Nonprofit fundraisers know they have to “go where the money is.” And these days, it seems like a lot of the money is in crowdfunding. Just witness the incredible success of all the recent “ice bucket challenges” and high-profile Kickstarter campaigns.

It’s not overstating to say that crowdfunding is redefining how nonprofits raise money. In fact, crowdfunding is projected to become a $96 billion-dollar industry by 2025.

Here’s how crowdfunding works. Organizations create a specific fundraising event or campaign and set up a page on a crowdfunding website. The nonprofit can accept money using the website’s credit card processor. Supporters and donors are then invited to link off the site and solicit their networks for funds.

That said, it’s important to start out with some perspective. Despite the promise and potential, crowdfunding is not an appropriate tool for every type of fundraising. For example, it usually isn’t effective for general fundraising or annual giving. Instead, crowdfunding works best for funding specific projects or campaigns.

Find the Right Partner

Start by reviewing different crowdfunding sites to understand what types of projects are being funded. For example, Kickstarter is a smart option for nonprofits raising funds for something tangible — a historical society seeking money for a statue or memorial garden, for example.

Eventbrite, another popular crowdfunding website, works well for galas, banquets and VIP events. You can promote your event, sell tickets, and accept donations online or onsite at your fundraiser using a free mobile app. General purpose crowdfunding sites like CauseVox, Razoo, and Causes allow you to create your own fundraising page and easily launch a crowdfunding campaign.

Note that crowdfunding sites typically charge a processing fee for donations, which can vary widely. Some charge more if a project doesn’t reach its goal, and at least one crowdfunding site withholds funding completely if the fundraising goal isn’t met. As with any fundraising campaign, be sure to add up the costs — including set-up fees, monthly fees, and fees for credit card processing — before jumping in.

Also look for a crowdfunding site that not only has plenty of traffic, but also has visitors that are actually making donations. The site should also make it easy to link your fundraising page to social networking sites.

Do Your Part

Crowdfunding is all about creating buzz and excitement as you engage supporters and build a community around your cause. At the core of any effective crowdfunding campaign is a compelling story — typically shared in a two-to-three-minute mix of video and content. Ideally, such a story will elicit a viral response, increasing the reach of your campaign.

It’s also important to show some early successes for your crowdfunding campaign. Fundraising consultants recommend running the campaign within your current network of donors, supporters, staff, volunteers, and board members several weeks before public rollout. Then hold off on a full-scale launch until you’ve reached 30% of your total fundraising goal through your existing network.

Watch Your Liability

It’s easy to get caught up in the “shiny and new” nature of crowdfunding. But in the end, it’s still fundraising — which requires following traditional charitable solicitation regulations.

Charitable registration requirements can become an issue since a crowdfunding campaign can easily cross state and jurisdictional lines. With that in mind, nonprofits are well advised to review Social Media and Internet Solicitation Wise Giving Tips, published by the National Association of State Charity Officials.

General purpose resources include Indiegogo’s free Campaign Field Guide and Cause Handbook and How to Plan a Nonprofit Crowdfunding Campaign from CauseVox.

A well-executed crowdfunding campaign might be just the thing your nonprofit needs to connect with your donors and solicit support more efficiently than ever before.

Contact us to review of your fundraising needs or would like assistance with selecting the best crowdfunding platform.

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