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On the pros and cons of crowdfunding

When it first appeared as a technique for fundraising, crowdfunding attracted a lot of attention and enthusiasm, and indeed in many cases it has worked very well.

I’m aware of a successful example close to home. The wonderful old art deco cinema in Sawtell on the NSW North Coast was in danger of being sold and demolished until a diverse group of cinema lovers banded together to raise cash (a lot of cash) and to sell shares in a new company to buy the cinema. The full story of that success in crowdfunding is here.

The key lesson from this and other successful cases is that if you have a campaign that is urgent and clearly definable as to what success will look like (eg a clear dollar target), and you also have a community of interest around the thing you are fundraising for, and donors can easily see progress, then you have a reasonable chance of success.

But there are signs that some of the gloss is wearing off crowdfunding, and that people are becoming more savvy about when it works and when it doesn’t. In May 2016 I attended the American Alliance of Museums conference in Washington DC, mainly to catch up with cultural fundraising trends in the USA. One very interesting talk I went to was on three museum crowdfunding case studies, ranging from $15,000 to $500,000. All three campaigns were successful, but the messages from them are interesting.

Keys to success were:

  • A good video to say what you are trying to do and build enthusiasm

  • Enthusiastic members and other stakeholders of your organisation out there promoting the campaign

  • Try and use a popular blogger to work with you, one who fits your cause

  • Acknowledging that crowdfunders see themselves as backers or investors. They want something in return. A reward, however small, they can’t get anywhere else.

  • Potential funders want a very tangible and specific project, especially those who work through Kickstarter

Points from the general discussion following the talks were:

  • You need to create a climate where people accept that private funding is needed, a strong case

  • Crowdfunding is a lot of work. There are often easier ways to raise money so there needs to be additional reasons to use crowdfunding eg to raise community awareness of you/your cause

  • Make sure your members and existing supporters know of your crowdfunding campaign in advance, don’t let it be a surprise. You want them as donors too and they need to understand why the crowdfunded approach is important

  • It’s important to clearly ask backers/investors to agree to be added to your mailing list to allow you to contact them again. Building such lists can be a key reason for crowdfunding campaigns.

  • The general view of the speakers was that crowdfunders will not generally become normal donors, but a proportion of them will become members

  • Your marketing and communications departments need to be involved in crowdfunding campaigns

  • Be careful around tax deductibility of crowdfunded donations, especially where there is a reward or gift to funders

My overall take on the talk is that crowdfunding is worth considering if the cause is right and you can deliver those keys to success, and if you can get additional benefits from the campaign (eg a bigger mailing list), but don’t expect it to be cheap or necessarily more effective than conventional fundraising approaches. Go into it with your eyes open!

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