What Is Crowdfunding?
April 30, 2015
By Brian Collins, CPA
Crowdfunding is a relatively new phenomenon that is becoming more popular with individuals and not-for-profit organizations looking to raise funds. Crowdfunding is the practice of soliciting small contributions from a large number of people, especially from the online community, to fund a particular project or cause. Crowdfunding is raising millions of dollars a year for individuals and organizations; for example, recently funds were raised for an elderly New York City resident who lost her home to a fire and, in another effort, donations to an inner city arts center raised funds for scholarships.
There are many websites dedicated to crowdfunding that are allowing young entrepreneurs, individual fundraisers, and not-for-profit organizations to raise money for projects, events, or charitable causes. Some websites, such as FirstGiving, are geared to not-for-profit organizations. However, there are a number of other crowdfunding websites, like Kickstarter and Indiegogo, that may not be not-for-profit specialized but could still be utilized to reach funders. Be sure to evaluate a handful of crowdfunding websites in order to find the one that best fits your fundraising goals and targets appropriate contributors.
Individuals like to contribute funds via crowdfunding because it allows them to support a specific project or cause and they know that their support is going directly to that project or cause. So, it is important for not-for-profit organizations to remember that crowdfunding works best for funding individual projects; however, it is not especially well suited for general fundraising or annual giving campaigns. Your not-for-profit organization should explore crowdfunding to determine if it is a viable fundraising tool for your next project or event.