Opportunities and Challenges in Nonprofit Crowdfunding

GoFundMe. Kickstarter. Indiegogo. You’ve probably heard of one or all of these crowdfunding websites. Perhaps you’ve used one of them to contribute to a good cause, or even organized an online fundraiser yourself. It boils down to this: crowdfunding has become a huge industry, and it continues to grow. A recent article published by the National Council of Nonprofits takes a look at how nonprofits can use crowdfunding to further their cause—and where they need to be sure to take caution.

Crowdfunding efforts can take place both online and live. In either case, fundraisers present prospective donors with information about their cause and allow space for questions, suggestions, and other discussion. Online crowdfunding generally has a longer window than live crowdfunding, which usually happens in the span of a single event.

Since online crowdfunding is the relatively newer method of the two, there are a number of areas where nonprofits need to exercise some caution. Before implementing an online crowdfunding campaign, nonprofits should ask the following questions:

  • Does the platform I’ve chosen have any particular specifications or requirements when it comes to what causes they allow to crowdfund via their website?
  • What are the baseline processing fees of the various crowdfunding platforms? Are there any additional fees, such as fees associated with not reaching our crowdfunding goal?
  • What laws and regulations should a nonprofit be aware of in regards to fundraising online, particularly when it comes to interstate issues?

This last point is a particularly tricky one because, in many cases, laws and regulations have yet to catch up with the rapid development of online crowdfunding technology. The best advice in this area is for nonprofits to exercise an abundance of caution by being sure to meet charitable registration requirements in all states that legislate them, prior to crowdfunding online.

For more details, read the article in full at the National Council of Nonprofits.