Have you ever donated a dollar or two to support the cost of someone’s medical bills through a site like GoFundMe? What about a couple of bucks towards the development of “the next big thing” on Kickstarter? If you answered yes to one or both of those, then you have contributed to a crowdfunding campaign.
Crowdfunding is a popular method of raising money that favors smaller, individual contributions over one or two big investors. The goal of crowdfunding campaigns is just as much about exposure (for a cause or a product) as it is about acquiring capital. How large a network you can get your cause to reach is often the best indicator of your success.
At SimpleTexting, we know a good handful of things about what it takes to get your message in front of a crowd, so we’ve broken down some of the most important things about crowdfunding, and developed a list of best practices for any type of organization (not or for-profit) looking to give it a try.
It’s estimated that GoFundMe, one of the most popular crowdfunding sites, receives over $140 million in donations per month. The site has been in operation since 2010. With around nine years of exposure, you would expect engagement with the platform to plateau, but the trend of crowdfunding as a preferred method of investment has in fact led to a more than steady growth. According to last year’s annual report, 61% of people who gave in 2018 were first-time donors.
So, what is it that makes crowdfunding so popular, enough that it’s projected to raise $300 billion USD by 2025?
Like a lot of seemingly mystical concepts, this question is best answered with science.
Howard Sherman, a crowdfunding expert, has defined the “secret psychology sauce” of crowdfunding to be this: “treat any crowdfunding decision as a business decision and act accordingly.“
For nonprofits, this tends to manifest itself in the story you’re telling— the emotional appeal. Unlike crowdfunding for business, where the user is investing in exchange for a reward, nonprofits are offering up emotional currency in exchange for cash.
It’s all about the user experience. Your “ask” must be specific enough that contributing parties feel a sense of accomplishment. For example, if you’re looking to improve educational conditions in sub-Saharan Africa, you wouldn’t want to ask people to donate to help children’s education in Malawi, and follow it up with a bulleted list of problems the region faces. You would be far more successful if you phrase it as “help us raise X amount of dollars to build, staff, and equip a school in Malawi. Then tell a story about one student whom this school would benefit (weaving as many of those relevant bullet points into his/her narrative).
On the opposite end of the spectrum, business crowdfunding is all about appealing to the logic of your investors. How can you make them feel comfortable getting in on the ground level of your idea? Address the risks head on and offer them ample background on why you know your idea will work. Additionally, it’s important to provide valuable return worthy of their investment level.
The rhetorical approach you take in constructing your narrative will also depend on the particular type of crowdfunding you’re participating in.
1. Reward: Most commonly found on platforms like Kickstarter, reward crowdfunding offers different levels of reward based on tiers of investment. You’re not fully investing for the sake of stock or company equity, but you’re still getting something in exchange for your contribution.
2. Donation: This method is most common for nonprofits or one-off causes (like funeral costs or donating to help a family replace items lost in a fire). The rationale here is entirely the same as donating to any nonprofit directly, however, the added benefit is the public declaration of support you’re able to make by contributing to a social site.
3. Equity: When thinking equity crowdfunding, think of the show Shark Tank. By contributing to an equity crowdfunding campaign, your contribution makes you a part owner of the company. You’ll be financially compensated based on the success of your investment. The incentive here is obviously the more capital you pour into the product’s success, the more you stand to gain.
Now, let’s take these psychological nuggets of wisdom and put them in to practice with some best practices.
Hopefully we’ve made one thing clear: sharing is key when it comes to crowdfunding success. The more eyes on your story, the better chance you have of meeting (or exceeding) your fundraising goal.
Take a second to read about the benefits of texting, and you’ll see that it’s one of the best spaces to share information and actually get a response. With that in mind, consider running a text-to-donate campaign as a way to engage with your audience as well as raise some capital.
If you want to give text crowdfunding a try, get 14 days completely free with SimpleTexting! All reward, no risk.