It’s all the rage these days, and the strategy has raised a boatload of money. It’s crowdfunding. But is it good for fundraising? And what does this topic have to do with major gifts?
Wikipedia defines crowdfunding as “the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the Internet.” The Crowdfunding Industry Report by Massolution put out data showing that the overall crowdfunding industry has raised $2.7 billion in 2012, across more than 1 million individual campaigns globally.
For a quick read on the top crowd fundraising sites (for commercial and non-profit ideas and causes) read this piece in Forbes Magazine by Chance Barnett.
There is no doubt that crowdfunding has raised a significant amount of money for some good causes, and it might be a strategy you want to consider for your non-profit IF it is done in the right way. But there is one potentially fatal flaw in this very creative concept – a flaw that is hidden and, if not handled carefully, will lead non-profit fundraisers down a wrong path.
The concept, in its current state, is about money – not lifelong partnership. You put your cause up and ask people to donate. They do, and you get the money. But the donor name and contact information often remains with the crowdfunding vendor, and no relationship with that donor can be developed.
And that is the problem. If you decide to use this strategy to bring in revenue, it will likely help you to secure funds in the short term. It will do nothing for you in securing real friends and partners for the long-term health of your organization.
So why am I bringing this up, and what does it have to do with major gifts? Let me tell you a story.
Several months ago I was in the offices of a very prominent and successful nonprofit in Southeastern U.S. that raises over $450 million a year from various sources, many of them institutional. We had done some analysis of their donor file in order to identify additional sources of revenue and discovered that, of the $30 million they were raising annually from private sources (yes, all the rest of it came from institutional sources), only 32 donors gave more than $10,000 a year, and of those 32 only three gave a six-figure gift!
I think you will agree with me that this organization’s donor file is a little weak at the top. If you were to get inside this organization you would find a very solid brand, a wonderful product/service and a great donor offer. So why were there so few major donors?
Here’s why.
The organization and its leadership have historically been committed to flashy public one-time-event fundraising, kind of like this crowdfunding concept or the Ice Bucket Challenge (more on that in my next post).
They had NOT been committed to the grinding, labor-intensive, more difficult work of developing a solid donor file made up of friends and partners. In short, they had always gone for the cash and not the relationship. And now, when it was time to secure more funds from private individual sources, there were no donors to be found.
As you know, Jeff and I have been obsessed with developing meaningful relationships in all areas of our lives, both private and professional. Professionally, we have been consistent in our position that major gifts is about a personal relationship with a donor – a relationship that can be filled with hope and potential while still fraught with messiness, ups and downs and great frustration.
There is no shortcut available here. In fundraising – good and profitable fundraising – the real work is about finding like-minded donors who share a passion for your cause. It is then about serving them by servicing their interests and passions over a long period of time. It is about multiple engagements over the life of the donor. It is about becoming engaged with a live human being. It is not about the money.
This is why, as you deal with your caseload of donors in the coming weeks and months, you need to keep focused on the people on that caseload – not the money that is in the caseload. These are wonderful people who have given themselves to your cause and trusted you with a relationship.
Keep this perspective as you continue to develop relationship and partnership, and do not get distracted by the quick fixes that will routinely float into your gaze. They are distractions that promise money. They are not about true relationship, which is what major gifts work is fundamentally about.
Richard
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The Problem with Crowd Fundraising
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Hi Richard,
Thanks for your outstanding musings. This column is a great resource for development professionals whether at small community organizations or larger higher education orgs such as mine. It is all about the relationships!
We recently waded into the crowdfunding space at our institution with a one year pilot. The pitfall to this strategy concerning building relationships from these efforts is a point well taken. We had the same concerns, but in identifying a vendor for our pilot, we made one of the requirements access to the name and contact information of any donor to the project. Our position was that we wanted to properly steward the donor for supporting a project at our institution and therefore would need this information to fulfill our stewardship needs. We found a vendor willing to work with us on this point as well as provide us a data file that would easily upload into our existing donor database.
As others consider crowdfunding the key to remember is that there are a growing number or vendors and a finite number of potential customers. These vendors need clients to survive! Leverage your buying power or the buying power of several non profits through coalitions in your area to get the best deal for all. This leverage will allow you to negotiate with vendors to see who will give you the best terms for your situation. Be sure to not only ask about getting the donor contact file, but also negotiate the fees and other costs that can redirect much needed resources from your cause.
I take the point of the post and consider it good advice overall. However, as part of our commitment to cultivating a culture of stewardship, it is essential to provide some kind of ‘crowdfunding’ DIY solution, which makes it as easy and attractive as possible for your existing donors to share their passion with others. We use a resource called Crowdrise, which allows us access to all donor information, and works hard to make sure their systems do what we want them to do, Using this resource, our youngest board member organized participation in the Chicago Triathlon and got almost 50 team members and raised over $75,000 for our ministry.
“You put your cause up and ask people to donate. They do, and you get the money. But the donor name and contact information often remains with the crowdfunding vendor, and no relationship with that donor can be developed.”
Sadly, this is true, not only of crowdfunding, but with other technological advancements like text to give programs and Facebook’s giving application. While the money is nice to have, applications like these do not allow the organization to create the long term partnerships an organization needs to have a successful major gift program.
“They had NOT been committed to the grinding, labor-intensive, more difficult work of developing a solid donor file made up of friends and partners. In short, they had always gone for the cash and not the relationship.”
This is so true of many organizations. Any relationships, whether parent/child, marriages, or organization/donor partnerships, take effort to be successful.