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Crowdfunding - how the wisdom of the crowd and the power of social media are changing everything we know about fundraising

document Crowdfunding, Distributed Knowledge

Ideavibes Whitepaper Crowdfunding

Thursday June 2, 2011

CROWDFUNDING
How the wisdom of crowds and the power of social media are changing everything we know about fundraising.

CROWDFUNDING

Table of Contents
The challenge for fundraisers ...................................................................................................................................................................... 3 The power of online communications....................................................................................................................................................... 4 What is crowdfunding?................................................................................................................................................................................. 5 Harnessing online conversations ............................................................................................................................................................... 5 How crowdfunding works ............................................................................................................................................................................ 5 Why ask the crowd? ...................................................................................................................................................................................... 6 Making the crowd work for you—the Return on Investment................................................................................................................. 6 Today’s wired donor....................................................................................................................................................................................... 6 Integrating crowdfunding into your organization: What you need to know ................................................................................... 7 In summary ...................................................................................................................................................................................................... 8 About Ideavibes .............................................................................................................................................................................................. 8 About Fundchange ......................................................................................................................................................................................... 8

CROWDFUNDING

THE CHALLENGE FOR FUNDRAISERS
Canadian fundraisers spend a great deal of time and resources trying to ﬁnd better ways to engage new donors, build meaningful relationships, and measure the success rate of the communication channels they use to raise funds. In today’s hyper-wired world, can fundraisers rely on online channels to successfully support their ﬁnancial targets and goals? Crowdfunding—or raising funds online through the power of engaged online communities—enables you to ﬁnd project or emergency funds, or complete your annual fundraising appeals in a few weeks, even days. With the right social media readiness, crowdfunding can revolutionize the way you interact and build relationships with donors. It can support stand-alone campaigns or be integrated into existing fundraising strategies. Crowdfunding also makes your philanthropic efforts completely transparent, and can increase repeat donations—all in real time. For donors, crowdfunding is a gateway to a world of community projects that speak to their interests and passions that can be easily funded with a few clicks of a mouse. It’s time for the fundraising sector take notice and better understand this new technology.

This document is a guide to understanding the power of online crowds, and why you may want to integrate crowdfunding into your fundraising initiatives.

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The power of online communications
Online conversations are enabling powerful new forms of social communication, knowledge exchange and fund seeking. As columnist Wayne Kurtzman writes in a Media Bullseye: Getting to the Point of Social Communications blog: “Social media is about people having conversations and reactions. The web has become, in the minds of many, a place as real as any three dimensional place…to learn, act, react and transact”1 With the pervasiveness of social media, organizations and charities are grappling with how best to incorporate social communication platforms into the fundraising mix. Via social networks, charities already have crowds of people, or fans that follow and talk about them and their and activities. A 2011 survey published by Blackbaud, Common Knowledge, NTEN states that upwards of 92 per cent of non-proﬁt organizations, regardless of their size, are using at least one social networking site like Facebook, Twitter or LinkedIn.2 In the Cornerstone Group of Companies report, Fundraising Trends and Challenges in the Canadian Direct Marketing Sector indicates that since 2003, there has been signiﬁcant growth in online channel use (up 425 per cent and increasing daily) for revenue generation outside of direct mail.3 Online giving is now the most used fundraising channel after direct mail. The total number of donors using the Internet is up 295 per cent from 2006 and revenue from web-based donations has increased more than 400 per cent.4 Altogether, these steep trends indicate that social media are enabling more meaningful interactions that are simply not possible with traditional broadcast media. For example, traditional communications media (like newspapers, magazines,TV or radio commercials) offer one-way message delivery. Social media enables two-way dialogue, which fosters stronger relationships with donors. Online interaction allows donors to converse and engage in real-time with members in your organization about what matters most to them. Another key social media advantage is that fans, crowds or supporters (not organizations) communicate and validate the cause with their online peers. In effect, these fans become your loyal volunteer communicators and fundraisers.

Communications Media vs. Social Media Relationship Building Tactics5
COMMUNICATIONS MEDIA Space deﬁned by media owner Brand in control One-way/Delivering a message Repeating the message Focused on the brand Entertaining Organization creates content SOCIAL MEDIA Space deﬁned by consumer Consumer in control Two-way/Being part of a conversation Adapting the message/beta Focused on the audience/Adding value Inﬂuencing, involving User-created content/co-creation

“You can’t buy attention anymore. Having a huge budget doesn’t mean anything in social media. The old media paradigm was PAY to play. Now you get back what you authentically put in. You’ve got to be willing to PLAY to play.” – Alex Bogusky, Co-Chairman, Crispin Porter + Bogusky Advertising and Design Agency
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CROWDFUNDING

What is crowdfunding?
Crowdfunding is raising funds online through the collective wisdom of individuals or groups of people, collectively referred to as: the crowd. As part of an organization’s social media mix, crowdfunding complements traditional fundraising techniques, as it taps into and appeals to philanthropic desires in ways that a growing number of social networkers now expect.

Harnessing online conversations
We know that fans chat online about issues. We know they are willing to invest volunteer time and money into causes that matter to them. Crowdfunding sites or platforms take these conversations to the next level by: • • • Bring fans right into their cause or mission; Making it simple for fans to select a speciﬁc project, and donate with the ease and speed of a mouse click; and Turning would-be bystanders into inspired, action-oriented philanthropists, and ideally repeat online donors.

How crowdfunding works
A crowdfunding site is accessed through an independent website, or via a technology platform that you can purchase to integrate into your website. Detailed descriptions of causes or projects to fund are listed on these sites. Visitors are invited to select, vote, or make a donation toward their preferred cause. As votes are cast and donations made, results are instantly aggregated. This means voters and donors can immediately see exactly where their support is directed, how others have voted, and how much money is being raised. As donations are made, donors receive receipts directly from the project organizers. Once the voting process is complete, causes or projects receive funding. As well, the most popular projects are validated by the crowd, and fan bases around projects are created.

The Crowdfunding Cycle (how it works)
1. organization posts project 2. organization promotes project to the crowd

7. payment sent to organization

3. crowdfunding site promotes site and all projects

6. organization posts new project

4. crowd visits site to find, vote for and fund projects

5. project gets funded

1. Kurtzman, Wayne. Media Bullseye: Getting to the Point of Social Communications [blog post]. Retrieved from http://www.mediabullseye.com/mb/2010/10/crowdsourcing-social-mediametrics.html 2. 3rd Annual Non-proﬁt Social Network Benchmark Report, Common Knowledge, 2011. Retrieved from http://nonproﬁtsocialnetworksurvey.com/ﬁles/2011%20NPO%20SN%20 Benchmark%20Report%20Final.pdf 3. Cornerstone Global File Audit Calendar Years 2006–2010. Global Audit Group: GLOBAL. March 2011, p. 4. Retrieved from http://www.the-cma.org/downloads/whitepapers/ CornerstoneFileAuditWhitepaper09.pdf 4. Ibid., p.8 5. Perkin, Neil. What’s Next in Media. Retrieved from http:/ /www.slideshare.net/neilperkin/whats-next-in-media. Slide 9.

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The voting process ensures that organizations have clear direction and insight about what cause or project matters most from the crowd—your organization’s most important stakeholders. Furthermore, donor funds have been raised in a shorter period of time and in all likelihood you have just attracted new supporters and donors to your organization. Crowdfunding conversations and transactions enable and inspire new levels of organizational trust, transparency and accountability as: • They give power to organizational supporters by letting them (not board members or staff) decide what initiatives are most important and deserve funding; and They enable donors to see exactly where and how their money is being spent.

your fans into excited networkers—maybe even ambassadors. Through the power of social media and the wisdom of crowds you can expand your public outreach and funding potential by having your networks engage and inspire their network as well. Your network’s network (and so on) becomes your cost-free promotion agents and can become part of your donor base. This is where the real power—and opportunity—of crowdfunding resides. As a result, crowdfunding brings non-proﬁt organizations closer to their online donor base. As well, online donors enable access to new networks and relationships. These networks can be prescreened, pre-qualiﬁed leads for future prospecting, and can be more inﬂuential and current than your organization’s website or Customer Relationship Management system.

•

Today’s wired donor
Current next generation donor research reveals signiﬁcant changes in Western societal demographics and the explosion of mobile-based, personal technologies to access social networks. Together, these trends are permitting greater intimacy and engagement with the public, donors, volunteers and stakeholders. In the 2010 United States study, The Next Generation of American Giving: A study on the multichannel preferences and charitable habits of Generation Y, Generation X, Baby Boomers and Matures, multi-channel integration is quickly becoming part of a modern and lasting approach to connecting people and causes: “At a minimum, social networks are a critically important word of mouth engine and starting to play a far more prominent role for donors of all ages.”8 The Fundraising Trends and Challenges in the Canadian Direct Marketing Sector report also shows that: “donors who make their ﬁrst gift to an organization online as opposed to via direct mail have a much higher average gift ($73 vs. $30), making them important from a revenue generation standpoint. Equally as important, there are now more than 4 times the number of new donors, per organization, from online initiatives than ﬁve years ago (9M to 40M).”9

Why ask the crowd?
Behavioural research suggests that given the right circumstances, crowds or groups of inspired citizens will make wise and remarkably intelligent choices.6 Crowdfunding websites and platforms are transforming how and why people support causes. It has been the subject of intense study for some time. In fact, James Surowieki’s 2005 landmark book, The Wisdom of Crowds: Why the Many Are Smarter Than the Few, is widely credited as helping root the wisdom and impact of the crowd concept onto the business landscape.7 In its simplest terms, crowdfunding engages people in two-way conversations, and mobilizes the collective intelligence from an often diverse, independent and decentralized crowd. Surowieki’s insight into group dynamics and decision-making, together with online engagement technologies are changing the way organizations connect with their stakeholders.

Making the crowd work for you— the Return On Investment
But tapping into your community’s needs and funding interests is only a part of the crowdfunding equation. Crowdfunding can turn

6. Surowieki, James. The Wisdom of Crowds: Why the Many Are Smarter Than the Few. New York: Random House. 2005. 7. Bloomburg Business week. Dec. 13, 2004. Retrieved from (http:/ /www.businessweek.com/magazine/content/04_50/b3912030_mz005.htm 8. Bhagat, Vinay. Loeb, Pam. Rovner, Mark. The Next Generation of American Giving: A study on the multichannel preferences and charitable habits of Generation Y, Generation X, Baby Boomers and Matures. (2010 March), p. Retrieved from http:/ /www.edgeresearch.com/Edge%20Research%20Case%20Study%20-%20Next-Gen-Whitepaper.pdf 9. Cornerstone Global File Audit Calendar Years 2006-2010. Global Audit Group: GLOBAL. (2011 March), p. 4. Retrieved from http://www.the-cma.org/downloads/whitepapers/ CornerstoneFileAuditWhitepaper09.pdf

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CROWDFUNDING

Integrating crowdfunding into your organization: What you need to know
Crowdfunding can help you raise more money, reach new donors, and provide you with an alternate channel to market your charity with little to no direct cost. It can be very successful, but it is not effortless: • Crowdfunding success comes quickest to organizations that are social media-aware and engaged. If your organization is not yet social media-enabled, it will take time and human and ﬁnancial resources to do so. Because your efforts are only as good as the crowd you are able to mobilize to your cause, it makes sense that your organization strategically manages and promotes its brand online. Do not consider crowdfunding if your target audience or segment does not participate online, or if your target audience is not going online in the future. • Do your homework on crowdfunding sites—in other words: be careful of the company you keep. If your organization is on a crowdfunding site that allows projects from suspect organizations, it may hinder the success of your goal and your organizations’ reputation. You need a trusted technology partner. A crowdfunding platform can be built onto your organization’s website, or you may opt to post your projects on established crowdfunding sites that are aligned to your sector and brand. Crowdfunding sites offer different beneﬁts for joining, so review them carefully.

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In summary
Crowdfunding has emerged as a new and innovative tool to bring individuals together to make charitable funding decisions. It is a social interactive application that provides new meaning to online communities. Crowdfunding has the potential to become the driving force behind fundraising, and maybe even social network innovation. Investing in crowdfunding may mean giving up some organizational project decision-making control. Depending on how social media savvy or mature your organization is, new human and ﬁnancial resource investments may be required to support your crowdfunding activities. Crowdfunding offers a low fundraising cost structure, real-time engagement with audiences, and considerably broader reach than traditional mass media. It can enable access to a much broader donor pool than current fundraising techniques. Best of all, it can complement an existing fundraising program.

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CROWDFUNDING

About Ideavibes
Ideavibes is a social enterprise that has developed a crowd engagement platform to enable organizations to create crowdsourcing and crowdfunding campaigns using the power of social media to tap into the wisdom of crowd and to strengthen relationships through engagement and participation. Ideavibes is about starting innovative projects, setting new directions and being more crowd or community focused, funding worthy initiatives and sparking social change. Formed in 2010, Ideavibes contributes a portion of its products, proﬁts and time to help socially conscious organizations make change happen. To ﬁnd out more about crowdfunding, and how your organization may beneﬁt from the power of engaged and passionate people visit www.ideavibes.com or contact paul@ideavibes.com.

About Fundchange—A crowdfunding platform
Fundchange is Canada’s newest online way to fund projects and build stronger communities. Fundchange helps charities and non-proﬁts use the latest social media tools to effectively engage current donors and attract new ones. Fundchange gives donors a closer connection to the projects they support and the ability to promote those projects through social media, signiﬁcantly expanding the funding opportunity. In a matter of weeks, even days, worthy projects are funded and communities grow and prosper. Crowdfunding by Fundchange brings the power of many to help the needs of the few. Fundchange is powered by Ideavibes and sponsored by TELUS. www.fundchange.com | paul@fundchange.com

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Summary This whitepaper looks at crowdfunding from the perspective of the charitable sector and is a guide to understanding the power of online crowds, and why you may want to integrate crowdfunding into your fundraising initiatives.

Description This whitepaper, while it has a Canadian slant, looks at the challenges being faced by the charitable sector and looks at how crowdfunding might be able to help.

Tags: Charity, crowd funding, Crowdfunding, fundchange, IdeaVibes

Posted by Paul Dombowsky

Jun 23, 2011 10:29 pm GMT Viewed 5044 times

Author: Paul Dombowsky Source

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