Crowdfunding is a new way to raise funds and it is growing fast!
Over $1.5 billion was raised in 2011, $2.7 billion in 2012 and $5.1 billion in 2013 according to a recent Crowdfunding Industry Report. Recent data pins social causes as the most active category (30%), with the average successful campaign raising around $7K over nine weeks.
The growth of crowdfunding is phenomenal and many predict that the trend will continue. A U.K. think tank believes that within five years crowdfunding could grow to £15 billion pounds in the UK alone. Canada now has a National Crowdfunding Association, a non-profit organization dedicated to creating a strong and vibrant crowdfunding industry in Canada. Their membership has increased substantially every year to 950+ members in 2015.
What is crowdfunding?
One way of looking at crowdfunding is that it is like a telethon without telephones.
It raises funds in a short amount of time for a project or cause often associated with a news event, relying on small donations (average crowdfunding donation is $88) from many people, all online.
Crowdfunding relies on social media for promotion. If successful, newsfeeds quickly pick up the story and help to contribute to the campaign’s success! Good examples of such campaigns are the Ice Bucket Challenge which raised $115 million last summer for the ALS Association to fight Lou Gehrig’s disease and the Barack Obama online campaign which raised $137 million during his 2008 run for the presidency of the United States.
Interest for crowdfunding is also often generated through media stories. A fine example of this is the Elijah’s drive which raised $175,000 for the family of a three-year old who died in the cold when he wondered from his grandmother’s Toronto apartment in the middle of the night.
Need for organizations to change!
Many charitable organizations still only use conventional means to raise funds which are demanding for staff and volunteers, and quite expensive. Organizations perhaps prefer these methods as they remain in their comfort zone and most are hesitant, sometimes afraid to try something different. The time has come for organizations, which are lagging behind in terms of technology, to update their fundraising strategies. They should consider adding crowdfunding as a cost-effective strategy.
The downside to crowdfunding is that it becomes prolific, remains unregulated, and therefore prone to abuse including fraud. A few bad cases will taint the water for all.
A Canadian protocol should be put in place. I am thinking of a framework that would guide the legitimacy of campaigns, prevent fraudulent practices including misuse of funds and provide safety guidelines and frequent reviews to safeguard the integrity of such campaigns. Perhaps such standards and safeguards should be applied by the crowdfunding platforms that are responsible for collecting monies and distributing them to the appropriate persons or organizations.
These protocols will have to be carefully written to avoid too much bureaucracy which will slow down and put unnecessary cost burdens on these ventures. They will also have to respect the fact that crowdfunding capitalizes on short energy pulse and has to happen very quickly, in a matter of days, to succeed.
Will crowdfunding take over from traditional fundraising methods?
Crowdfunding campaigns are trendy and popping up everywhere! The general public is stimulated by them. I believe that they are here to stay as they can play an important part in fundraising. It is remarkable to see how some campaigns manage to attract so much media attention in a very short period of time.
However, in my opinion, crowdfunding campaigns will not completely replace traditional fundraising efforts such as galas, special events, corporate giving, in memoriam campaigns, lotteries, direct mailings and many other types of efforts. They complement the existing fundraising avenues and help create outstanding awareness for many good causes.