There is a growing realisation in the Indian social sector of the importance of small individual givers, as other sources of funding experience either low growth or a decline in donations.
Foreign funding–-as indicated by FCRA donations–has fallen 65 percent in 2016-17 with respect to the previous year. As per the 80G deductions claimed by individuals and corporates in their income tax returns, corporate donations have grown by only 15 percent in the last four years. On the other hand, individual donations have grown by almost 40 percent and also make up approximately 40 percent of all donations. In reality, this share might be higher since many Indians may not be claiming the tax benefit.
In addition, there are those who donate more than 10 percent of their gross income and cannot benefit from the 80G deduction. All this could mean that individual donations already make up more than 50 percent of all donations.
Individual donations already make up more than 50 percent of all donations.
Despite the fact that nonprofits have started raising more money from small donors through both, crowdfunding platforms and their own websites, there is still limited understanding of each of these channels and their usage.
People continue to think of these channels as ‘either-or’ options, little realising that they aren’t mutually exclusive; there is a role and use for each of them and together they can work wonders for the nonprofit.
Understanding crowdfunding
The term crowdfunding can be misleading, especially for nonprofits that are not internet savvy. The impression they have is that they will create a campaign online and a ‘crowd’—i.e. a random group of people—will come forward and fund it.
That, in itself, is a wrong assumption. Raising money from complete strangers rarely works–the exceptions being emergency cases such as medical or disaster fundraisers–where media has created enough external awareness for the issue.
Infact, in most cases, it doesn’t work if there isn’t enough media attention. I remember, very distinctly, when at one point there were simultaneously floods in Jammu and Kashmir and in Assam–-Jammu and Kashmir got widely reported in the press while Assam did not. Fundraising followed a very similar pattern.
It’s therefore only in such specific cases that crowdfunding in its absolute literal meaning, works. However, as a nonprofit considering crowdfunding as the primary online channel, there are a few things to keep in mind:
- Traditionally organisations are not very successful at raising money from crowdfunding. It is individuals who raise money from their networks as people respond to people. People rarely respond to organisations.
- Crowdfunding typically entails raising money for a finite period. As a nonprofit you are in need of funds always–why run a fundraising campaign that has a fixed duration?
- It makes an existing donor question their relationship with your organisation: “I know this nonprofit, but I don’t know what this crowdfunding platform is. How much can I trust it with my personal information?”
- You run the risk of losing an engaged supporter. Once they are on a platform, your supporters might find some other cause that piques their interest and decide to give to that. Your donors will also receive mails to donate to other projects, once again distracting them from your cause.
- It doesn’t offer you a permanent channel for fundraising. If you send your supporters a link and they give once, they can’t use the same link the next time they want to give, since the campaign would have expired. So, now they don’t have a channel to give. Very few of them will take the effort to find the contact details of your organisation and attempt to get in touch with you directly. This deprives you from creating ongoing recurring donors who can give to you at any time
- And last but not the least, crowd funding is more expensive, with fees ranging from 8-15 percent of the funds raised.
Your supporters—board members, volunteers and fellows–will give you funds anyway, so why do it in a campaign format? Running a crowdfunding campaign as an organisation is usually a lot of work and may not always justify the time and effort. In fact, a more personal, well-timed communication is the best way to get the maximum benefit out of your supporters.
Provide existing supporters a way to give directly on your website
When people already know you and want to give, you should direct them to your website. It is something they will always remember; they can give whenever they want, come back to it regularly and refer it to friends and family whenever appropriate.
Research in the US shows that nonprofits that allow people to donate on their own branded platform are likely to get 25 percent more donations than from a giving platform; and 50 percent more than from a crowdfunding platform.
Nonprofits that allow people to donate on their own branded platform are likely to get 50% more donations than from a crowdfunding platform.
When people donate on a crowdfunding platform, it will most likely be smaller amounts—an average of INR 2,000. A large reason people give on these platforms is because their friend is running a campaign and has asked them to support their cause. People look at it as a gift, something given only because someone they know has asked.
When people give directly on the organisation’s website, based on my experience both at GiveIndia and Danamojo, the average amount tends to be around INR 5,000. This is because they have made a direct and conscious choice to give to a particular nonprofit and hence it will be a significant proportion of their total giving.
In other words, it’s the difference between a gift budget and a charity budget.
Having a way to donate online on your own website helps you in different ways.
- It provides a safe, secure, and trusted way for your donors to give to your nonprofit
- The giving page on your website will not expire; therefore, not only can your supporters donate to you at anytime, they can also refer their friends, family and colleagues
- Only you have access to the donors’ information and can thus maintain their privacy
- And, last but not the least, it is cheaper and costs between two to five percent of the funds raised
Use crowdfunding to move existing supporters up the value chain
So where does crowdfunding work and when should a nonprofit use it?
Many nonprofits ask me “How can I get new donors?” My answer to this question is, crowdfunding, because, if done properly, it is an easy and cheap way for a nonprofit to raise money.
Nonprofits should think of crowdfunding as social fundraising or peer-to-peer fundraising—a channel to encourage their existing supporters to help raise money from their personal social networks.
This is also because crowdfunding is truly effective when individuals raise money. Most crowdfunding platforms will tell you that personal fundraisers (for a nonprofit or otherwise) raise anywhere between 50-80 percent of the funds on their own platform.
So, use it very strategically to get your employees, volunteers, board members, and donors-who-want-to-do-more, to fundraise for you. In fact, make them ‘crowdfund’ for you. They will do this by reaching out to their own social networks–ones you don’t currently have access to–and help you get new donations and donors at almost zero cost.
Crowdfunding is therefore a great way to help your supporters move up the engagement ladder and contribute in ways other than their own money.
However, it’s not easy: out of 100 existing donors, only one person might agree to fundraise. A good way to start is to encourage them to use platforms that allow for fundraising to happen naturally–for instance, marathons, which most people associate with charity fundraising already–and then consider moving onto individual campaigns during special occasions, for instance birthdays, weddings, anniversaries and so on.
The nonprofit’s role is to coach people on how to fundraise; and for that they should have fundraised themselves to understand what it takes and what motivates people to give. Second, they should be willing to ask their supporters to do it.
Nonprofits hesitate to ask for more help from supporters. But they must realise that supporters want to do more; they just don’t know how or what. Once they are shown the way, they are more than willing to engage more closely. Nonprofits are forever thinking of ways to attract new donors; why not use the ones you have to get more?
In conclusion, use your own website to raise money continuously from your existing donors while using crowdfunding platforms as a channel for your supporters to fundraise for you.
