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Crowdfunding a New Source for Nonprofit Fundraising

Like any fundraising effort, crowdfunding requires preparation, marketing and working with donors.

By University Alliance
Crowdfunding a New Source for Nonprofit Fundraising

Café Momentum is a different type of Dallas eatery. While the restaurant employs experienced waiters and cooks, it also serves as a culinary training center for juveniles coming out of detention centers. 

Rather than rely on traditional fundraising campaigns, however, the nonprofit Café Momentum is trying a newer approach: harnessing the power of crowdfunding, Café Momentum plans to rely on donations over the Internet from a large number of people.

Relatively new, crowdfunding worldwide increased from $1.47 billion in 2011 to $2.66 billion in 2012 and was expected to hit $5.1 billion in 2013, according to an April 8, 2013 article by Reuters. 

Half the $2.66 billion generated by crowdfunding in 2012 went to charitable organizations or projects without financial rewards for the donors, according to a September 2014 article by Nonprofit Quarterly. 

While crowdfunding holds potential, like any fundraising effort it requires some preparation. Prospective fundraisers need to start ahead of time to secure commitments, work with existing donors and develop a marketing plan – necessary steps for all fundraising projects. Letting donors know money will go to specific projects helps create interest and donor confidence. 

Also, some of the many crowdfunding sites have an all-or-nothing policy. If a nonprofit fails to generate enough donations to meet the minimum goal established for the campaign, it gets nothing. 

For nonprofits, however, crowdfunding can pay off. The Communities Foundation of Texas raised $26.3 million during the annual North Texas Giving Day in 2014, compared to the $4.2 million in donations in the Giving Day's 2009 debut, and $1 million more than the 2013 effort. In 2014, 26% of donations came from people giving for the first time.

The Communities Foundation of Texas managed to match the generosity of Internet users and the ease with which one can donate online. Throughout the 18-hour event in 2014, 98,000 donors across the country gave online to 1,580 certified nonprofits. Since its beginning in 2009, North Texas Giving Day has raised $86 million in donations, the Communities Foundation of Texas said in a news release.

Café Momentum aims to have similar results in its own crowdfunding efforts with fundraising drives like its "Get the Doors Open" campaign. Café Momentum launched a crowdfunding-based capital drive in February 2013. 

By promising unique rewards to sponsors, including public recognition and even input into the restaurant's design, Café Momentum aims to use the Internet to spur investment into its brand in a way not otherwise possible. 

Fundraising packages are priced at specific amounts and represent concrete additions to the restaurant. 

For example, a dining room table package costs $2,000 while office and security supplies were priced at $6,500. More ambitiously, a $27,000 wine package provides donors the opportunity to help select the wine and be named as a sommelier on the wine list. 

The strategy worked. Though the nonprofit started with the modest fundraising goal of $50,000, donations rose to more than $140,000 by August and in January 2015, the restaurant opened for dinner three nights a week.

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I am taking Principles of Leading Transformational Nonprofits and have enjoyed Dr. Ricke-Kiely's interactive online teaching style. Our virtual classes have been absolutely amazing. The classroom included tech support as well as classmates from other parts of the country. Dr. Ricke-Kiely's knowledge, experience and subject matter expertise were outstanding. Her ability to reference the other recorded lectures and bring them into our virtual lectures made things really come together. This course is a must for anyone in nonprofit leadership.

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Category: Nonprofit Leadership