Crowdfunding—it’s a magical word. It seems to promise so many donations that you’ll end up crowd-surfing on a wave of money and good-will (or maybe that’s just me). But it’s a word that most charities are now aware of—whether they’ve dipped their toes in already, or are wondering if they should see what all the fuss is about.

Whatever camp you’re in, given the current climate—NCVO’s Almanac found that in 2012/2013 voluntary income to the sector had fallen by £185m—all charities should be considering ways to diversify their income. This is why earlier this year we hosted a seminar for charity trustees on the two leading sources of alternative finance: social investment and crowdfunding.

As we’ve already produced a fair amount on social investment, we thought we’d highlight a few of the insights the event offered on crowdfunding.

Charities are well-placed to harness crowdfunding. One of our speakers explained that those who give via crowdfunding methods ‘want to feel that they are part of a movement’. Successful crowdfunding campaigns, whether for-profit or not, depend on creating a compelling story that will resonate with supporters. Charities are already very good at this.

Crowdfunding can engage new supporters. Nesta’s research has shown that only a quarter of people making pledges on crowdfunding platforms say that they would have otherwise used that money for traditional charitable giving. It can tap into an unreached market, and often create new advocates for a cause.

Crowdfunding is relatively low-risk and low-cost, but it requires real commitment to succeed. Nesta’s Peter Baeck told the delegates that 55% of crowd-funding attempts fail: ‘These are often the ones who decide to crowdfund on Monday, and launch their campaign on Wednesday’. Whatever your campaign, plan, plan, plan.

Crowdfunding is not a silver bullet. As with social investment, charities should view crowdfunding as a potential part of a healthy funding mix, not as a quick-fix answer to everything.

Crowdfunding may not be right for every organisation or cause. There is a need for charities to innovate, but this must be approached strategically, with positive outcomes for beneficiaries in mind. Crowdfunding is the means to an ends, not the ends itself—so charities should think hard about whether this endeavour has the potential to create a real impact for their beneficiaries, or whether they are simply seeking a PR high.

It’s worth considering whether crowdfunding may give your charity’s income a bit of a boost, particularly if you’re looking to move your eggs into a number of baskets. But always remember: beneficiaries come first.

For more information and practical tips on crowdfunding and social investment, read our full event report

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