaches. So how can NPOs harness this method to support their work? At the Trialogue CSI Conference 2015, two panellists discussed crowdfunding in the non-profit sector.
What is crowdfunding?
Crowdfunding, simply put, is fundraising achieved through receiving small amounts of money from a large number of individuals. While this concept has been around for a lot longer, with the help of the internet, crowdfunding platforms have really taken off over the past 15 years. They are now a viable way for just about anyone to raise funds in a relatively short space of time.
Statistics show that globally the practice has grown exponentially over the past five years, and continues to do so. According Massolution’s 2015CF – Crowdfunding Industry Report, global crowdfunding experienced accelerated growth in 2014 – it expanded by an impressive 167 percent reaching $16.2 billion raised, up from $6.1 billion in 2013. In 2015, the report predicts that the industry will more than double once again, on its way to raising $34.4 billion for entrepreneurs, creatives and social causes. Most crowdfunding platforms operate off commission on the final amount crowdfunded.
What kinds of crowdfunding exist?
Panellist Daniel Shaw, Chief Operating Officer of the newly launched Ripple platform in South Africa, describes the most commonly known crowdfunding types as rewards-based and equity-based crowdfunding. In rewards-based, the project creators presell either the product being funded or project related items, known as rewards, to funders as a pay-off for financial contributions. In equity-based crowdfunding, the funder buys into the company receiving shares in exchange for the money pledged.
However, lending-based (or debt-based) crowdfunding now dominates the industry: in 2014, it raised $11.1 billion dollars. Other forms of crowdfunding exist, the most relevant of which to the NPO sector is charity crowdfunding, where individuals play a donor role to assist social projects. In 2014, social causes earned $3.06 billion globally.
Does crowdfunding work in the South African context?
“Crowdfunding isn’t new in South Africa,” explains Daniel. “The original crowdfunding here is the stokvel, where groups of people pay into a joint savings scheme.” Nowadays there are a number of South African-based crowdfunding platforms available, but the most popular for entrepreneurs and creatives at present appears to be Thundafund. While it was launched in 2012, it has risen into prominence in the last two years, now boasting 4 888 supporters that have raised a total of over R4 million for 117 successful projects. And Ripple is Thundafund’s new sister site, aimed specifically at causes and social activism. “Ripple is purely donations based and you can do this either through crowdfunding or crowdsourcing, which means donations of time or resources,” says Daniel.
Another cause-based crowdfunding site highlighted by Daniel is the Backabuddy platform. This site operates slightly differently in that it provides “charity champions” with a platform to fundraise for the cause of their choice, usually by taking up challenges such as a sporting events for the cause. Backabuddy has helped raise over R21 million in the past four years.
Other cause-related sites with some prominence in the South African market include ForGood which focuses on goods donations and volunteerism, and GivenGain, an international site accessed by many corporates as part of their employee giving programmes.
How can crowdfunding work for me?
Panellist Catherine Taylor previously worked for Backabuddy and has years of experience assisting NPOs with various funding strategies. “Include at least one or two elements of crowdfunding into your fundraising strategy,” advises Catherine. “Work off events like the Cape Cycle Tour that are already in existence and use them to create your own campaign by encouraging individuals to fundraise for you. By increasing the amount of individual donors with your organisation, you can enhance sustainability.” Catherine further elaborates through the following points in getting people involved.
- Appoint a driver – someone in your organisation should be dedicated to bringing in donors.
- Find a strong hook – think creatively to get people to join the campaign e.g. your organisation could collect entries on their behalf, provide goodie bags, prizes etc.
- Set targets – for both your overall campaigns and for the charity champions involved.
- Make the ‘ask’ as tangible as possible – be clear about what it costs per beneficiary to your project, for example. This motivates champions and backers to reach the target.
- Be relentless about the marketing – contact the event organisers about pushing the cause etc.
- Develop touch points to keep people engaged.
Daniel adds some basic pointers for building a successful crowdfunding campaign: “Do your research so that you can make informed choices as to which platform suits you. Ask questions like, is it easy to put my campaign up? Is good support provided? And go through the payment process to check it is intuitive. Then focus on making the experience as visual as possible for users.”