Much Ado: Does the Rise of Crowdfunding Actually Matter for Most Nonprofits?

“The first billion took five years, the second took nine months and the third took seven months.” That’s not the kind of thing we hear often in nonprofit fundraising circles. While it seems more suited to the gilded heights of venture capital, it’s actually a statement from a GoFundMe spokesperson following the release of the crowdfunding site’s 2016 giving report

Crowdsourced cash is a techie-driven attempt to disrupt philanthropy. And while the fundraising numbers are still modest relative to overall charitable giving, online crowdfunding has been accelerating. Less clear is what this means for most nonprofits. 

According to GoFundMe’s report, the company has raised that $3 billion since 2010, from a total of over 25 million individual donors. GoFundMe puts itself up there with digital economy titans like Uber, citing a 2016 Pew study reporting that while only 15 percent of Americans have used a ride-sharing app, 22 percent have donated to an online fundraising campaign.

In our own coverage of the Pew study, we discussed how crowdfunded giving differs a lot from your usual philanthropic fare — which is one reason why this phenomenon doesn't impact your average nonprofit as much as you might think (or hope) it would. For one thing, crowdfunding isn’t so well suited to supporting ongoing work or planned initiatives by nonprofits. Three billion dollars may sound impressive, but much of it went to private individuals in need, or to campaigns created around natural disasters or tragic events like the shootings in Orlando. The majority of crowdfunded dollars overall go to help individuals, with most of that money raised from donors who know those individuals. 

GoFundMe’s list of top 2016 campaigns contains few surprises. The biggest money was raised for the Pulse nightclub shooting, the Louisiana floods, and Standing Rock. As a category, natural disasters figure prominently on the list of top campaigns.  

Clearly, crowdfunding is a huge asset for nonprofits whose work tends to be responsive to news events. And activist organizations can do well here, as the Standing Rock example shows. Online platforms like GoFundMe allow organizations to mobilize new money quickly, bypassing slow-moving or conservative foundations. One thing crowdfunding can do best, as the GoFundMe report makes clear, is open up paths to funding for people and causes with powerful stories. While luck and the media determine who benefits from a campaign gone viral, an emotional appeal tends to be a key ingredient of success. 

Crowdfunding can also be useful as a barometer. Major gifts aside, where do average people contribute their charitable dollars? Which stories and causes grab their attention, and how does that break down demographically? For instance, if the Pew study serves as a guide, crowdfunding tilts female and urban. But younger men are more likely to engage in “investment crowdfunding” to support a new technology or invention. 

As crowdfunding steadily gains steam in nonprofit and for-profit circles alike, we should remember that platforms like GoFundMe, Kickstarter, Indiegogo, CrowdRise and the rest are for-profit companies, too. They generally take a cut of every donation. In a way, they’re also taking a cut from the public’s capacity for charity, while simultaneously trying to make themselves synonymous with charity. GoFundMe’s report asserts that the company’s own name can and should “become shorthand for help.” 

That’s all well and good if crowdfunding actually contributes to an increase in total charitable donations. Giving Tuesday, for example, melds online culture with charity to create a new post-Thanksgiving fundraising opportunity. Who can argue with that? Still, for many nonprofits — those engaged in the pick-and-shovel work of making change year in and year out  the rise of crowdfunding has yet to become a trend that really matters much.