Nonprofit Crowdfunding

Crowdfunding also finds application in the field of fundraising for charitable initiatives, which is one of the oldest manifestations of what has evolved into today's online funding search: the “collection.” Crowdfunding for the nonprofit sector is a great opportunity to fund social, humanitarian or environmental projects by soliciting the participation of a vastly larger audience of potential supporters than can be reached in the public squares, on television or in the pages of newspapers.

The two most congenial types of crowdfunding for nonprofits are obviously donation and reward crowdfunding, but we will see that there are also hybridizations between fundraising for charitable causes and financial crowdfunding, for example with lending crowdfunding.

In this article we find out how crowdfunding works for nonprofit charitable projects and what specific strategies allow you to create a successful no-profit crowdfunding campaign.

Why crowdfunding for nonprofits

There are many nonprofit organizations in Italy and around the world, and they carry out their charitable initiatives through various sources of money:

• Membership dues and periodic contributions of any associates
• Private donations
• Public grants.

But fundraising is a chronic need for these kinds of associations, and crowdfunding is emerging as a tool that can revolutionize it. 

Here are the main benefits of nonprofit crowdfunding:

1. Access to a global audience for all

Crowdfunding enables nonprofit organizations to raise funds in innovative ways, overcoming traditional funding-related logistical limitations and reaching potential donors everywhere. With the ability to mobilize large numbers of small donors, even the smallest organizations can obtain significant resources and build useful relationships. Crowdfunding democratizes access to funds, allowing even those who cannot rely on large donors to obtain the resources to pursue their initiatives.

2. Increased visibility

Crowdfunding platforms not only facilitate fundraising, but also increase the visibility of social causes. The success of an online crowdfunding campaign for a charitable cause quickly makes headlines and fuels word of mouth offline as well. By sharing on social media and creating a community around a cause, organizations can amplify their message and engage a wider audience, even attracting the attention of the press.

3. Creating and engaging a community

Those who donate to an offline charity usually consider their good deed concluded with the payment of the sum, at most they talk about it with some friends or family members if they happen to get into the subject, but nothing more. An online crowdfunding campaign, on the other hand, stimulates the creation of a real community of supporters who are encouraged to follow the progress of the collection and contribute to it personally, becoming ambassadors of the project and promoting it in turn. This creates a megaphone effect and a lasting bond between the organization and its supporters.

4. Virality and the urge to imitate

Related to the previous point is the advantage of being able to take advantage of the spirit of emulation that characterizes certain trends that become established online, get people talking about them, become the hallmark of a merit or identity, and then are followed by a large number of people, until they go viral. While certainly not every crowdfunding campaign for a charitable cause can go viral, it is equally true that one can exploit this mechanism on a smaller scale.

5. Greater Flexibility and Creativity

Crowdfunding campaigns offer nonprofits the freedom to design customized and creative fundraisers that reflect their unique mission and values. This creativity can translate into more engaging and attention-grabbing campaigns. Campaign construction and start-up times are also quick, not requiring the going through intermediaries and bureaucracy that offline or publicly or privately sponsored fundraising campaigns are subject to.

6. Transaction simplification and transparency

Crowdfunding platforms provide an integrated payment system that allows donors to contribute by credit card, PayPal or bank transfer. This saves organizations from having to handle payments manually, reducing the risk of administrative errors or data loss or privacy breaches. 

In addition, donors can see the progress of fundraising in real time, increasing a sense of trust and involvement. Some platforms also offer a reporting service to help organizations monitor progress and share updates with supporters.

7. Lower operating costs

Compared with physical events, door-to-door or street collections, or mail campaigns, crowdfunding for nonprofits reduces the costs of organization and logistics. All-digital management saves on administrative expenses, printing of printed materials, and rental of event space. There are still promotion expenses to consider, such as online advertising, but they are significantly lower.

Donation crowdfunding for charitable causes

Among the types of crowdfunding suitable for nonprofits, the main one is definitely donation-based crowdfunding. It is probably the oldest model, as reflected in the history of crowdfunding. It was created specifically to support charitable causes. In this model, donors contribute without expecting anything in return except the satisfaction of supporting a cause. Examples of platforms that support this type of crowdfunding include GoFundMe and Rete del Dono, but also Produzioni dal Basso and ForFunding, a portal now acquired by Intesa Sanpaolo.

How does donation crowdfunding for nonprofits work?

• The sponsoring entity sends the application to a platform (or logs in directly: many donation platforms have no entry selection)
• The sponsoring entity builds an online collection page, describing the project, its mission and impact, specifying the economic goal and how the money will be used.
• The promotion of the campaign begins, with posts, videos, and images spread across various online and offline communication channels.
• People sign up on the portal and make their cash contributions, which are disbursed to the sponsoring association at the end of the campaign, net of any transaction costs and fees charged by the platform.

In our article on donation crowdfunding platforms, we delved into their operating mechanisms, which are generally similar but may diverge in terms of entry selection and pricing policies.

Example of donation crowdfunding for nonprofit: in 2023 on the Produzioni dal Basso platform, €163,186 was raised for flooded families in Emilia-Romagna.

Reward crowdfunding for charitable causes

Reward crowdfunding for nonprofits is a more complex fundraising model because it involves a reward to be recognized by supporters. Unlike reward crowdfunding campaigns launched by companies to raise capital for product development, those for supporting charitable causes usually involve small token rewards or personal recognition.

For example, participants in a charitable reward crowdfunding campaign might receive items produced by the association or the communities the association supports or the inclusion of one's name on a plaque at the association's headquarters or at the place where the funds are allocated, etc.

This model is particularly useful when the campaign is used to support projects designed to produce something: for example, solidarity crafts, food and wine products made by at-risk communities or people in prison, a social exposé documentary, etc.

The mechanism of operation is similar to that for donation crowdfunding, with the difference that at the end of the campaign the sponsoring entity is required to deliver the rewards to supporters. Therefore, more resources and logistics are required.

Is there such a thing as nonprofit lending crowdfunding?

Lending crowdfunding is a crowdinvesting mode, so participation in the campaign has at its base the purpose of earning money by receiving interest on a loan.This model of capital raising, however, has some opportunities for intersection with fundraising for charitable projects, albeit usually outside the proper nonprofit field.

Examples:

• Lending crowdfunding platforms such as Kiva and Zidisha are dedicated to microcredit for disadvantaged communities: they host campaigns to raise finance for small businesses, social projects or individuals in developing countries.
• Nonprofit organizations can invest part of the funds they receive as donations in lending crowdfunding campaigns to quickly raise more cash for initiatives that require immediate capital or to intervene in emergency situations.
• Lending crowdfunding platforms focused on impact investing, such as LITA, host campaigns of positive social or environmental impact projects that can apply for low-interest loans.
• Lending crowdfunding platforms that focus exclusively on sustainability projects and supporting local communities in emerging countries are present throughout Europe with the goal of combining financial returns with positive impact on the planet and people. We interviewed in a webinar the CEO of Bettervest, one of these portals.
• Personal lending crowdfunding, opposed to the business model, allows individuals to raise loans to finance a personal project, such as studies or medical treatment. It is an uncommon model in Italy, but in other countries it is widely used, and some platforms offer the possibility of applying for zero-interest loans for medical expenses, emergencies or community projects.

How to launch a nonprofit crowdfunding campaign

Launching a crowdfunding campaign for a nonprofit cause requires more than just asking for donations. To achieve maximum success, it is essential to follow a clear and engaging strategy, much of which overlaps with the communications strategy for corporate crowdfunding. Here are the basic steps:

1️. Set a clear and realistic goal

• How much do you want to raise? → The amount must be realistic and justified. Supporters want to know how the funds will be used.
• Break down the budget → Specify what the donations will be used for to increase the credibility and reliability of the project.
• Create a sense of urgency → Campaigns with a well-defined deadline tend to perform better.

2. Convey an exciting and engaging story

People donate when they feel an emotional connection to the cause. Good storytelling can make the difference between a successful campaign and one that goes unnoticed.

• Use the power of storytelling to tell a true story, with real faces and names to help show concretely why the cause matters.
• Show the problem and the solution → What is the current critical situation and how can funds make a difference?
• Use clear and accessible language → Avoid technicalities or overly general speeches, focus on emotion.

3. Create strong video and visual content

One or more short, high-emotional videos can greatly increase campaign success. Statistics show that campaigns that include videos and photos in their communication raise more on average than those without (GoFundMe).

The most effective videos are those that have the problem and solution presented by people directly involved in the project and people directly affected by the critical issues the fundraiser intends to address. The closing should always be a clear call to action inviting people to support the project by participating in the no-profit crowdfunding campaign.

Example: Charity: Water, which brings clean water to poor countries, has been hugely successful because of the personal stories told in its videos. Each donor also receives updates with photos and videos showing how the money was used. 

4. Promoting the nonprofit campaign: Social Media, Email and Influencer

Once the crowdfunding campaign is launched, it is essential to actively promote it. Using social media, email marketing and other communication strategies is crucial to reach a wider audience.

• Social media-Facebook, Instagram, LinkedIn, and TikTok-are the most direct channel for telling the story and updating the community as a whole, while email is used to build one-on-one communication with potential supporters. Live events can also be organized on Facebook or Instagram to interact with potential donors in real time.
• Involving well-known personalities or micro-influencers who believe in the cause can give great visibility.

Real example: The Italian association Sant'Egidio promoted the "Add a Place at the Table" campaign with famous influencers and testimonials. This brought in thousands of new donations to provide meals for the homeless during Christmas. 

5️. Managing donors and keeping them involved

In addition to finding supporters for a cause, it is equally important to maintain a relationship with them in order to create an involved and cohesive community, which will also be useful for future projects.

• Publicly thank donors → A simple thank-you message or social media post increases retention.
• Update supporters → Sharing photos and videos on campaign progress helps build trust.
• Create a community → A Facebook or Telegram group or newsletter can keep donors involved long after the campaign ends.

5. Analyzing Nonprofit Crowdfunding results

After the conclusion of the campaign, it is important to analyze the results to understand what worked and what can be improved in the future. 

• Gathering feedback from donors and evaluating success metrics can provide valuable information for future campaigns. 
• Using analytical tools to monitor campaign performance and identify areas for improvement is essential for optimizing crowdfunding strategies.

Finally, it should be mentioned that even for nonprofit entities, as for businesses, a crowdfunding campaign is a great moment of exposure, so it carries reputational risks that must be kept in mind. It is essential to organize all communication for the campaign with absolute transparency and openness to criticism and advice, as well as to check all regulatory obligations to be met.