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Is Crowdfunding for Social Change More Than Hype?

CrowdfundingCrowdfunding is quickly becoming the new shiny object in the world of social change. From Giving Days, to new giving platforms, to lots of articles and studies (here and here to start), it seems that crowdfunding is everywhere lately.

I’m all for innovations in the funding of social change, but I’m not convinced that crowdfunding is really creating anything fundamentally new.

Under “crowdfunding” I include efforts like Kickstarter where a creative effort (a film, art exhibit, library) can garner small investments from a large number of people. And I’m also including Giving Days, at the city and national level, where nonprofits try to raise as much money as possible in a 24-hour online “event”. What these efforts all have in common is they raise money, from a large group of people, over a short period of time.

I earned my fundraising chops working public television pledge drives, one of the earliest “crowdfunding” efforts. The technology was different (TV screens and telephones, instead of CRM systems and social media), but I’m not sure much else is.

So I would like to see us separate what is potentially exciting about crowdfunding from what is just hype. To help in that effort, I offer some questions:

How much is truly new money?
It’s unclear to me how much new money crowdfunding brings to social change organizations. For example, nonprofits participating in Giving Days encourage their annual donors to give on that specific day so that Giving Day dollars are higher. But that’s not new money. True innovation in social change funding comes from efforts to grow the 2% pie - giving as a share of America’s Gross Domestic Product has stayed at 2% for the last 40+ years. I’m not convinced that crowdfunding uncovers money that would not have otherwise ended up somewhere in the nonprofit sector.

How many new donors are being retained? 
The point of crowdfunding is that it’s a one time deal. There is a message of urgency that encourages donors to give NOW. So the numbers on a specific Giving Day or with a crowdfunding campaign may be good, but is the funding sustainable? Are nonprofits or social change organizations actually growing their donor base? Are they able to go back to these investors later and encourage them to give again? And if the funding isn’t sustainable, is it really worth the effort it took to get it?

Is crowdfunding reinforcing the “Overhead Myth”?
The destructive idea that donors shouldn’t support nonprofit “overhead“, or administrative costs, is slowly dying, but crowdfunding might just be bringing it back to life. Nonprofit crowdfunding darling charity:water has been taken to task for reinforcing the idea that 100% of the dollars they raise go “directly to the field”. And crowdfunding projects are often specific and “sexy,” which means that the money is not being raised for boring things like the staffing, technology, and infrastructure that most organizations desperately need. Are we perpetuating the overhead myth by encouraging donors to give to specific projects, instead of to overall issues, organizations or teams?

What’s the return on investment?
A lot of time and effort can go into crowdfunding campaigns. If the benefits are shortlived, donors aren’t retained, and the majority of the funding is not new dollars, while the costs (staff and board time, technology investments) are high, then what is the true return on investment? I’m not arguing that it can’t be positive, but I would like to see more critical analysis about it, both at the aggregate and the individual organization levels.

I hate to be a Debbie Downer, but I’d like us to dig a bit deeper to understand what the real effects of crowdfunding are so far and what it’s true promise is. If there is already research out there that can answer some of these questions, please let me know in the comments below.

Photo Credit: SeedingFactory.com

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10 Great Social Innovation Reads: March 2012

March, perhaps because it included SXSW Interactive, seemed to be largely about the use of new media to tell social change stories. There are an increasing number of ways and examples of how those working to solve social problems can tell their stories and get people motivated to act, from video, to Pinterest, to infographics, to data visualizations and much more.

Below are my ten picks of the best reads in social innovation in March, but as always, please add what I missed in the comments. And if you want to see other things that caught my eye, follow me on Twitter, Facebook, LinkedIn or Pinterest.

  1. By necessity, nonprofits and social entrepreneurs are turning to new mediums to tell their story. The Chronicle of Philanthropy has created a showcase of nonprofit infographics and visualizations, and the MediaShift blog profiles the various ways educators are using Pinterest for curation, and finally while at SXSW Interactive, The Chronicle of Philanthropy got 25 nonprofit leaders to film their elevator speeches–it’s fascinating to see the various ways people tell their story quickly.

  2. Speaking of video storytelling, there was much debate about the Kony 2012 video produced by nonprofit organization Invisible Children. But I think Paul Shoemaker from Seattle SVP had the most reasoned and interesting take on it all when he argued that nonprofits should not be evaluated based on “one-size fits all” metrics.

  3. A new campaign aimed at solving staggering youth unemployment combines technology, crowdfunding and social entrepreneurship. It will be interesting to watch.

  4. From the Atlantic, the results of a new study that demonstrates that because of technology and the social media environment how Millennials think and process is changing dramatically, so how we educate future generations must change dramatically as well.

  5. Amy Sample Ward gives a great recap of the social good focused sessions at SXSW Interactive.

  6. Writing in the New York Times, David Carr, examines “Hashtag Activism,” and whether someone clicking a “Like” button can really change the world.

  7. As the arts continue to struggle to find funding amid shrinking audiences and competing charitable priorities, crowd-funding may be the answer.

  8. Beth Kanter hosted a great group of guest bloggers from the GeoFunders National Conference on her blog in March, my favorite of which was Adene Sack’s post describing the 3 myths about scaling nonprofits.

  9. Writing on the Harvard Business Review blog Navi Radjou, Jaideep Prabhu, Simone Ahuja argue that Millennials take a do-it-yourself approach to solving large social problems, “they rely on a frugal and flexible mindset…and use the tools they have on hand to create a simple but effective solution to a highly complex problem. They are the contemporary MacGyvers.”

  10. Rich Tafel takes social entrepreneurs to task for “failing to recognize the complex nature of the problems we face [and] engaging in linear, simplistic solutions, when lasting change requires collaborative efforts.”

Photo Credit: kadorin

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