USING CROWdFUNDING FOR NONPROFIT FUNDRAISING

USING CROWdFUNDING FOR NONPROFIT FUNDRAISING

Crowdfunding (the collective effort of individuals to pool their money through the Internet) has gotten very crowded in the last few years, with over 35,000 projects being funded since 2009 by industry leader Kickstarter alone.

Forbes Magazine reports that 2013 will be the year that this relatively new method of fundraising will consolidate, rather than expand -- it's time for the leaders with quality sites to prevail, much like Amazon, Ebay or Craigslist did.

Crowdfunding can be divided into these categories:

Crowdfund Investing (CFI): When President Obama passed the JOBS Act in 2012, it created, for the first time, an opportunity for non-accredited individuals to participate in the growth of small businesses or startups by investing through an online crowdfunding website. Typically, a company will sell many small amounts of equity to a large number of investors. For more information about CFI, check out The National Crowdfunding Association's homepage featuring a Crowdfunding 101 tutorial and resources for entrepreneurs and investors including legal matters, marketing and accounting.

Rewards-Based Crowdfunding: With this platform, entrepreneurs offer some sort of compensation or perk for donations. For example, if you donate $50 to help finance an independent film, you might, in return, get tickets to go to a preview party when the project is completed. Or you could pre-order a product that you're backing. Sometimes donors are given credit publicly in the credits or at events. Some funders receive lights installed in the bottom of their shoes. There are no SEC restrictions on this type of funding.

Peer-to-Peer Crowdfunding: This model, also known as micro-financing, allows you to lend money online and be repaid after the project is completed. Since almost half of start-ups begin with less than $5000 and are often financed by family and friends, p2p funding is an option that can formalize this kind of loan.

Philanthropic Crowdfunding: Here we have group fundraising which is usually for a specific project and may or may not offer rewards. Proposals might include things such as wedding guests pooling for a large gift, funding for a documentary film or music cd, or even opening a restaurant. Examples of this platform are Crowdtilt, Indiegogo and Razoo. They vary in the fees they charge and the type of projects they're willing to fund, as well as whether or not the recipient gets to keep the donations if the stated goal isn't met.

It's no surprise that Crowdtilt is emerging as the leader of the pack, since, in addition to supporting projects such as party buses or other private events, co-founders James Beshara and Khaled Hussein are now catering to the nonprofit world. Through built-in widgets, they automatically connect your campaign to social media, and issue tax deduction forms for your donors. Best of all, they charge a relatively small fee of 2.5%. Crowdtilt also claims that successful campaigns typically raise 188% of their goal amount.

Here's how they compare to other crowdfunding websites that support nonprofits:

Crowdrise: 4.75 percent fee plus additional charges depending on which plan you choose

Causes.com: Uses Network for Good's platform and charges a 4.75 percent fee

Stay Classy: Offers software for nonprofits and charges a minimum of 3 percent plus a monthly fee

Network for Good: Minimum $49 monthly fee and 3 percent of donations

Donors Choose: Public school teachers post funding requests for classroom projects (no fees)

The Denver Public Library is a Cooperating Collection of the Foundation Center and provides a core collection of Foundation Center materials, including the Foundation Directory Online.
Please contact the Nonprofit Center if you’d like to make an appointment to learn how these resources can benefit your nonprofit organization:

720-865-1363 or lflavin@denverlibrary.org.

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