What Is Crowdfunding?

The name is pretty self-explanatory: think crowd + funding. A group of people (a crowd) contributes an amount of money (funding) on behalf of a cause or an organization. This group of people is usually brought together in person or through the Internet by an individual, also known as the crowdfunder or social fundraiser. Crowdfunding or crowdsourcing sometimes refers to a campaign where there is one fundraising page with a set goal. It is more commonly known as peer-to-peer fundraising when it is an individual soliciting donations on behalf of an organization for a campaign or nonprofit organization.

How Can Nonprofits Use Crowdfunding?

There are several ways in which organizations can benefit from crowdfunding efforts.

1. Crowdfunding Through Social Networking Platforms

Organizations and individuals alike can rally donors on social networking platforms like Facebook, which allows its users to add donate buttons to their profile pages so their followers can contribute donations to their organization of choice. The nonprofit organization gets donations, the social networking site user gets peer interaction and generates goodwill, and users never have to leave Facebook, improving their overall engagement. Instagram now offers an option for organizations to add a donate button to their profile, as well as letting individual users add a donation sticker to their Instagram stories to solicit donations on behalf of an organization.

2. Text-To-Give Campaigns

Also known as text-to-donate campaigns, this strategy capitalizes on the pervasiveness of mobile phones and is touted as one of the most effective ways for nonprofits to raise money for their causes. Users text a phrase or keyword to a specific number. Then, the cell phone user will receive a link to a donation page for the organization. An example of this is texting REDCROSS to 90999, which will allow individuals to donate to the American Red Cross Disaster Relief.

How Does Crowdfunding Help Nonprofits Amplify Their Fundraising?

The more funds nonprofit organizations bring in, the more people it can serve. Crowdfunding allows nonprofits to raise donations from a larger audience without hiring more people to its development team. In fact, individuals not directly affiliated with nonprofits can and do leverage crowdfunding strategies on behalf of nonprofits every day. Utilizing crowdfunding strategies also tells supporters that your organization is savvy to the latest donor engagement strategies and technological advances. It’s another way to invite supporters to help nonprofits carry out their missions.

Bottom Line

Crowdfunding is a term used to describe the process of an individual raising money on behalf of an organization by soliciting donations from their friends and peers.