What is crowdfunding? Where did it come from? Where is it going?
To give you some perspective, crowdfunding originates in the relatively recent phenomenon of crowdsourcing, wherein a collective body gets together and works towards a common goal using predominantly online methods. In less than ten years, we’ve seen this digital method of raising funds transform from a $1.5 million US marketplace in 2006, to around $5 billion today. Such tremendous growth warrants a closer examination to see where these funds are coming from, and why individuals are getting behind it.
Here at bv02, we’re fortunate to have an example of crowdfunding at work on our proverbial doorstep, having collaborated with the Advancement department of Carleton University on the Futurefunder initiative in 2012. Together we built a custom in-house platform that would allow the university to receive micro-donations online. More than two years after its launch, the platform now offers an opportunity to understand why this form of fundraising has become so popular and where the trend is heading in the university sector.
In just over 1.5 years, online giving has tripled, with new donors becoming a substantial driver of giving activity.
How it works:
The fundamental idea behind Futurefunder is that it allows members of the university community to put forward an idea that might gain philanthropic support. It is a space where community members can become fundraisers for projects that matter to them.
The process and criteria are very straightforward. Project owners get started via a simple online form. This form is reviewed by the Advancement department to ensure that the project meets certain charitable standards, and that it has the support of university leadership.
“It’s all about the power of individual ideas and uniting a crowd behind them. I think academics have this limitless capacity for amazing ideas, innovation, discovery – but what they lack is a crowd of supporters and engaged citizens to fund and promote their work. Crowdfunding makes that a possibility. We just need a few brave and creative souls to try it.”
– Ryan Davies, Carleton University, 2014
While there’s currently no limit to the size of scope of a project, the university does encourage smaller, less ambitious funding goals. Crowdfunding is based on the idea of requesting small gifts from a larger number of donors. The lower the total, the easier it is to reach it on those small donations. In terms of project timeframes, the university also recommends shorter horizons. Ryan explains, “urgency is an important driver here. We ask our project owners to think of a go-no-go kind of quality; i.e. if I don’t raise the funds by a certain day then I can’t do it. I think that’s really compelling, and really helps sell the project.”
We asked, what happens if the project isn’t fully funded? In fact, Carleton University goes a long way to supporting projects if they don’t reach their target: they may match funds from other donors; the university leadership might decide they can match some of the investment; and then sometimes if it’s halfway there, it might be enough to be seed-funding for a project to get started.
This is quite different from platforms like Kickstarter, where if the goal is not met no funds are applied to the project. In the situation of Futurefunder, while it may be that a project group can’t meet their goal, there may still be a future for the project. Not meeting their total isn’t necessarily a sign of failure.
If they aren’t able to get started, the Advancement team typically rolls the funds up to something bigger at the departmental/faculty level. At all stages, their intent is to make sure that donors are clear on the process, that there’s transparency — they know where their funds are going and that they are supporting something that matches their interests.
This is one of the critical differences between Futurefunder and other crowdfunding platforms. As an in-house platform, it is owned entirely by the university, and the university makes the decisions about which projects it can support. As Ryan notes, with Futurefunder, there is no commission. “Other platforms are created with that in mind — they are ventures for companies. Ours is inherently charitable. All money donated goes to support the University because we own the platform. This is part of our business.”
When asked what drove the change from traditional fundraising, Ryan noted that, fittingly, it was a request from donors. It was driven by the community itself. What the university recognized early on, however, is that it offered the benefit of potentially opening them up to new markets. “We in the fundraising team can reach alumni, students, parents. But there is a whole other, infinitely sized group of donors connected to students, researchers, colleagues that have no association with the university.”
These new markets offered hope to university leadership that crowdfunding could work. While having obvious benefits like being inherently democratic and a lot more open, crowdfunding is still a new method for fundraisers, and there was uncertainty that it would make sense for them. The benefit that they didn’t anticipate, is that Futurefunder has contributed to a culture of philanthropy on campus. “It succeeds because faculty members and students and community members are engaged, are getting behind the initiatives, acting as ambassadors, spreading the word, are participants in its success. Building our platform has encouraged that, has opened people’s eyes to that fact that fundraising matters and makes a difference.” Crowdfunding is touching people on a deeper level, and changing attitudes about fundraising and what it means to be part of a community.
In just over 1.5 years, online giving has tripled, with new donors becoming a substantial driver of giving activity. This is truly impressive. As Ryan notes, this suggests that there is something magnetic about Futurefunder projects — by leading with ideas, ideas that come from the community itself, they are able to engage a much broader audience/network.
What’s next for Future-funder and crowdfunding for universities?
With results like this, the Advancement team is very optimistic about the potential for crowdfunding to support the university’s projects going forward. The energy and the passion for Futurefunder has been so obvious and strong that they want to make it the first stop for donors. Increasingly, this platform will be the front door to giving at Carleton.
Ryan predicts that we’ll see a lot more experimentation with these platforms in the university market. Other universities will adopt their own in-house platforms, while some will see crowdfunding-as-a-service be the option that works for them. He also foresees a real emergence of university community members becoming project owners, and creative pitches as they take up their cause and run with it.
Lots of exciting stuff happening in the practice of crowdfunding.
Interested in hearing more? Well, we had the opportunity to have Ryan Davies, Director of Advancement Communications for Carleton University join us on an episode of The Brief to discuss his take on the success of the Futurefunder project.
Links for your enjoyment: