Explosive growth of crowdfunding continues to bring good news to nonprofits

Just as rapidly as the world and the economy continue to change in matters driven by technology so does nonprofit fundraising. We continue to witness changes that are in particular driving forward online fundraising in ways never previously imagined. One of the fastest growing methods for both nonprofits and small businesses alike has been the remarkable explosion of crowdfunding.

Although some analysts tend to say that funding (in all sectors) is going through a revolution I prefer the term evolution – at the core of most changes in the charity sector and beyond are the dynamic changes taking place due to technology. Compare how you use technology for work today with five, ten or especially fifteen years ago. Not only were many of the norms of 2014 not previously reliable due to limited technology – many of them hadn’t even been invented. Crowdfunding as one example is only about a decade old and less than half that in terms of large awareness. At the heart of nonprofit fundraising is remaining flexible enough to reach the platforms where donors engage either in a planned approach for existing donors or in terms of raising awareness to potential donors. The opportunities now afforded to everyone have altered so much in recent years and best of all the playing field is being leveled for the most part. That last piece of news might be the best piece of all and as long as net neutrality remains in place it matters less than ever whether a business or nonprofit organization is large or small, well established or brand new.

For a number of small and brand new organizations crowdfunding is providing options that previously would have been little more than whimsical at best. If your organization is located in a small town on Manitoba or Montana your audience is no longer limited to your own locality, if the idea and cause create a spark of interest the web and particularly crowdfunding can see funding grow like wildfire.

I came across some amazing data (see the infographic below) from the blog of Clarity FM which shows that the overall crowdfunding economy has grown by an amazing rate in just three years. From $1.5 billion in 2011 to an astounding $5.1 billion last year and the anticipation for continued growth in the immediate years ahead. The data includes the for profit sector but the growth is remarkable no matter how you view. The largest established funding sites such as Kickstarter, Indiegogo, Startsomegood and FundRazr  have become synononmous with the evolution of crowdfunding adding the important elements of security and credibility for those who wish get involved in much the same way that Amazon.com helped establish online retailing.

The article also contains some important data about the potential for changing rules about crowdfunding which may potentially remove the ceiling on non-accredited investors from the current limit of thirty five individuals. Take a look at the entire article and additional infographics from ClarityFM here.

Written more about the private sector, a very interesting article at Forbes.com looks at the future of crowdfunding and asks whether it can even gradually replace venture capital/angel investors. The article poses concerns in addition to the optimism,  focusing on the fact that legitimacy and security of crowdfunding operations and the sites that host them have to not fall foul of the public as a result of scams or websites that were designed to commit fraud. It is a reasonable concern and one that could make or break the continued growth of crowdfunding in the business arena.

While this doesn’t have to spill over to the nonprofit environment a poor reputation for crowdfunding as a concept would negatively impact anyone involved. If you search today you’ll find scores of websites that offer crowdfunding solutions with each promising very similar tools to help raise donor awareness. My recommendation would be to stick to the larger sites that I’ve mentioned above and if you are a donor do your homework about the cause you’re considering supporting. All good crowdfunding sites typically permit you to see forums/discussions about the fundraising and allow you to contact the organizers if you have questions.

Regardless of the type of fundraising donors are best served researching any organization that is new to them and for the most part I do think this does happen.

One other consideration – many smaller established nonprofits are beginning to turn to crowdfunding for specific fundraising drives and initiatives and being impressed by the viral nature of the different networks. Crowdfunding doesn’t need to be the singular approach for a charity but it some circumstances if it is something you’ve yet to try it certainly merits consideration for your charity. It need not replace traditional fundraising methods but can enhance your options.

Overall I feel that the future of crowdfunding remains bright but do tread carefully in terms of donating or indeed new business support. That collective commitment to best practices and ethical behaviour can keep the fundrasing potential of crowdfunding burning brightly.
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Miratel Solutions is a Toronto call centre, eBusiness, and letter shop mail house specializing in professional fundraising services including PCI compliant inbound telephone fundraising, outbound telephone fundraising, online fundraising, lottery fundraising services, donation processing and receipting and direct mail fundraising services. We are committed to our CSR business values in all our business decisions  and advancing the missions of the nonprofits we proudly serve.