Donation crowdfunding is the oldest form of crowdfunding developed in history. Unlike other types of crowdfunding (lending, equity, reward), it is primarily used by nonprofit organizations to fund social or cultural causes and does not provide monetary or other reward for supporters. The mechanism is that of the charity collection, which used to be able to take place door-to-door, at schools or association headquarters, while today it can be done online on donation crowdfunding platforms.
It is not compulsory to rely on an online platform to do donation crowdfunding, but it is useful to gain more visibility and reach a wide audience of potential donors more easily, as well as to have support in managing the cash deposits.
How a donation crowdfunding platform works
Donation crowdfunding platforms can be generalist or specialized in specific areas, for example, only school projects, only volunteer projects, only sports projects, etc.
Moreover, some of them are reserved for associations and companies, while others also allow individuals to raise funds for personal initiatives (personal fundraising), for example, to support medical expenses.
As with reward crowdfunding platforms, there can be a selection at entry to check the suitability of the proposed project, or paths for uploading the project online independently.
Platforms offer a storefront and rely on payment agents to handle transactions, sometimes retaining fees, other times offering a free service. In addition to this, campaign promoters can take advantage of technical support and advice on campaign sponsorship.
Donors can make deposits by their preferred payment method and obtain a receipt, which, in the case of donations to nonprofit organizations, serves to benefit from the relevant tax breaks.
Usually for donation crowdfunding, it is not necessary to set a minimum and a maximum goal: any amount raised by the campaign's set deadline will be donated to the campaign sponsor.
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How much does it cost to run a donation crowdfunding campaign?
The basic information about the cost of crowdfunding can also be useful for the donation mode. For this, too, those who launch a campaign inevitably incur costs.
As anticipated, some donation crowdfunding platforms allow free use and do not charge fees, but even then there are usually transaction costs for processing payments: these can be fixed or as a percentage of the amount contributed.
Other platforms, on the other hand, also charge fees for the service offered, which usually range from 3 to 5 percent on the amount of donations. In some cases, set a minimum threshold, the campaign initiator can freely decide what percentage to pay to the platform.
In addition to the costs for the platform, those who decide to launch a donation crowdfunding campaign must also consider a budget for promotion, which is essential to give the campaign the resonance it needs to make a good collection. This budget is extremely variable depending on several factors:
- promoting entity
- collection goal
- target
- communication channels.
The higher the collection target and the less well-known the promoting entity is with its own community, the more budget will be needed. This will need to be allocated to online advertising, production of materials (print or digital), and possibly compensation for the people running the campaign if they are large operations and not volunteer-based.
The best donation crowdfunding platforms
The 2023 report of the Milan Politecnico Crowdinvesting Observatory also devoted a short paragraph to donation and reward crowdfunding (23 platforms overall), highlighting in particular how in Italy donation-mode fundraising is widely used and participated in for major causes related to natural disasters or humanitarian emergencies.
Among donation crowdfunding platforms, the report highlighted those that raised the most resources:
- ForFunding (linked to Intesa San Paolo, only for associations or companies)
- Eppela (also for individuals, both donation and reward)
- Produzioni dal Basso (also for individuals, both donation and reward)
- Rete Del Dono (also for individuals).
To these can be added other relevant entities:
- GoFundMe (both nonprofit associations and individuals)
- DeRev (legal entities and individuals, both donation and reward)
- IDEArium (for projects related to schools)
- LoveItaly (for projects related to cultural heritage).
Choosing the right platform depends on your goals, your budget and the target audience you intend to reach: there is no absolute "best" donation crowdfunding platform!
With Turbo Crowd you can discover all the other crowdfunding methods available to raise capital and the most effective marketing strategies to promote a campaign: learn more about these topics in the rest of the blog and in our Facebook group.
