What Is Crowdfunding?

The term “crowdfunding” has become more and more prevalent when it comes to discussing fundraising. What was once a strategy used just for entrepreneur’s for-profit projects, crowdfunding has now translated into being quite beneficial for nonprofits who are looking for new avenues to raise funds.

Below, we’d like to give you a brief overview of the types of crowdfunding and how it can benefit your nonprofit organization.

What is Crowdfunding?

definition of crowdfunding

Types of Crowdfunding
  • Rewards-based – Individuals who donate specific amounts are offered a reward for doing so. In the case of a product or service, it is usually early access to said product. Examples of these types of crowdfunding sits are Kickstarter and Indiegogo.
  • Crowdlending – Individuals give someone an interest free loan for a project. The crowdlending website, Kiva, allows anyone to lend money to a particular borrower with the guarantee of repayment.
  • Donation-based – This is standard charitable giving but donations are received through an online platform for a specific period of time. Donors Choose is a popular site for this type of crowdfunding.
  • Equity crowdfunding – This is the latest type of crowdfunding and it can be a bit tricky. Until very recently, only accredited investors were able to invest in companies (and receive equity in return). Now, unaccredited investors are able to invest so the general public is able to play a larger role in this type of crowdfunding.

Fundamentally, crowdfunding is about people coming together to make things happen and the industry is growing fast!

In 2014, $16 billion was raised using crowdfunding, and it will be about $36 billion by the time 2015 is over. That number is expected to keep doubling, and will outpace venture capitalism.

What that means for nonprofit chapters and clubs is that the public is going to become more and more comfortable with crowdfunding as a way of donating. It may not fit into your nonprofit’s fundraising strategy at the moment, but it will certainly become a necessity in the next few years.

How Do I Launch A Crowdfunding Campaign?

If you’re thinking about launching a crowdfunding campaign, find an existing campaign (or two or three or four) that interests you, and back it. Pay special attention to the user experience, the messaging, the email frequency, etc. to see what you can learn and to find the site that will work best for your group. Researching each site is key, as well as defining your target audience to find out where they are most likely to see your campaign. It is also ideal to have about 30% of your campaign goal reached even before you launch your group’s campaign (Strangers don’t like to give until they see that you already have some traction).

Need More Information About Crowdfunding?

Check out these resources for more information on crowdfunding