The Pros and Cons of Crowdfunding for Nonprofits
Crowdfunding has become a popular fundraising method for nonprofit organizations looking to raise money quickly and efficiently. Here at PRIDE, we've been a part of several successful crowdfunding campaigns, and we've learned a few things that we would repeat, plus some things we would do differently now. You can also read our official review of all the major crowdfunding platforms!
The most important takeaway from our team is that it isn't a perfect system for funding smaller, community based nonprofits. While it can be an effective way to raise funds, there are both pros and cons to using crowdfunding. Here are some of the key advantages and disadvantages of using crowdfunding for nonprofits.
Pros:
Quick and easy to set up: Crowdfunding campaigns can be set up quickly and easily, with no need for extensive planning or preparation. This makes them a great supplement to other best-practice fundraising.
Wide reach: Crowdfunding allows nonprofits to reach a wide audience, including people who may not have been familiar with their cause previously.
Low cost: Crowdfunding platforms typically charge low fees, meaning that most of the funds raised go directly to the nonprofit. It also usually doesn't cost anything unless donations are made.
Provides feedback: Crowdfunding campaigns can provide valuable feedback on what resonates with donors, allowing nonprofits to refine their messaging and appeal to potential donors more effectively.
Builds community: Crowdfunding can create a sense of community among donors, as they are able to share their support for the nonprofit and engage with other supporters. Dollars are great, but people give for a sense of belonging, and this is a cheap and easy way to potentially achieve that.
Cons:
Requires significant effort: While crowdfunding campaigns can be easy to set up, they often require significant effort to create and maintain momentum, including consistent communication and outreach. If you have the time, give it a shot! But don't replace your regular fundraising outreach with this and expect 1:1 results.
Not guaranteed to succeed: Crowdfunding campaigns are not guaranteed to succeed, and nonprofits must be prepared to handle the possibility of falling short of their fundraising goal. Some will fail even if they are perfectly optimized on paper.
Can be competitive: With so many nonprofits using crowdfunding platforms, it can be difficult to stand out from the crowd and attract donors. A wider market for potential donors also means a wider market for competition.
Limited control: Crowdfunding platforms often have strict rules and guidelines, limiting the control that nonprofits have over their campaign. The formatting, branding, rules, etc. - it's all set in advance. Some platforms are better than others in this area. See our full list for the ones that are the most customizable.
May not be sustainable: Crowdfunding campaigns may provide a one-time boost in funding, but they may not provide a sustainable source of income for the nonprofit. We should treat them as a one-off to fund something hyper-specific, not an ongoing strategy.
Crowdfunding can be an effective way for nonprofits to raise funds and reach a wide audience. However, it is important to weigh the pros and cons carefully before embarking on a crowdfunding campaign. By understanding the potential benefits and challenges of crowdfunding, nonprofits can make informed decisions about whether or not to pursue this fundraising method among their overall portfolio of strategies. Crowdfunding is a tool, not an overall approach to funding your mission.
Still have questions on crowdfunding? Reach out to us! We are happy to chat with you and discuss whether this is a good strategy for your situation.
