Synopsis

This white paper is intended to help educate nonprofit leaders, both staff and volunteers, in the benefits of crowd-funding campaigns for their organizations. It will begin with a definition of crowd funding and a brief history of the concept before exploring the elements of a successful campaign. An example of a nonprofit that has integrated crowd funding into their development mix will be cited.

What is crowd funding?

This white paper begins with the definition, and the historical evolution, of crowd funding.

Technology has drastically influenced emerging new trends as the landscape for giving and investing has changed and the old formulas are being altered or replaced. Until recently, funds and investments were generated in both the corporate and nonprofit communities by asking a small number of people for large sums of money. Today, crowd funding is creating a dominant presence by embracing a reverse process, so that funding a for-profit venture or a charitable project is done by raising smaller amounts of money (starting as low as $1) from a larger number of people, typically via the Internet.

Given the downward trend in philanthropic giving based on the negative influence of the 2008 recession, crowd funding provides a unique chance for individuals to be involved at a monetary level that is comfortable while still feeling like they are making a difference and having a stake, in the success of the nonprofit’s mission.

As a result, this funding innovation has sparked the imagination of the nonprofit world, just as it has in the for-profit sector. It has quickly become a global phenomenon, enabling thousands of people to have a financial impact on an organization in a way that was previously available only to the very wealthy.

Historical Perspective on Crowd Funding

Crowd funding, however, is not quite as new a concept as one might think. In fact, the case can be made that in some form or another it has been around for hundreds of years. In the 17th century, collective fundraising was used to finance publications that were planned, but not yet published. More currently, in 1949, iconic comedian Milton Berle hosted the first telethon for the Damon Runyon Research Foundation raising over $100,000 in 16 hours–which would be the equivalent of about one million dollars today. In essence Berle’s initiative was a nonprofit crowd-funding venture.

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