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What Crowdfunding for Nonprofits Is & How It Works

Guide to Crowdfunding for Non-Profits
Susan Guillory
Susan GuilloryUpdated January 23, 2023
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Crowdfunding for nonprofits can be an effective, cost-efficient way to raise funds for a program or project, or help cover your organization’s operating costs. But launching a successful campaign isn’t as simple as putting up a page and watching the donations pour in. Like any other form of fundraising, nonprofit crowdfunding takes time and effort to be successful. Here's what you need to know. 

What Is Nonprofit Crowdfunding?

Nonprofit crowdfunding involves collecting small donations from a large number of people, typically via an online crowdfunding platform. While there are many different types of crowdfunding, nonprofits generally rely on donation-based crowdfunding. With this model, people donate money without expecting anything in return. You can launch a nonprofit crowdfunding campaign to raise funds for a specific program or project within your organization or as a general donation to the cause. Crowdfunding for nonprofits can also be a way to simplify online giving for your donors.

How Does Nonprofit Crowdfunding Work?

To run a nonprofit crowdfunding campaign, you need to pick a platform (see below for some options), set a total fundraising goal, and design your crowdfunding page, which can usually include text, images, and videos. Many nonprofit crowdfunding platforms will offer a built-in donation button, as well as a fundraising thermometer feature to help you track your progress toward your goal. Once your campaign is up and running, you’ll be responsible for advertising it to your donor base. Online communication channels, especially email and social media, can be particularly effective, since they allow donors to access your campaign in one click.Many crowdfunding platforms allow you to create a crowdfunding campaign for free. However, the provider will typically take a percentage of each donation or of the overall profits in addition to credit card processing fees.

Pros and Cons of Nonprofit Crowdfunding

As with any form of fundraising, there are advantages and disadvantages to nonprofit crowdfunding. Here's a look at how they stack up.
ProsCons
Can be cost effectiveFinding the right platform requires research
Has the potential to open up new donor streamsPlatform fees can eat into your donations
Allows you to test-market ideasTakes time and effort to execute a successful campaign
Raises your nonprofit’s profileIf uptake is slow, it could discourage donors

Pros

One of the benefits of nonprofit crowdfunding is that it can end up costing less (in terms of both time and money) than traditional forms of fundraising, including events, call outs, and mail outs. A well-run crowdfunding campaign also allows you to reach beyond your typical donor pool and can open up new donor streams. What’s more, you can use your campaign as research. If you’re launching a new product, service, or event, for example, a crowdfunding campaign can be a great way to get the word out about it and test the market. If you raise the amount you set as your goal, it’s a good indicator that the market is excited about the idea.Crowdfunding is also a valuable form of marketing and publicity for your organization and can lead to increased media attention.

Cons

Crowdfunding platforms are not one-size-fits-all. Some are geared to funding new products or companies, whereas others have features that cater more to social causes. As a result, you’ll likely need to do some research and comparison shopping to find a platform that meshes well with your nonprofit.Also keep in mind that crowdfunding is not free. Platforms typically charge a fee, which could be a flat fee or a percentage of what you raise. There may also be processing fees. Another potential downside of nonprofit crowdfunding is that, thanks to its popularity, it can be difficult to stand out in the crowdfunding space. Despite putting in a lot of work into a campaign, you might not succeed.There is also a chance it could discourage donors. These platforms typically allow donors to see results in real time. That can be motivating. But If a campaign is slow to get uptake, it can signal it’s not a good cause. A poorly imagined crowdfunding campaign could potentially discourage donors, and do more harm than good.

4 Tips for Nonprofit Crowdfunding

If you think nonprofit crowdfunding could be a good fit for your organization, here are some ways to get the most out of your campaign.

1. Picking the Right Platform

With so many platforms targeting nonprofits these days, selecting the right one for your campaign can be overwhelming. You might start your search by looking at the big names that have been doing crowdfunding for a while and see if they’ve run nonprofit campaigns. You may also want to research what platforms similar nonprofits are using.As you peruse different platforms, it can be helpful to check out the testimonials or success stories section typically posted on each site. It’s also a good idea to look closely at campaigns that are similar to what you want to do to make sure the platform has all the features you're looking for. Finally, you’ll want to look at how they charge for their services. Some take a higher percentage than others.

2. Telling a Great Story

One of the secrets to nonprofit crowdfunding success is to tell a story. You’ll want to write a compelling and inspiring explanation of why you’re raising money, who you’re helping, and how donors can be a part of the experience. While this is a crucial part of any fundraising campaign, it’s particularly important for crowdfunding since many of your potential donors won’t have heard of your organization. You may also want to hire a professional videographer to create a video to embed in your page. This can bring your story to life.

3. Providing Updates

Consider posting updates on your page and following-up with your donors to keep them in the loop. Let them know how they’re helping you to accomplish your goal by sharing pictures, telling stories, and thanking them for their generosity —  anything to let them know you’re appreciative. The goal here is to help supporters feel proud of their donations so they can inspire their friends, family, coworkers, and diverse networks to also consider joining your community. 

4. Expanding Your Crowdfunding Strategy

To expand the reach of your crowdfunding campaign, consider adding a peer-to-peer fundraising option. How it works: When supporters go to your main campaign page, they can either donate or create a personal fundraising page to raise money on behalf of your organization. To help them succeed, you may want to set them up with social posts, messaging, and resources they can use to promote their fundraising pages to their networks. With peer-to-peer fundraisers, your supporters can raise more money for your nonprofit than they could donate out of their own pockets.

Successful Nonprofit Crowdfunding Campaigns

Here’s a look at two crowdfunding for nonprofits examples to illustrate how this type of fundraising can work for your organization.

Upward Scholars

Upward Scholars is a Bay Area nonprofit that provides financial, academic, and career development support to economically disadvantaged adults. In 2019, the organization brought in around $50,000 in donations. By using the crowdfunding platform Donorbox in 2020, the organization raised $150,000 (exceeding its goal of $100k) in just a few months.

Boys & Girls Club of Hawaii

The Boys & Girls Club of Hawaii has nine clubs on the islands of Oahu and Kawaii serving 15,000 young people. After launching a campaign with the nonprofit crowdfunding platform Qgiv, the organization experienced a 100% year-over-year increase in their fundraising during their “Great Futures Day” campaign. In 2017, they raised $100,000. In 2018, they raised $200,000. In 2021, the event raised $275,000. Recommended: Guide to Nonprofit Financial Statements 

Nonprofit Crowdfunding vs. Crowdfunding for Business

Nonprofit organizations generally use donation-based crowdfunding, while businesses will typically use these three other types of crowdfunding:
  • Rewards crowdfunding With reward-based crowdfunding, a business offers investors rewards in exchange for contributing to that business’ product or project. The reward might be company-branded swag, an advance copy of the product itself, or access to exclusive events.
  • Equity crowdfunding In equity-based crowdfunding, investors get a small ownership stake in the business in exchange for their investment.
  • Debt crowdfunding With debt crowdfunding (also known as peer-to-peer lending), a business gets a loan online from many individuals instead of applying for a business loan with a bank or other lender. In this case, individual donors expect to get their money back, plus interest. 

5 Popular Crowdfunding Platforms for Nonprofits

Here’s a look at some popular nonprofit crowdfunding platforms you may want to check out.

Donorbox

Donorbox provides a robust selection of fundraising tools for nonprofits, including crowdfunding.Pros
  • Offers multiple currencies, languages, and payment options
  • Offers other fundraising solutions
  • Low 1.5% platform fee (+ payment processing fee)
Cons
  • Some users find the set-up to be challenging
  • Fees for added feature and integrations can add up
  • Email support tends to be better than phone support

Classy

Classy strives to make the crowdfunding process easy for nonprofits. They also offer other services for nonprofits, including recurring giving, international fundraising, and virtual events.Pros
  • Provides analytics and reports to track donations
  • Option to add sponsors to a campaign
  • Also offers virtual events, auctions, and mobile bidding
Cons
  • Does not publish pricing
  • May have more features than you need
  • More costly than some competitors

Causevox

Causevox is a fundraising platform that offers crowdfunding, as well as donation forms, peer-to-peer fundraising, pledges, and event ticketing.Pros
  • Free account available
  • Integrates well with popular software and apps
  • Offers a variety of online training and education tools
Cons
  • Standard plan starts at $155 per month (if billed annually)
  • Free plan is limited

GoFundMe

Made famous by its personal campaigns, GoFundMe has also proven itself to be a great platform for nonprofit fundraising as well. To launch a charity campaign through the site, your organization must be a licensed 501(c)(3) organization operating in the US, Canada, the UK, or Australia.Pros
  • Excellent customer support
  • Can get started for free
  • Easy to set up and use
Cons
  • Fees tend to be higher than other platforms
  • Integration with other software and apps is limited

Kickstarter

Kickstarter is a mecca for all types of crowdfunding, both for-profit and nonprofit. Before launching a campaign, their team will provide suggestions for making your project run more smoothly.Pros
  • Highly-trafficked crowdfunding site
  • Easy to use
  • Do not get charged unless your project is fully funded
Cons
  • Not tailored to nonprofits
  • If you don’t reach your goal, you don’t get any of your donations

The Takeaway

Nonprofit crowdfunding can be a cost-effective way to raise funds, promote your organization and its mission, and expand your donor base. Just keep in mind that finding the right platform and launching an effective campaign typically requires an investment of time, effort, and (typically) money. Looking for faster funding? Keep in mind that your organization may be able to qualify for a nonprofit business loan. If you have strong credit and your nonprofit is generating revenue, it may be worth applying for a loan through your local bank or credit union. Just make sure that the bank or credit union lends to nonprofits. You might also want to explore online business loans, which tend to have more flexible qualification criteria (though rates are typically higher).

3 Small Business Loan Tips

  1. Online lenders generally offer fast application reviews and quick access to cash. Conveniently, you can compare small business loans by filling out one application on Lantern by SoFi.
  2. If you are launching a new business or your business is young, lenders will consider your personal credit score. Eventually, though, you’ll want to establish your business credit.
  3. If you need to borrow money to cover seasonal cash flow fluctuations, a business line of credit, rather than a term loan, provides the flexibility you likely need.

Frequently Asked Questions

What are some popular platforms for nonprofit crowdfunding?
Are there any downsides to crowdfunding for nonprofits?
Do you lose equity in your nonprofit when crowdfunding?
Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Photo credit: iStock/Andrii Yalanskyi
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About the Author

Susan Guillory

Susan Guillory

Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego. She’s written several business books, and has been published on sites including Forbes, AllBusiness, and Cision. She enjoys writing about business and personal credit, financial strategies, loans, and credit cards. Follow her on Twitter @eggmarketing.
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