Should Your Church Raise Money Through Crowdfunding Sites?

Brady Josephson spends a lot of time thinking about fundraising. A self-described “charity nerd” who teaches fundraising at North Park University in Chicago, he is managing director of NextAfter Institute, where he provides training to help organizations raise more money online.

ChurchLawAndTax.com talked to Josephson about how crowdfunding can work for churches.

What are some of the pros and cons of crowdfunding?

First off, let’s define crowdfunding. It’s really just raising money in smaller amounts from a variety of donors using an online tool. The biggest difference with crowdfunding is that it is often done on an online platform like GoFundMe.com, CrowdRise.com, or FundRazr.com. This style of fundraising often has a funding goal with a thermometer and a timeline or countdown. These tools often try to tap into the social networks with easy-to-share functionality.

One of the pros of this strategy is that churches don’t have to invest in the technology or worry about the functionality. This is increasingly important for online donations: giving donors a good online experience. These appeals are also pretty easy to set up and get started. The idea of having a tangible goal and timeline helps. So does making the appeal public, accessible, and shareable.

One of the cons: It’s still just a webpage; it’s up to you to market the campaign and communicate the value and impact of the project to get donations. There is often a false assumption that just by being on one of these sites your campaign will be seen by others and supported. It’s still up to you to promote the appeal.

Another con, but an overblown one, is the cost. Most crowdfunding sites charge 3 percent to 7 percent to process donations, which sounds expensive. But processing an online donation on your own site also has a cost. So you are paying a little bit more for all the technology and no hassle.

What could be more worrisome is the lack of data or information. Sometimes you won’t get any donor information. So you won’t know who to thank or how to follow up.

If you’re at a smaller church and want to get into online fundraising but don’t have a lot of time, trying a crowdfunding appeal can be a great approach. You test online giving without much time or risk and raise a few bucks along the way.

When does crowdfunding work best? What kinds of causes or appeals seem to work?

Like all fundraising, the closer the donor feels to the end impact or outcome the better. Being very specific with the problem and solution and how a $25 or $250 donation will help is very important.

Smaller amounts are also generally best. Your project may be $100,000, but that doesn't mean you should just put up that big number and pray for donations. And remember that the average online donation is around $70. So if you want to raise $50,000, you're looking at 715 or so donors. That's a pretty big number. Be careful with how audacious your goal is.

Can crowdfunding detract from other kinds of fundraising? Does it encourage people to give to projects that are a crisis or tug on heartstrings, but not ongoing needs?

There is some concern that crowdfunding donors are less likely to remain donors and give again. That could be partly because the charity doesn’t get their information so it can't follow up. Or it could be because the donor gets hooked on the tangible project—rather than the mission of the organization. The end and ultimate goal for organizations is repeatable or sustainable support.

If you reach your goal once, great, but you'll still have needs and projects. So, longer term, I think organizations need to be thinking not about one project but how they can build and grow support over time. And I have more concerns about crowdfunding's ability to do that over and over again.

I do think all fundraising, for the most part, needs to pull on the heartstrings—even for ongoing support. But when I am advising a small organization or church, I always start with monthly giving as the focus before something like crowdfunding.

Are there risks to using a crowdfunding site?

Yes, but I think it’s overblown. Most large crowdfunding sites have much better security than most nonprofits. You’d be shocked to know how insecure many nonprofit sites are. Using a small or lesser-known crowdfunding site could bring up some worries, but the big players are all quite good and secure.

How should a church decide whether or not to try crowdfunding?

If you don’t do any online fundraising right now and want to see if it can work, then it can be a good fit. If you have a person or group in your church or organization that wants to fundraise for a project, then crowdfunding is perfect for this need. And if you have no time, money, or expertise in online fundraising, then crowdfunding sites can be a good and easy way for you to collect donations.

I love crowdfunding because it democratizes giving and fundraising. So it should be embraced and not feared. But the big win in the long run for nonprofit organizations is ongoing support and a deeper relationship with your organization.

For a better understanding of the potential legal and tax issues connected to crowdfunding, see “The Pros and Cons of Crowdfunding”