About four years ago, a student at the University of California, Berkeley, conducted a crowdfunding campaign and gave the institution $86,000. The university's reaction? Anxiety. "Everyone wanted to know where the money came from. He was a good kid doing a good thing. But from the university's perspective, it set off alarm bells," particularly with how the gift could be distributed within Berkeley's guidelines, says Richard Swart, who became the institution's crowdfunding scholar-in-residence in 2015.
That student's campaign supported a science project, Swart says, but the university delayed jumping on the crowdfunding bandwagon. Administrators wrestled with legalities, tax liabilities, and how to construct a university-run platform that carefully picked organized, energized student groups to participate. Now the university employs a director of crowdfunding strategic initiatives, and in April 2015 it piloted a crowdfunding program (crowdfund.berkeley.edu) with five campus groups that raised $63,000.
To prevent students from "going rogue," as one development officer puts it, a small but growing number of institutions have launched centralized, full-service crowdfunding programs that lend know-how to students, faculty, and even alumni running their own campaigns. Crowdfunding was a novelty when institutions first adopted it five years ago, but now it's a fundraising phenomenon: Globally, fundraising receipts were expected to reach $34.3 billion in 2015, according to Crowdsourcing.org figures cited by Massolution, a research and advisory firm that handles crowdsourcing for private, public, and social enterprises. That's more than twice the $16.2 billion raised in 2014—which more than doubled the $6.1 billion in 2013.
Crowdfunding has become a way for development shops to serve constituents it could not before, a philanthropy education tool for students, a gateway for a steady stream of new donors, and a vehicle for discovering major gift prospects.
"If universities don't figure out how to do it, then student groups will find another way," says James Page, former associate director of alumni engagement at the University of Missouri–St. Louis. Now that UMSL has its own platform, "donors can make a gift to exactly where they want and see the impact. And they're in the university system, which gives our office a chance to reach out to them—and form a relationship."
If you can't beat them—help them out
For all of the hype generated by crowdfunding, success is no guarantee. About 90 percent of Indiegogo campaigns flop, according to a report on the news site The Verge, and Kickstarter's failure rate is 63 percent.
Given crowdfunding's high failure rate, advancement pros need to provide guidance and help starry-eyed students and faculty set realistic goals, says Dayna Carpenter, director of annual giving at the University of Maryland, Baltimore County.
"We hear a lot on the news and via social media about campaigns outside of higher ed that have been wildly successful," Carpenter says. "But it's a lot harder than it looks."
She's seen the consequences when campaigns aren't strategized: When alumni give to a crowdfunding campaign and it fails, they're less likely to give in the future and more likely to harbor doubts about the university. "It's worrisome when they don't hit their goals," Carpenter says. "Alumni or donors would not have confidence in your overall goals."
That's why several institutions have created systems and hired staff to support crowdfunding. Ryan Lawrence, assistant director of web fundraising at the University of Delaware, refers to his institution's crowdfunding service as "The Home Depot of fundraising. You can do it. We can help." Leaders of projects that university officials select for crowdfunding (udel.edu/crowdfunding) receive a success kit that includes tips for promoting their cause—use visuals and convey emotions, among other guidelines—and advice on how to make an ask.
UMSL's Office of Alumni Engagement manages the crowdfund.umsl.edu platform and provides training and coaching. The Arizona State University annual fund employs six students as campaign account managers. Their job: to assist student groups and faculty with everything from planning a campaign to setting up a financial account at the university.
The Haas School of Business at the University of California, Berkeley, gives students two options: A partner page on Indiegogo allows students to crowdfund "offshore" for their own private initiatives and startups (the Haas stamp of approval lends the project more legitimacy). If they crowdfund "onshore," they pay a smaller administrative fee and donors get a receipt to claim a tax deduction.
Digital natives, digital donors
Another reason crowdfunding should be integrated into development: 75 percent of active millennial donors prefer making online contributions, while millennials as a group are expected to inherit $140 trillion between now and 2052, according to Carpenter's research, "Using Crowdfunding to Engage Students in Philanthropy."
Alumni, recent graduates, and first-time donors are the most frequent crowdfunding contributors, according to Carpenter's research. Each of these groups skews toward millennials—digital natives who respond more to online campaigns than snail mail solicitations or stand-alone emails.
Carpenter isn't the only one who thinks crowdfunding can lure the next generation of longtime donors into the fold. Since 2013, Cornell University has crowdfunded 23 projects, raising more than $361,000 from 2,600 donors. No wonder Andrew Gossen, senior director for social media strategy in the Office of Alumni Affairs, is a devotee.
"I'm excited about crowdfunding because it gives people a compelling giving opportunity that aligns well with the digital world we're living in right now," says Gossen, who blogs at higheredcrowdfunding.tumblr.com. "It delivers a quality donor experience in a way that you can't take for granted in a higher ed context."
The New York institution has even hired a manager of crowdfunding to work in the annual giving office: Jennifer Kwiatkowski, associate director of marketing and participation for the Cornell Annual Fund. The move was a green light from Cornell's senior leaders to fold crowdfunding into larger giving efforts. "It's absolutely an indication that we're taking this more seriously," Kwiatkowski says.
While the number of institutions investing in crowdfunding is growing, those institutions are still a minority. Only half that have tried crowdfunding were satisfied, citing challenges with gift receipting, allocating staff time, setting up technology, and fear of fragmenting the donor base, according to a 2015 Ruffalo Noel Levitz white paper.
"Most universities are missing the point," says Berkeley's Swart, who works worldwide as a crowdfunding and alternative finance consultant. "You may have a donor who gives $20 or $40 to a project, and the university will say, ‘The cost of managing the relationship is more than what we're going to get.' And that's very shortsighted." Crowdfunding allows institutions to build a powerful digital network of supporters and contacts—think LinkedIn—one graduate or millennial at a time.
These donors may not have contributed in the first place if not for the campaigns, which allowed them to support a specific project, says Jas Johl, Berkeley's director of crowdfunding strategic initiatives.
Crowdfunding also aligns well with other institutional priorities. The University of Colorado Boulder runs crowdfunding out of the Office of Strategic Relations and not advancement. The platform is a "medium for content strategy that aligns with our campus's goals of reputation, student success, and revenue diversification," says Mia Fill, crowdfunding program coordinator. "We're continuing the conversation with CU-Boulder supporters by showing them the great things our students, faculty, and staff are doing that might not be promoted elsewhere."
Shad Hanselman, executive director of annual giving programs at Arizona State University, sees crowdfunding as a student engagement and philanthropy education tool. The campaign account managers who facilitate crowdfunding report to the new student engagement development coordinator.
"We're educating students by providing this service," Hanselman says. "The groups that come in to do crowdfunding, there's a need to fund what they're working on. By teaching them to do fundraising, they get an education in what philanthropy means for our institution. We're working to position ASU as an area for desired giving."
The major gift connection
Done right, crowdfunding can also attract big donors. The University of Mississippi conducted a $1 million campaign through its platform Ignite Ole Miss (ignite.olemiss.edu) for a faculty support position in honor of an outgoing chancellor.
"A lot of these projects have a major gift or a lead gift to give it life," says Suzanne Thigpen, assistant director of university development. "The rest comes in organically."
A memorial scholarship campaign to honor an Ole Miss business student who died in a sledding accident started with the owner of Papa John's. The student had interned at the pizza chain, and CEO John Schnatter gave $12,000 for the scholarship. The effort exceeded its $80,000 goal.
"Crowdfunding gives development officers and deans the opportunity to get in front of key donors. It can be a door opener at times. We didn't know the CEO of Papa John's until this campaign. He approached us," Thigpen says, adding that development officers also promote crowdfunding campaigns to donors in their portfolios.
At the University of Maryland, College Park, all gifts, including those from its crowdfunding platform Launch, are entered into a database where unit-based gift officers can review contributions made to their schools. "A few weeks ago, a development officer said she had a prospect who had become known to her as a result of crowdfunding. We see crowdfunding as creating a pipeline into more traditional forms of development," says Nora Pittmann, manager of new donor strategies in the annual giving department.
Pittmann also informs gift officers if donors in their portfolio made a gift on Launch (launch.umd.edu), so that contributors are thanked not just by the program raising money but by the gift officer as well.
One crowdfunding campaign started with a development officer. A donor contacted the gift officer about increasing the endowment she had established in her husband's memory, Pittmann recalls. UMD conducted a crowdfunding campaign, even producing a video to promote the cause, and raised the endowment to $50,000 by what would have been his 50th birthday. "She made a couple of significant gifts. [The campaign] was almost like a stewardship gift for her."
UMD isn't the only university to open its crowdfunding platform to alumni and friends—provided that the institution benefits. Alumni of UD's Kappa Alpha Psi fraternity chapter had $43,000 of the $50,000 minimum needed to endow a scholarship; crowdfunding on the university's platform pushed them over the top.
At UD, crowdfunding donors who contribute $1,000 are eligible, like all annual donors at that level, to join the Leadership Society. Privileges include invitations to special events and discounts on some campus purchases.
New donors, now what?
Sixty-six percent of people who give through ASU's crowdfunding platform PitchFunder (pitchfunder.asufoundation.org) are new to the university. More than 60 percent of UMD's crowdfunding donors are first-time contributors. How do universities cultivate these newfound donors?
ASU puts all new donors into its database for solicitation while UMD focuses only on alumni, starting with the projects it chooses to crowdfund.
"We choose projects that will have good appeal for alumni donors. Some projects bring in more alumni donors than others," Pittmann says, noting that 36 percent of crowdfunding donors are alumni. As examples, a project to digitize The Diamondback campus newspaper and a drive to buy a new van to transport marching band members' equipment drew support from alumni who participated in those activities as students, Pittmann says. The platform has improved its unique donor numbers and made inroads with lapsed donors.
"If somebody's first gift to the university is to crowdfunding, we exclude them from annual giving, direct mail, and the call center," she says. "It's about the message being consistent."
Crowdfunding donors don't see their contribution as a gift to the University of Maryland but as a gift to their niece or a project, Pittmann says. "If they then got a letter to support [the annual fund], it wouldn't make sense. Our sense is that we've burned that bridge with them."
Crowdfunding donors are only treated like annual giving donors if they've contributed elsewhere to the university. Crowdfunding donors are solicited again, but initially only for other crowdfunding campaigns in the same area. A donor to a medical research project, for instance, may be solicited for another medical research project before being put into the general pool.
At ASU, crowdfunding donors are added to the database for annual fund calls. During the discovery-style conversations, student callers thank donors for their gift and ask why they contributed to that project. Even if a gift is the result of a student asking his uncle to support a water project, for example, the student caller then informs the donor of other sustainability projects he could support.
"We're learning what they're interested in, and we can connect them to a larger program. It's a great discovery tool," says ASU's Hanselman.
Crowdfunding donors tend to support areas they've already given to, he says, rather than new ones. "It's not only a tool for fundraising—it's a tool for engagement, for being a service entity, for creating relationships that will have long-term impact," Hanselman says. "It's an investment in the future that has immediate returns. People give to things they're passionate about. These things exist at your institution. This is a front door to giving."
Proceed with caution
Even with crowdfunding spreading faster than you can say "please, give," some development offices are being cautious. The University of Calgary hopes to launch centralized crowdfunding before August 2017, but the institution needs to "look at how it will integrate with the current digital platform and how it will be managed," says Miranda Diakiw, who recently left the position of director of development, annual giving.
Handling new donors acquired via crowdfunding is also a concern. "How do you steward them?" she says. "How do you engage with them outside the particular project they are giving to?"
Competing fundraising efforts could also confuse donors, says John H. Taylor, who consults for nonprofits to enhance development and advancement operations. Upon receiving an annual fund call, a crowdfunding donor might say, "‘Wait-I already gave. And that's my annual gift.' But it doesn't count."
"There are still a lot of unanswered questions that really can only be answered by trial," says Adam Compton, assistant director of development at North Carolina State's College of Humanities and Social Sciences. He has plenty: "Is this just a transaction and not truly philanthropy? What does retention look like? Who manages these projects? What's the cost?"
Answers might not come quickly. "Realistically it will take five to 10 years for a series of best practices to emerge," says Cornell's Gossen. "But out there on the web, the number of people giving continues to rise, and it would almost be professional malpractice to ignore that."
8 Ways to Break the Crowdfunding Code
Crowdfunding's potential is huge, but so is the prospect for failure. Can institutions predict a campaign's performance? While crowdfunding is not yet an exact science, you can project its success. Here's how to help your student, faculty, and alumni fundraisers succeed:
- Vet the cause—and the donor base. Peer-to-peer fundraising succeeds when there is an existing community willing to support that specific cause. Avoid trying to build communities around preselected causes, says Brian Soward, founder and CEO of the crowdfunding platform USEED.
- Teach the basics. Most crowdfunding teams are novices—they need an education in fundraising. "We're teaching them how to set goals, how to craft their message, how to speak with their audience, and how to bring their teams together," says Shad Hanselman, executive director of annual giving programs at Arizona State University.
- Push the silent phase. Just like in traditional campaigns, crowdfunding requires a planning period in which showrunners secure pledges, among other activities, to ensure the effort is successful.
- Encourage reasonable goal-setting. The University of Colorado Boulder advises student groups to be realistic: Only about 20 percent of potential donors in their network will contribute. Campaigns with that target are more likely to succeed than those that need 80 percent of potential donors in their pool to come through, says Mia Fill, crowdfunding program coordinator.
- Supply a tool kit. The success kit Ryan Lawrence gives the University of Delaware's Crowdfunding Ambassadors offers specific advice on using video (be authentic and inspiring); email (include a link to your project); and social media (posts should have a call to action, using words like give, donate, support, and share).
- Provide ongoing support. At ASU, six students work as campaign account managers (CAMs). "When someone wants to do a campaign, a CAM will help them plan, launch, and set up an account with the university. A lot of the difficulty is knowing the right places to go," Hanselman says.
- Offer incentives. For each milestone a campaign reaches, UD offers additional support. Campaigns that reach 25 percent of their fundraising goal get archived on the university's crowdfunding site, Lawrence says. Hit 75 percent of goal, and the university will promote the campaign on its social media accounts.
- Include crowdfunding in your stewardship plans. Better yet, "integrate crowdfunding into your development information system and stewardship plans," advises Michael Greenberg of the crowdfunding platform ScaleFunder.