Giving to charity online through crowdfunding has been a resounding success, with dozens of giving sites scattered across the web.
But, what is crowdfunding? There are several types, including reward-based, donation-based, and equity-based lending. All of these types depend on collecting small amounts of money from many people. The reach of internet fundraising has made crowdfunding a lucrative activity, both in the commercial world and in the nonprofit arena.
Donation-based crowdfunding, or nonprofit crowdfunding, involves individuals raising money for friends, family, or even strangers using crowdfunding platforms easily accessible on the internet and social media. Individuals also use peer-to-peer fundraising on these platforms to raise money for a specific charity or cause.
According to philanthropy-focused organization The Blackbaud Institute, crowdfunding is the most popular among GenZ and Millennials, but its use has grown among all generations. For instance, by 2018, crowdfunding had increased to 48% among Millennials, nearly quadrupled to 36% among Gen X, and more than quadrupled to 25% among Boomers. Most people using crowdfunding do so to support family and friends.
However, charities also use these crowdfunding platforms to raise money, often through special events such as races or special campaigns such as GivingTuesday. Some crowdfunding sites provide services to nonprofits as well.
Donation-based crowdfunding platforms usually have one or more of these three purposes:
- Provide a place and services for charitable organizations to raise money through traditional fundraising campaigns or peer-to-peer campaigns
- Offer a space where individuals can find credible charities to fund
- Allow individuals or groups that are not charities to raise funds for themselves or their favorite causes
Here are five popular crowdfunding sites that serve one or more of these purposes.
The personal version of this crowdfunding platform serves individuals well and is quite popular. GoFundMe claims to have collected 100 million donations from millions of campaigns resulting in $5 billion in donations.
GoFundMe makes it easy to set up a campaign for personal and business needs or to raise money for a favorite charity.
Although setting up a campaign is free, all donations are subject to a processing fee of 2.9% plus $.30 per transaction. The donations for an individual go into the organizer's bank account. When you set up a campaign to support a nonprofit, the donations go directly to that organization, rather than through a personal bank account.
GoFundMe Charity serves nonprofit organizations. This is a simple platform that offers the basics. An organization sets up a branded page on the GoFundMe website. Setting up is free, but donations are subject to a starting fee of 1.9% plus a $.30 processing fee.
There is no subscription and no additional services such as donor management. The charity can install a donation button on its own website, on mobile, on social media, and in emails so donations can be processed through GoFundMe.
Pros: Simplicity is the strength of this platform for both individuals and charities, as well as the low transaction fees. Another plus is that funds raised for a registered charity by an individual go directly to the charity, adding a layer of protection.
Cons: GoFundMe works well for small organizations with a slim fundraising infrastructure of their own that don't want to pay for the extra features other platforms offer. However, for larger organizations with robust donation systems in place, this platform could be redundant or serve as an add-on to its existing system to provide additional reach.
Donors wishing to contribute to an individual's fundraising campaign must be careful. GoFundMe does not screen individual fundraisers. Although successful individual fundraisers often get a lot of press, most fundraisers set up by individuals receive very few donations. Keep expectations in check.
Fundly is a versatile platform for individuals to raise money for themselves, other people, or a cause.
This service allows anyone to raise funds through Facebook, email, or with a mobile app. The service is free until money starts flowing. Then Fundly charges a platform fee of 4.9%, a credit card processing fee of 2.9%, and $.30 per transaction.
As of 2015, Fundly was acquired by NonProfitEasy, which is for nonprofit organizations that wish to run crowdfunding or peer-to-peer fundraising campaigns. This is a full-featured program that provides donor management, pledge management, grant management, event management, and more.
Starting fees for small organizations are a few hundred dollars and up plus the same charges per transaction as for the individual fundraising program. A free trial is available.
Pros: Lots of help, from guides to examples of fundraising campaigns, for individuals. For organizations that want a full-featured service at a reasonable cost, Fundly may be a top pick.
Cons: Fees should make individuals think hard before launching a campaign. Will you raise enough money to make it worthwhile? For organizations that do not need a full-fledged donor management system, Fundly may not be the way to go.
Mightycause is a triple play. The crowdsourcing platform works especially well for small nonprofits, providing all the resources it needs to run its giving program, from annual fundraising to events management. Individuals can mount personal fundraising campaigns, and donors can browse all the campaigns.
Essential services are free, but organizations can move up to an advanced plan with more features for a flat fee of $99. Transaction fees are 2.9% and $.30 per donation using PayPal and 1.2% plus $.29 per donation using Mightycause's system.
But Mightycause also serves individual fundraisers. For instance, people can create a campaign or set up a team effort to help another person or a favorite nonprofit. Setting up a fundraiser is free, but donors will be charged a 4% platform fee and a transaction fee of 2.9% plus $0.30.
If you're helping a friend or relative, you can arrange for the donations to flow right into their bank account. If you raise money for a charity, the money flows right to them.
Pros: This is an extremely easy to use platform for both individuals and nonprofits. Pricing is reasonable, and there is plenty of guidance and help. Donors will find a fine array of charitable causes.
Cons: Best for smaller nonprofits. Larger organizations may want more features.
Network for Good was one of the first online giving sites, and one of the first organizations to provide donation services to nonprofits. It is still popular with smaller charities because of its experience, its easy-to-use platform, and low cost.
Unlike other crowdfunding sites, Network for Good does not provide a space for individual fundraising.
What Network for Good does very well is educating new and small charities about online fundraising. It offers a robust program of webinars and how-to information that can help get a charity off the ground and into online fundraising. It is an all-inclusive solution for charities that don't want to set up their own donation processing systems. The organization also provides donor management services that are priced according to the number of contacts.
Besides powering many charitable online giving sites, Network for Good has its own website. Through that site, donors can give to their favorite charities, keep all their giving records in one place, and spread the word about those charities to friends via social networking. Network for Good charges a 5% fee for each donation to cover all expenses (disclosed on each donation page).
- Robust education for new and smaller nonprofits
- Easy-to-use platform for charities and donors
- Reasonable fees
- Donors can track their gifts easily and receive a year-end summary
Cons: The positives can be negatives. The simple-to-use platform can also be quite plain with few bells and whistles. When a donor gives on a charity's website through its donation button, the receipt will say Network for Good rather than the charity's name. That results in some confusion for donors.
If you'd rather be safe than sorry about your charitable contributions and enjoy a bit of research, try donating through Charity Navigator. This platform is not the usual crowdfunding type. It does one thing and does it well.
Charity Navigator rates charities based on stringent criteria that includes financial health, transparency, and accountability. Plus, there is a trove of useful information, including the ratings for listed charities, ranging from one to four stars.
For good results, donate to the charities with three or four stars.
You can research charities and then donate through Charity Navigator's Giving Basket. Pick one or more charities, set up monthly giving if you wish, and get a receipt, all for a modest processing fee of 3.95%. You can also click through to the website of any charity that gets your interest and give there.
On the homepage of Charity Navigator, you can find links to useful articles and guidelines, plus lists of featured charities that frequently change. These are often tied to hot charitable themes, issues, or emergencies.
You can search for charities by name or category. If you want to find a reputable charity that helps dogs, look for animal charities. If you have a specific charity in mind, check to see if it has a rating.
Pros: Donors typically do less research about charities they donate to than when they buy an appliance for their home. Charity Navigator fills a gap for donors who want to be sure their donations do the most good. The site is easy to use and its criteria for rating charities is transparent.
Cons: Not all charities are listed at Charity Navigator; only those 501(c)(3) charities that have been reviewed and rated. It is not a complete list of all charities. Charity Navigator focuses on larger nonprofits, so you may not find your favorite local charity on the list.
The Bottom Line
Crowdfunding is big. Donation-based crowdfunding sites are abundant. Some are general; others specialize in particular fundraising types such as athletic events, auctions, or peer-to-peer fundraising. There are lots of lists of these sites on the internet.
These platforms make it easier for nonprofit organizations and individuals to set up campaigns and capitalize on the power of small donations given by masses of people.
Whether your organization wants to engage in crowdfunding or, as an individual, you would like to help out family, friends, or yourself, think about your goals and then pick the platform that works best for you.
If you are a donor in search of fundraising campaigns, search out sites that list many charities and personal fundraisers, consider the costs of donating, and then choose according to your interests and pocketbook.