Crowdfunding for Nonprofits

Jaclyn Rundle, Ph.D. Central College Economics, Accounting & Management Dept. Pella, Iowa [email protected] 1. Traditional fundraising methods seem to be losing steam. In the past, telemarketing approaches (e.g., phone-a-thons) were an important source of small contributions Now nonprofits make more fundraising calls but bring in fewer dollars Why? ◦ Donors drop landlines ◦ Cell phone numbers are hard to access ◦ People screen calls For instance, as walk/run fundraisers like the Komen Walks proliferate, they bring new problems: ◦ Each new event increases competition for participants and donations ◦ High potential for donor overload and brand confusion ◦ Result: Lower revenues for each nonprofit Worth noting: Komen Walks in Maine, Arizona and elsewhere have been canceled due to significant attendance declines 2. The fundraising environment is shifting dramatically. 2018 Giving USA Report Statistics: ◦ Overall charitable giving has increased to record levels over the last four years; ◦ But, compared to the past, a smaller percentage of U.S. households now donates. ◦ Now, 20% of households give 80% of all donations. Generational demographics: Gen X is small compared to Boomers and Millennials, resulting in fewer Gen X households in prime giving age. Religious participation, which often motivates giving, is on the decline in the U.S. What does “support for causes” mean today? People now can contribute directly to causes by doing rather than donating. Example: Instead of donating to environmental nonprofits, environmentalists may support the earth by installing solar panels or biking to work. Another example of the shifting environment for fundraising…. Many charities expect past giving patterns to remain stable under the new tax law. But the American Enterprise Institute, a conservative think tank, predicts in its June 2018 study that 2018 donations will drop by $16 billion or 4%, as many fewer people in the U.S. itemize tax deductions. The greatest impact will be seen among middle- and upper-middle-income tax filers. Are these your donors? Nonprofits Are Experimenting With New Fundraising Approaches As Traditional Fundraising Methods “Age Out” And As the Environment Changes 1. Using data and research to boost fundraising effectiveness 2. Social giving and networking 3. Technology-based fundraising Examples: 1. Using experiments and data analysis to improve fundraising, even for small nonprofits 2. The “social donor” phenomenon, including ◦ Classic crowdfunding; ◦ New variations, such as decentralized fundraising and interactive fundraising using games & teams 3. Capitalizing on new technologies to attract donors & provide them with a means to give Studies show that only about half of all nonprofit organizations review scientific studies to find ways to improve fundraising But nonprofits that review scientific studies or conduct their own research report greater fundraising productivity than other nonprofits Bonus: More social scientists are researching charitable giving and fundraising Example: University of Chicago’s Science of Philanthropy Initiative (SPI): “Evidence- based research on charitable giving” Created in 2012 Offers annual conferences Aggregates results of academic research – but provides “Practical Takeaways” Research identifies effective and ineffective approaches to fundraising Social Information: What a donor knows about other people’s giving amounts Upward Social Information: A donor learns that others have given more than the donor Downward Social Information: A donor learns that others have given less than the donor Donors tend to increase their giving when provided with Upward Social Information But tend to decrease their giving when provided with Downward Social Information Where does Social Information come from? It can come from a neutral or public source (e.g., a newspaper article) Or it can come directly from a nonprofit, as it strategically seeks a larger donation The Two-Step Ask works to raise the level of an individual donation Step 1: Ask donor: How much would you donate for Christmas gifts for one Angel Tree child? Step 2: After listening to the Step 1 response, ask the donor: How much would you donate to buy Christmas gifts for ten Angel Tree children? The donation amount received after Step 2 is significantly larger than when only the Step 1 question is asked Why? Because people tend to be mathematically consistent in their thinking Donor’s mental calculation: My donation for ten kids should be much bigger than what I’d give for one child Science of Philanthropy Initiative web address is spihub.org SPI research articles always include “Practical Takeaways” Experimental focus: SPI encourages all nonprofits to conduct their own experiments; FAQs are on the SPI website Why conduct experiments? Surveys & focus groups tap into people’s intentions while experiments analyze what people really do. Increasingly, nonprofits conduct their own experiments and analyze their own internal data. Why? To learn about ◦ Their donors; ◦ Their donors’ patterns of giving; ◦ How often to contact donors; ◦ Specific ways to increase donations; and ◦ Which fundraising events and methods are or are not worth the time and effort The Alley Theatre is a Houston-based 501c3 Alley has annual revenues of $22 million (so, not a small nonprofit) Vision and Mission: To be a leader in the American Theatre movement through productions of its resident theatre company The fundraising staff is small – three people The question: How to bring in more money without hiring more fundraising staff? Paid a consultant to develop two predictive models, which continually analyze and “score” the theatre’s internal data First predictive model identifies donors likely to become major donors ($10,000+) Second predictive model identifies ticket buyers who are likely to become donors Result: With no extra staff, donations increased more than 3% - and provided insight into donor/ticket buyer behavior SAWF is a 501c3 founded in 1992 Based in Durham, NC Annual revenues of less than $750,000 (so, a small nonprofit) Mission: Collective action by farmworkers, college students and community to create improved conditions and justice for farmworkers SAWF created an “experiments team” made of some staffers, donors and board members The team’s job is to devise fundraising questions; conduct mini-experiments; and analyze data to find answers. Examples: ◦ Question: Will donor appreciation parties produce new funds even if no formal “ask” is made at the party? Answer: Yes. ◦ Question: Will new money come in as a result of SAWF paying to be included in a public charitable giving guide? Answer: No. 1. Emotion, not logic, motivates giving, and people yearn to make a difference – so use vivid story-telling to explain the mission and to convey the impact of the donation 2. Giving is social – so foster communities of giving, using social media and face-to-face groups 3. Premiums may deter giving – but people still love to win stuff, so consider using raffles and contests in fundraising Any nonprofit can review the social science research of SPI (or others) and adopt recommended techniques and practices Any nonprofit can analyze its own data and do its own experiments, like SAWF, Boston Ballet and Alley Theatre Reminder: Data is already available in your nonprofit’s records & databases Simple, clear questions work best (like SAWF) Ask one question at a time (i.e., keep a singular focus) Question example: How often should we communicate with different types of donors? Question example: Which fundraising events are worth the time, money and effort required to hold them? Question example: What rate of return does our nonprofit receive from the total time and effort we spend on applying for grants? Analyze nonprofit records to identify basic demographics: gender, age, race/ethnicity, income, marital status, geographic location Why do this? Some examples: ◦ Age: Is your donor base is aging out? If yes, devise strategies to recruit new, younger donors ◦ Marital status: Studies show that nonprofits often target couples for donations, losing out on the sizeable giving capacity of singles of all ages ◦ Diversity: As the U.S. population changes its composition, so should your donor base Today, donors increasingly want to give as part of a community They seek connectedness to a cause and/or a group of like-minded people This phenomenon is expressed in many new fundraising methods: ◦ Crowdfunding ◦ Interactive fundraising using teams and games ◦ Donor-directed and personal-event-based fundraising Crowdfunding is online social fundraising through networks, using a campaign There are multiple fundraisers: The nonprofit itself, individuals & teams Key element: Find potential new supporters when current individual supporters reach out to their individual social networks online 1. A project with a specific use for funds raised 2. A precise fundraising goal in dollars 3. A deadline for raising the funds (e.g., 30 days) 4. A platform (special website, e.g., Kickstarter) 5. A well-developed campaign to motivate supporters & donors 6. Supporters and donors (some already known to the nonprofit; others not yet known) 7. Continual engagement with stakeholders via social media, email, etc. – don’t ever let the campaign languish! 8. Pro tip: Before the campaign launches, have a match ready, to generate enthusiasm Average amount raised in nonprofit campaigns: $9,200.00 (down from $16,000) Average contribution: $66.00

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