Two’s Company, Three’s Crowd Funding

A term that is being bandied about in fundraising circles recently is crowdfunding. It is a relatively simple concept that describes the act of raising funds through a group of individuals (or crowd) for a specific project or cause.

Crowdfunding has its roots firmly in the charity sector, although it is quite popular in the music and arts industries and becoming more popular with business start ups.

While it’s not a totally new concept – it’s been around since the late 1990s – it has had a recent resurgence due to the ease by which it can work with the support of the internet.

Crowdfunding sites are starting up all over the globe, with seven already in Australia, as indicated in the diagram below.

According to the Daily Crowd Source website, there are three main categories of crowdfunding;

Equity-based crowdfunding is asking a crowd to donate to your business or project in exchange for equity.

Debt-based crowdfunding is asking a crowd to donate to your business or business project in exchange for financial return and/or interest at a future date.

Donation-based crowdfunding is asking a crowd to donate to your project in exchange for tangible, non-monetary, rewards such as an ecard, t-shirt or just for the giving  feeling.

It is this last type of crowdfunding that we will feature here today as it most commonly used by charities.

So, exactly how does it work?

Once they have decided on their project, charitable organisations can choose an online crowdfunding platform to use and then they set up their project page. They list on here all the details of the project including what the project is, who it will help, why it is needed and how much it will cost. It is important to remember that this page is your only chance at getting through to a potential donor – be sure to inspire them!

As your project funding period passes your organisation should promote it through various online networks and social media sites. The more people that visit your project page the more chance you have in raising the funds you need. When an interested donor visits your page, they can pledge an amount to donate. This amount is only taken from their account when 100% of your funds have been raised.

How can it help charities?

Crowdfunding can be of great benefit to the charitable organisations because it can help raise funds for some of those innovative projects that perhaps you can’t get off the ground elsewhere. It can also be a great way to grow your donor base.

Crowdfunding seems to appeal to a younger, more savvy investor who wants to have more involvement in the social outcomes they help fund, so this type of fundraising may just help your organisation tap into potential new, younger donors.

Before you get started

One crowdfunding blog recommends asking yourself three questions to see if you’re ready for a crowdfunding project;

1. Is this an idea that enough people will think is valuable? You want enough people to invest in your project otherwise it won’t be viable.
2. Is this a project that can be accomplished with limited funds?  Make sure you get your ask amount right. Obviously, the less money you need the quicker you can raise it, but you don’t want to fall short and have to change an ask (or ask again).
3. Are you dedicated to seeing this project through to fruition? Individuals who invest in your project are investing in your ability to complete it – they have the faith that you will do it, so you need to be sure you can.

So, if you think you’re community group is ready to get started here are three Australian sites you might want to check out;

And remember, every crowd has a silver lining (at least the potential to, anyway).

See you in the pond,

The Fish Chick.