Crowdfunding Fuels Philanthropy

Crowdfunding is a rapidly expanding Internet tool designed to allow large numbers of people to invest or contribute money in support of new businesses, people in need, interesting ideas or important causes. Its recent growth is impressive.

In 2012, crowdfunding supported more than 1 million global campaigns. The amount raised was $2.7 billion, an increase of 81 percent from the year before. In 2013, it is expected that the amount contributed to global crowdfunding campaigns will almost double to more than $5 billion.

Of these billions, hundreds of millions of dollars are being raised specifically for philanthropic purposes. Increasingly, people are associating crowdfunding with an easy and effective way to contribute money for a wide variety of good philanthropic causes.

While traditional fundraising typically focuses on large donations from a few donors, crowdfunding turns that model on its head by generating small donations from many donors. This vastly expands opportunities for donors to connect with causes that matter to them and for nonprofits to find new donors.

The use of Internet technology democratizes philanthropy as never before, making it easier for everyone to participate. Campaigns can go viral and become available to far more potential donors than ever before.

Crowdfunding can create a new community of previously unconnected people with a shared passion for the same cause. As a platform for cause-related marketing, it is an attractive option for business donors as well as individuals. It is an especially appealing venue for younger, more tech-savvy donors like millennials.

Take a look at these crowdfunding sites that encourage at least some of their donations to go to philanthropic purposes:

Crowdrise.com offers an easy and fun platform for donors to seek out and contribute to causes they are passionate about and nonprofits to raise money online. Actor Ed Norton was a co-founder.

Indiegogo.com successfully raises money for creative initiatives in the arts, entrepreneurial efforts and social causes, organized by both nonprofits and others. To be tax-deductible, donations must be made to 501(c)(3) organizations.

Omaze.com offers once-in-a-lifetime experiences, usually with celebrities, in return for donations to charitable organizations. Rather than going to the highest bidder like in most charity auctions, the winner of the experience is chosen randomly from all donors.

Kiva.org is a leading microfinance lender. People can donate as little as $25, which is then lent to borrowers in developing countries who are trying to lift themselves out of poverty. More than a million people have made contributions toward nearly $500 million in loans in 72 countries. The loans have a remarkable 99 percent repayment rate.

DonorsChoose.org raises money for public school teachers who post classroom project needs ranging from pencils to microscopes. Donors can search the site for projects that appeal to them. More than 150,000 teachers from 51,000 public schools have raised nearly $200 million to help more than 9 million students.

StartSomeGood.com supports individuals, for-profits and nonprofits, as long as the project advances a social good. The site has a unique “tipping point” model of crowdfunding, where the money will be given to the recipient only if a certain percentage of a goal has been raised. This assures a level of success before money is distributed.

GoFundMe.com combines crowdfunding with social media contacts to raise money for people with medical issues, education costs and other personal needs. It has raised $120 million to date. A current example is its effort to help people seeking funds to help recover from Colorado’s recent floods.

Crowdfunding has emerged as an exciting and effective tool for both donors and nonprofits. By leveling the playing field, it allows many small donors to meaningfully participate in important causes. Plus, it connects donors and nonprofits in creative, educational and easy-to-access ways. Crowdfunding can easily play a role in many personal or business philanthropic strategies.

This post originally appeared in the Denver Post on October 13, 2013.  It is re-posted here by the author.