Tuesday, March 11, 2014

Wading Through the Crowdfunding Options

Written by Kassy Rodeheeaver and Lisa Bunker, Pima County Public Library

Crowdfunding has seen overwhelming successes in both the nonprofit and business realms. A recent IndieGoGo campaign raised over $1.3 million for a nonprofit to purchase land for the Tesla Museum  (http://www.indiegogo.com/teslamuseum), while Roberts Space Industries raised over $6.2 million (http://www.forbes.com/sites/erikkain/2012/11/19/star-citizen-smashes-previous-video-game-crowd-funding-records-raising-6-2-million/) through its Kickstarter campaign and the company’s website for the development of an online video game called Star Citizen. With these great successes, web developers the world over have jumped on the bandwagon to expand and build on crowd-funding models for clients. 

If you have done any research at all, you’ve probably found at least three or four contending platforms that you could use to host your own crowd-funder.  
Trying  to decide which model fits your funding needs best can be a nightmare, but we’ve come up with some criteria for you to consider while evaluating your choices. 

The first thing that you should check out when looking at a potential crowd-funding platform is if your project or organization is even eligible to use their services. This is especially true in the case of nonprofits. Some platforms require that you are recognized by the IRS as a 501(c)3 organization. Other sites may not be as stringent with that requirement, but if your donors are savvy about their charitable donations they may want the added benefit of being able to claim tax deductions by giving to only  organizations with IRS recognition. Some of these platforms will also automatically generate gift receipts that donors can print out for their records. Another thing to consider is that by working with a platform that requires nonprofit projects to have 501(c)3 status, you may be giving your project a little more credibility than if you were to host it on another platform that doesn’t have this requirement. 

If you are looking at crowdfunding from a business perspective, you may be limited in terms of the types of businesses allowed. For example, Small Knot requires that you be a small, local business to use its services.

Another aspect that you should consider is whether or not your parameters fit neatly in the format of the platform. Some platforms require that you have a specific program or project, while others allow you to raise money for general support. Platforms may also have a theme for the projects that they host—whether it is art (http://www.unitedstatesartists.org/), social or economic projects (http://www.openideo.com/), or automotive projects (http://fundinggarage.com/). These are just a few of the more unique audiences that crowd-funding platforms reach. 

Crowd-funding platforms also vary in terms of their gravitas—some are more light-hearted or irreverent than others. Crowdrise features a picture of a napkin (http://www.crowdrise.com/about/napkin) that is on their website’s “About Us” header, which seems to speak volumes about how they present themselves and wish to be viewed by others. Environments like these may not always be appropriate for your project, but then again, perhaps they are the perfect match for your work.

Customer Support
How much support you need to get started on your first crowd-funding project may determine which platform is the best for you. Most of these services are very intuitively designed and easy to set up. However, if you encounter any unanticipated difficulties, having someone that you can actually talk to may make all difference. Visit their “Contact Us” or “Support” page to see what your options may be. Is someone always going to be available to assist you, or are they only available from 8-5 Eastern Time? Can you call, email, or chat with a live person, or are you forced to work out your problems from their FAQ or Help pages?

Many of the crowdfunding platforms are for-profit businesses, but there are costs associated with using even non-profit platforms. They need server space, bandwidth, and they need to pay their employees. Payment processing fees generally hover around 3% of the pledged or donated amount, but you will see a wide range of total fees across platforms to cover their overhead. Some of the platforms have clearly stated their commission rate, while others package processing and use fees together as one number. There are a few platforms that are completely free, but you should definitely look at the other criteria before deciding which one would be best for you. 

The goals you set and reach for your fundraiser may also impact the commission rates. Some platforms will still allow you to collect the money you raise, even if you do not reach your goal (known as “Keep it All”). However, these models often see much higher rates than other platforms that require you to reach your goal to receive any funding (known as “All or Nothing”).  

IndieGoGo, RocketHub, and MedStartr are all examples of platforms where this is true. Some platforms require that you identify which model you wish to use before the crowd-funding time period begins.

Not everyone’s crowdraising experience is going to be the same. You need to make sure that the platform you choose has all of the features that are important to you. For example, a tried and true method of getting more people to donate is to have a matching fund donor. If this is a component of your online fundraiser, make sure that you can highlight that in some way in your campaign. 

Another thing to consider is if the platform allows you to enter offline gifts as part of the funds towards the goal. This may or may not be important if you advertise to your donors and supporters ahead of time that they need to give through the crowd-funding platform to have their donation count, but there will most likely still be those who go to your website to make the donation. 

Public Side
One of the most important things to consider is what the public view of your crowd-raiser looks like. The design or layout of the page or pages will impact how many ways you have to engage your supporters. Photos, videos, and space for the written explanation of your project are all vitally important to a successful fundraiser. As anyone experienced with online fundraising would tell you, making it easy to donate is imperative. The donate button should be clearly visible, and the format of actually making the donation should be as seamless as possible. You may also want to look for a platform that recognizes your donors and their pledges on the page. 

You should also consider if you can post updates on the campaign progress and how that information may reach your donors. This is also a very social way of fundraising, so consider checking to see if your donors can interact with you by making comments about the fundraiser. 

It is also vitally important that some type of sharing mechanism is embedded in the design of your crowd-raiser so that your supporters can re-post the page through their preferred social media channels to help raise awareness and reach more people. 

Methods of Payment
Crowd-funding platforms usually use a third-party service to process payments. You may want to review their processing options to see what is available to you. If your project needs immediate funding, you don’t want to use a system that processes your payments on a monthly basis. The options will of course depend in part on the structure of the crowdfunding platform that you choose (“Keep it All” or “All or Nothing”), but this should be considered if you’re doing a longer campaign. You could find yourself locked into using a service without any other alternatives. 

Branded donation pages raise more money (http://onlinegivingstudy.org/quarterlyindex) than non-branded pages. However, this may not matter as much if you’re looking at a crowd-raising schema where you’re trying to engage new donors who are unfamiliar with your website’s look. However, you should be able to find ways to link back to your website to easily give people a way to get more information about your organization should they desire it.

Donor Information
The last thing you may want to consider when choosing the right platform for your crowd-funder is how easy it is to collect donor information from the website. You’ll want to be able to easily download supporter information to your donor or client database so that you can continue to contact them with information about your work. 

Here is a quick chart for you to use to create a matrix of your top contenders to help you decide which one will work for you. We didn’t include eligibility, because if your organization doesn’t fit with the platform, there is no reason to compare it with other options!


Platform #1
Platform #2
Platform #3
Context: What other types of projects are on the platform? What is the tone?

Customer Support: How easy is it to get help? What methods do they offer (email, phone, chat, etc.)?

Commission: How much of your funding would they take?

Adaptability: Do they offer features that your crowd-raiser needs?

Public Side: How user friendly is the page? How can you tailor your message?

Methods of Payment: What payment processing system do they use? How long til you get the money?

Customizability: Can you brand the page with your organization’s look?

Donor Information: How easy is it to download supporter information?

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