What is crowdfunding?

Before we dive in, it’s important to understand exactly what the crowdfunding definition is and what online fundraising involves. So, how does crowdfunding work? 

Crowdfunding uses the power of social networking and the internet to spread the message about the causes you care about. Whether you’re raising money for a personal emergency, a memorial, IVF, or even just to support your favorite charity, crowdfunding is a simple way to find some financial relief. 

Here are the six main questions to consider when deciding if crowdfunding is right for you.

1. How soon do you need donations?

If you find yourself in any kind of financial emergency, crowdfunding is an obvious choice. Crowdfunding is one of the quickest ways to get the money you need, so it’s the perfect choice for an emergency or a time-sensitive situation. Donations are processed in a timely manner so you receive your funds within a matter of days.

2. How much money do you need to raise?

If you need to raise anywhere from a few hundred to a few thousand dollars, creating an online fundraiser is the best way to reach your goal quickly. Many crowdfunding sites will allow you to surpass the goal you set, so there’s no limit on the amount you can raise. You’ll also find that many platforms will allow you to keep whatever you raise—even when you do not meet your goal amount.

3. Is fundraising really free?

Many crowdfunding sites advertise free fundraising, but it’s important to be aware of any possible platform, payment processing, or other fees that might exist on the site you choose. You’ll want to research which crowdfunding site has the lowest fees so you can make your fundraiser truly count. These are the most common crowdfunding fees:

• Payment processing fees: These are standard fees that any website dealing with money needs to charge to process payments. Standard payment processing fees are around 2.9% + $0.30 per donation.
• Platform fees: A platform fee can range from 1%-5%. Crowdfunding sites charge this fee to help cover business expenses, but there are some sites that charge a 0% platform fee, which helps you keep more of your donations. 
• Sign-up fee: Some sites charge a one-time sign-up fee. Since there are countless free options, be sure to avoid sites that require you to pay a fee to use their service. 

4. Who will be supporting your fundraiser?

One of the many benefits of crowdfunding is how easy it can be to gather support online. Spreading the word through social media with your friends and family is the best way to ensure you’re receiving as many donations as possible. Once your community is aware of your campaign, they can then share it within their own network to help you gain more support. 

There are far more advantages than disadvantages of crowdfunding, and that includes being given the tools to easily share your fundraiser on social media and other outlets to reach more supporters. 

5. What if I don’t use social media?

While social media is the best way to reach people you know and even new supporters, it’s not the only way to get the word out about your fundraiser. Even if you’re not on social media, you can reach supporters through email or by, printing out flyers to post around your local community. 

Phone calls are another great way to ask for donations, and they add a personal touch. If someone you know and trust has social media, asking them to share your fundraiser with their network is also another method to bring more attention to your cause. If you go with this option, be sure to ask them to include how they know you and why your fundraiser is so important to them. 

6. Is crowdfunding safe?

Online fundraising platforms are a great way to reach people outside of your immediate network, including strangers. With this in mind, it’s normal to wonder if crowdfunding is safe for both you and your potential supporters.

You may be wary of adding your personal details anywhere online, like your bank account and Social Security number, but most crowdfunding sites are protected with advanced security technology to ensure both you and your donors are protected from any potential fraudulent behavior.  

Start crowdfunding today

Weighing the pros and cons of fundraising as you go through these questions is a great way to ensure your fundraiser gets started on the right foot. Even if you are facing an emergency, it’s important to feel you’ve made the best choice when you’re fundraising for a cause you care about. Remember to consider all your options when choosing a crowdfunding platform and go with the one that rewards you the most for your time and effort.

Use these crowdfunding tips to find success

1. Make it attention-grabbing

If you’re wondering how to have a successful fundraiser, start by focusing on what will show up on social media: the title and the main image. 

The title should entice people to click on your fundraiser. Try to make it intriguing and relevant for the reader by including the actual cause in the title. For example, titles like, “Bring Joy to Kids in the Hospital” or, “Helping Our Hero Get Back on His Feet” work perfectly. 

Choose a main image that is clear and related to your cause. Since people are bombarded with thousands of images a day, it’s important to make your post stand out. If you can, include photos with the people, animals, or places the fundraiser is for.  

2. Write a compelling story

The story is arguably the most important part when it comes to successful fundraising. It’s what will ultimately lead someone to decide whether or not they will donate. Write the story with both strangers and friends in mind. This way, if someone you don’t know stumbles across your fundraiser, they will have enough information to encourage them to donate. 

Here’s what to include for a great story:

• The hook: To hook your audience, focus on writing a great first line. It should create a reason for the reader to keep reading. 
• Context: Let people know the basics of your story—the who, what, where, when, and why of the fundraiser.  
• The current state: Bring the audience into your moment. If this is a personal fundraiser, this would mean how you feel about your circumstances. If this is a fundraiser for an organization, focus on why it means so much for this organization to receive donations. 
• Hope for the future: What do you hope to accomplish with the funds you raise? How will donors’ support positively impact the future? If you can, frame your story in a positive light, focusing on a hopeful future and by showing donors how they can be a part of making that dream a reality. 
• Emotion: Connect with readers by engaging with their emotions. Facts tell the story, but emotions move the reader to act. The more you can relay the emotion that lies behind your cause or circumstances, the more likely supporters are to donate.  
• Formatting: Most crowdfunding platforms allow you to include bolded, underlined, and italicized text. Emphasize the most important words or points to help your readers skim your story and understand what matters most. 

3. Gain trust 

Since crowdfunding is a relatively new concept, potential supporters might be asking, is crowdfunding safe? It’s normal for people to have questions about online fundraising, making it even more important for you to put their minds at ease. 

Potential donors might be wondering how they can be sure that the money will go to the right place or person, or how you’re related to the person or cause you’re raising money for. 

With this in mind, it’s important to include as many details as possible in your story, and to consistently update donors on where the funds are going and how they are being used. Supporters love to see how their contribution is making an impact.  

4. Create a buzz

There are three fundraising fundamentals to keep in mind when creating buzz around your cause.

Grab their attention

One of the top online fundraising tips includes writing a hook that you can share on social media. Since your audience on social media might not have much time, consider what you could share in your post that would really grab someone’s attention. Can you make your post inspiring? Intriguing? A cliffhanger? Here are a few examples:

• I’m changing the world. Click here to learn what I’ve been up to!
• We’ve been living in the presence of a silent superhero! Read her story here.

Ask for support

Loop your inner circle of friends and family into your efforts. Before or right after you go live, text or call five close supporters. Ask them if they’d be willing to share your campaign, or even donate. This will arm you with the confidence to share the fundraiser with your wider circle.

Start sharing

Finally, share your fundraiser on multiple platforms so that you don’t miss anyone. Every one of your contacts has a unique style of communication. Share by email, phone call, text message, Facebook—and make sure to tag specific people on Instagram, Twitter, Snapchat, or anywhere else you communicate with people you know. Most crowdfunding platforms have easy sharing tools built into their fundraiser dashboards. Ultimately, it’s important to ask people you know to share your fundraiser—even if they can’t donate. 

Keep the momentum going

Keep donors and supporters excited about your cause by posting updates to your fundraiser every week or so. Don’t forget to share them! Consider the following ideas for updates:

• Share important milestones and accomplishments. For example, “We’re halfway to our goal!” 
• Create ‘mini goals.’ For example, “We hope to raise $500 by Friday! Can you share our fundraiser and help us get to our goal?”
• Publicly thank donors or those who have shared your fundraiser. 

5. Go above and beyond

Going the extra mile for your fundraiser can truly improve your chances of success. Here are a few ideas: 

• Make a video: Bring your cause to life with a simple video that tells your story. Keep the length around 1-3 minutes. 
• Get specific: Share the impact that specific donation amounts will have. For example, if your campaign is raising money to buy coats for kids who need them, including the fact that a donation of $26 will buy one coat may encourage more donations. 
• Make flyers: Print them out and hang them around your community. This is a great way to reach community members. 

Are you ready to start fundraising?

Before you start, be sure to choose the crowdfunding site that’s right for you, and one that includes the fundraising basics. Remember to keep certain questions in mind when choosing the platform to ensure it fits all of your needs like, “is it really free to fundraise?” and, “does the platform provide all of the sharing tools I’ll need?”

So much of a fundraiser’s success depends on how well it’s crafted, and if you stick to the tips we’ve provided here, you’re guaranteed to make your fundraiser as successful as it can be. 

Benefits of crowdfunding

Why start a fundraiser? Through crowdfunding, you can quickly and easily raise money for causes close to your heart, all while creating a community of like-minded supporters who are eager to help. Crowdfunding is right for you if you need to raise money fast, like in the case of a personal or financial emergency, or if you want to support a project or charity that needs funds on a deadline.  

Make sure to consider the following features when choosing a crowdfunding platform.

• Safe crowdfunding practices that keep donor protection in mind. This means encrypting credit card data, using an up-to-date SSL certificate, and having a refund guarantee. 
• Fundraising with no cost to start a fundraiser. In most cases, you will still need to pay a small percentage fee for payment processing, no matter the platform. 
• A crowdfunding site specifically designed for your fundraiser. Some sites are better suited for personal fundraising, while others are geared toward community projects and charities. 
• Look for a platform with an updated and active crowdfunding blog. A blog not only acts as a resource to help you start a successful fundraiser, but also lets you know the platform is committed to helping its users. 

1. Donation-based crowdfunding

One of the most popular types of fundraising, donation-based crowdfunding is simply asking for a small donation from a large number of people to raise money for something you care about. 

How does donation-based crowdfunding work?

Donation-based crowdfunding is best used to raise money for personal needs as well as community-based projects. You can share your fundraiser with your own network and on social media as a way to amplify awareness and encourage more donations. Examples of donation-based crowdfunding include raising money to cover medical expenses or an unexpected financial crisis or raising funds for local projects like a community garden or new park.  

2. Reward-based crowdfunding

Rewards-based crowdfunding is another common type of crowdfunding, typically used to raise funds for a new startup or organization that offers a product or service. 

How does reward-based crowdfunding work?

With rewards-based crowdfunding, donors can earn rewards based on the amount they donate. Common rewards include handmade items, prizes donated by partner companies, or free products or services offered by the fundraiser organizer. For example, an artist raising funds to start an art collective and gallery could offer original signed artwork, replica prints, or even a free art workshop based on the amount donated.   

3. Equity crowdfunding

Also known as crowd-investing, investment crowdfunding, and crowd equity, equity crowdfunding is best for small to medium-sized companies that are seeking a large amount of capital to launch or grow their business.

How does equity crowdfunding work?

In exchange for donations, donors receive a percentage ownership in the company. This percentage varies depending on the business and can be a great way for companies to quickly raise funds without the headache of a traditional business loan. Usually, equity fundraising requires large fundraising minimums, typically into the thousands of dollars.   

4. Debt Crowdfunding

Also known as peer-to-peer lending and crowdlending, debt crowdfunding is a fast and easy way for both individuals and businesses to raise the money they need when they need it. 

How does debt crowdfunding work?

Debt crowdfunding works by collecting donations with the promise to pay them back at a later date. Debt crowdfunding is usually used by businesses that need capital, and that prefer to pay back the funds rather than give out equity. Individuals also used debt crowdfunding when they need money to pay off a loan or other financial obligation. With a debt fundraiser, make sure to clearly state what the money is needed for and when donors can expect repayment.  

5. Real estate crowdfunding

Among the recent types of crowdfunding models, real estate crowdfunding is becoming more popular for investors who want to put their money in real estate, without the hassle of getting a traditional loan or the obligation of owning all of a single property. 

How does real estate crowdfunding work?

Typically, an individual or a real estate company will collect funds from investors to pay for a large property, like an apartment building. With real estate crowdfunding, investors can contribute much smaller amounts of money—usually starting at $5,000—depending on how much of the property they would like to own. Investors will then receive payouts each quarter, depending on how much revenue the property generates. 

Start crowdfunding for your cause today

For the majority of crowdfunding needs, donation-based crowdfunding is the best solution. There are no complicated requirements to start a donation-based fundraiser, and no lengthy waiting periods to receive the money you’ve raised. And unlike other forms of crowdfunding, donation-based means you never have to pay the money back. Plus, people love supporting causes, ideas, and other people who they connect with—we can all agree that it feels good to do good. Sign up today and start your fundraiser, and see how quickly you can raise the money you need.