Crowdfunding: Opportunities and Challenges in Higher Ed
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Higher education has faced steady declines in alumni participation percentages over the last several decades. While crowdfunding has transformed the philanthropic landscape many wonder if it is just a passing trend. Learn how UMBC’s annual giving program is using crowdfunding as an alternate way of engaging students with the process of fundraising — moving beyond one-time project campaigns to engage prospective donors and achieve sustained donor engagement.
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Crowdfunding: Opportunities and Challenges in Higher Ed
- 1. Crowdfunding: Opportunities & Challenges in Higher Ed Dayna Carpenter – Director, Annual Giving Office of Institutional Advancement dayna@umbc.edu (410) 455-3377 @boyles_d
- 3. Crowdfunding sounds trendy – but . . .
- 10. How does Crowdfunding apply to Higher Ed? • Project-Based Annual Giving • Giving Days/Challenges • Peer-to-Peer Fundraising • Student and Faculty Philanthropy
- 12. Phases of a Capital Campaign (and a Crowdfunding Campaign) • The Quiet Phase • The Campaign Kickoff • The Public Phase • The Campaign Closing Celebration
- 13. Rosso’s Concentric Circle Constituency Model
- 15. Segmentation • Prescriptive vs. Self-Selected Segmentation • Lead-Generation and Data Capture Tool • If used right, reduces donor fatigue • Changes the “voice” of the Asker/Solicitor • Subtle way of involving donors in a “second ask”
- 16. What’s the right goal? • Donors • First-time Donors • Dollars • Recurring Donations • Participation
- 18. Trinity College Giving Day
- 19. Florida State University: The Great Give
- 20. St. Mary’s College of Maryland
- 23. UMBC Crowdfunding: The Future • Connecting with Events • Incorporating in Direct Mail and Calling Efforts • Personalized pages for high-end donors • Team – or – Board/Chapter-based Giving
- 33. Taking the long-term approach . . . • Provides a great “first” giving experience • Highlights direct donor impact • Broadens your fundraising constituency • Identifies donor interests – contributing to marketing opportunities • Turn students and young alumni into Philanthropists – instills a habit of giving
- 34. Thank You Dayna Carpenter Director of Annual Giving, UMBC dayna@umbc.edu (410) 455-3377 umbc.givecorps.com
Notas do Editor
- Most of you have probably used (or at least seen) platforms like KickStarter, IndieGoGo, or GoFundMe – so the idea of crowdfunding probably isn’t new.
- Crowdfunding has been around – in a loose form – for decades. The Statue of Liberty was funded by a number of donors who purchased miniature versions of the statue to help it go from concept to reality. We also see Salvation Army Bell-Ringers out during the holidays. In this instance, many smaller-sized gifts are coming together to help clothe and feed the needy.
- Crowdfunding has been around – in a loose form – for decades. The Statue of Liberty was funded by a number of donors who purchased miniature versions of the statues to help it go from concept to reality. There have also been instances throughout history of artists and musicians having their work funded by a crowdfunding model. However, the actual term crowdfunding is more recent. It originated from the concept of crowdsourcing, where many people came together online to solve complex problems. We also see many ties with grassroots political fundraising (Howe, 2009, and Parry, 2009). With the premise being that many politicians were engaged in crowdfunding activites as they looked to fund their political campaigns and elections. They sought many small gifts from individuals that, pooled together, amounted to significant campaign contributions. Howe cited the fundraising success of Barack Obama’s 2008 presidential campaign as a game changer, where the politician and his staffers harnessed the power of the web and turned the old model into a science, “raising some $272 million from more than 2 million, mostly small, donors” (Howe, 2009, p. 253). Through his campaign, Obama’s campaign team worked with Blue State Digital – a strategic consulting and technology firm. Some of the first colleges and universities to partner with Blue State did so because the firm’s background was not in higher education and they felt that the firm would bring a fresh perspective to their online communications with alumni (Parry, 2009). The firm’s creative and strategic use of technology “increased the general public’s comfort level with the kinds of tools that are going to benefit higher ed when it comes to engagement and giving online” (Parry, 2009). Blue State are segmenting donors “by their interests and by how deep a relationship they [were] willing to have with an institution, and to talk to groups differently if possible” (Parry, 2009).
- The prevalence of crowdfunding platforms is growing quickly. In 2012, there were “more than 50 crowdfunding websites in the US, and they are experiencing an exponential growth in popularity” (Gerber, Hui, and Kuo, 2012). By 2013, the number of crowdfunding sites worldwide ballooned to more than 450. Danmayr’s research shared that 98% of funds raised through crowdfunding efforts were attributed to platforms in North America and Europe. A World Bank report estimated that $1.5 billion was secured through platforms in 2011. Recent figures show that $5.1 billion was raised in 2013 (Hanselman, 2014).
- Most crowdfunding platforms can be divided into two general types depending on how they handled money. Threshold Model – (Think KickStarter or IndieGoGo . . . ) Here, funds are held in an escrow account until the goal is reached. If the goal is not reached, funds are refunded or credited back to the donor who can then reinvest with another project. Keep It All Model – (This is much more typical in the nonprofit sector). Here, the project owner or organization gets to keep all funds raised, regardless of whether or not the project goal is actually reached.
- there are four primary types of crowdfunding models. These include donation, lending, reward, and equity-based models (Danmary, 2014, and ScaleFunder, 2013). Donation: In the donation model, which is most similar to traditional fundraising, individuals contribute money with no expectation of receiving tangible benefits in return. Lending: The lending model is one where project contributors receive income from their loan, “with an expectation of repayment of their initial investment” (ScaleFunder 2013). Rewards: In the rewards-based model, individuals contribute to a project in order to receive something in exchange. Equity: In an equity-based model, contributors receive revenue form the project’s profits (Danmayr, 2014 and ScaleFunder, 2013). There are also a number of hybrid approaches or platforms where any combination of models might sit together.
- The trick is that crowdfunding needs to start as largely EMAIL driven. A study by Arizona State University found that: 3% of donors came in through Twitter 12% reported having found the cause through Facebook 32% through “other sources” . . . Person-to-person, event-based, etc. And 53% found out about the project through EMAIL communications.
- Feedback Loops – People are motivated by the feedback and recognition of their peers. Brabham cited the presence of feedback loops as both a marketing tool and a motivator for individuals to be brought into a new project (considering a contribution to something they hadn’t before) – and – to introducing other actors into the stewardship process. Goals – They like working towards goals, especially when those goals are specific, challenged and attributed to an individual vs. a group. The individual vs. the group was a common theme in the research – stating that the most successful projects had initial funding from friends and family members who would be attached to an individual associated with the group – as opposed to a general ask when the donor didn’t have a personal connection with the project being funded. After the initial gifts were made, those people not associated with the gift would be more likely to contribute. Reciprocal Relationships – Giving was more likely when there was a reciprocal relationship or request. They found that people were more likely to donate to an organization if they were first asked how much they would like to donate. The strongest connections happen when the relationship is mutually beneficial. Wash’s Completion Bias – People were more motivated to give when they saw that a goal was within reach. Gifts to complete a project’s goal were more likely to come from previous donors as opposed to non-completion donors. Individuals made larger gifts (up to two times larger) than the typical donation when they were finishing a project. This was compelling because it highlighted the importance of having a goal that is achievable. Meters and visible depictions of progress towards a goal could enhance this. There is a social proof that shows that once a project has hit 30% completion, it is much more likely to be funded than ones that are slow to hit that benchmark. Social Loafing – Wash (Michigan) also referenced the phenomenon of social loafing. This happens within groups who lack urgency because they assume that someone else in their group would do the heavy lifting in the campaign. If a group of people was working toward a goal and they did not have a clearly defined role or individual goal – it was much more likely that they wouldn’t do the necessary work to complete the project’s goal. People are less motivated to work toward group goals because they can’t see a strong connection between their effort and the final outcome as they can for individual work.
- Crowdfunding can be seen as the entry-point into annual giving – lengthening the major gift pipeline. In my research last year, I saw many ties between the crowdfunding campaign model and what we see in capital or comprehensive campaigns.
- I’ll open this slide by saying that many people hesitate to explore crowdfunding because they think that they don’t have the staff or expertise to carry it out effectively. In truth, successful fundraisers already know how to do this. We’re looking at traditional, relationship-based fundraising strategies that closely align with campaign experience one would see in a capital campaign. Quiet Phase: A number of professionals mentioned that a key reason failed projects were not successful was because they lacked a motivated champion or a proper marketing strategy. Just as major gift fundraisers need to spend time educating and cultivating donors in advance of a capital campaign, the project owners of crowdfunding initiatives would be wise to follow suit. Dawkins’ assertions that an organization should go as far as having key supporters lined up for the launch of the project who will make the first momentum-building gifts reinforces this connection. Campaign Kickoff: The next aspect of the capital campaign framework is the campaign kickoff. Kilstedt shares that “[t]he campaign kickoff occurs after enough of the money has been raised to provide reasonable assurance that the campaign will reach its goal” (Kihlstedt, 2010, p. 178). With this rationale, it might be wise for crowdfunding project owners to not publicly share projects outside of their close family and friends until an initial percentage of gifts have been secured. On a college campus this might translate into key faculty members contributing to a research fund, or parents of students who were intending to travel on an Alternative Spring Break trip making the first gifts before the projects were actively marketed to a broader base of alumni. Public Phase: The third campaign phase is the public phase. In this phase, “many volunteers will solicit a broad group of likely prospective donors” (Kihlstedt, 2010, p. 179). This is where the crowdfunding truly happens. Once the initial project owner has enlisted the support of their inner circle, the project has the potential to spread through social networks and garner support from individuals who may or may not be directly involved with the project. Previous investments would signal to a new audience that the project is capable of being fully funded. Campaign Closing Celebration: The final phase of a campaign is the closing celebration. Just as with the celebration of a large, public capital campaign – owners of university crowdfunding campaigns will benefit from recognizing the progress made toward their goal. Kihlstedt explains that “[t]he celebration provides an important sense of closure and accomplishment. . . The public celebration is often used to unveil the donor plaques and to honor the campaign leaders, key staff members, and major donors” (Kihlstedt, 2010, p. 179). Translating this celebration into crowdfunding, this might be the time that project owners distribute tangible or experiential perks. They should close the fundraising circle by generously thanking and acknowledging the donors of the project, regardless of whether or not the project was fully funded. Where in annual giving the fiscal year is often a hard deadline, crowdfunded projects have the capacity to lengthen the communication process – as groups can follow-up with donors and continue the relationship after the campaign has officially concluded. Lower level donors probably aren’t as used to receiving project updates and reports after the fact as their major-donor counterparts.
- Hank Rosso’s Concentric Circles Constituency Model is applicable because it helps to illustrate audiences that are closest to the colleges or universities who employ the crowdfunding platforms. Audiences at the core of the circle will be the first who are called upon to help share projects and leverage their social media contacts. From there, one could envision a ripple effect that expands outward as project owners share their fundraising initiatives with a broader audience. We’ve been sharing this type of diagram with some of our project owners – encouraging them to consider who their potential audience is.
- Hank Rosso’s Concentric Circle Constituency Model has the capacity to help nicely illustrate individuals involved in the crowdfunding process. Visualizing prospects in concentric circles could help development professionals identify key constituencies in their planning for crowdfunding campaigns. While the core constituency remains intact, one can imagine how project team members have the potential to expand and change the circle’s reach. When each individual takes on a fundraiser or advocate role, they become the center of their own concentric circle. Some circles will overlap, some will be larger or smaller than others, but the end result is the same. Each motivated individual attached to a project has the potential to reach a different donor constituency.
- In most development offices – an annual giving director will be analyzing data and looking for affinities and commonalities between large groups of people, helping to build a segment for solicitation. Many offices have had significant success with this type of segmentation, but even the best segmentation strategies are prescriptive and might not be entirely inclusive of all of the types of donors or individuals who might consider a gift to a certain project. Like we saw in the slide before, crowdfunding has the ability to empower another layer of fundraisers for your institution. Not only are they reaching out to their family and friends with an ask – now people who are friends of those friends – or people who just happen upon your website, might be contributing to projects that you wouldn’t necessarily associate them with. Maybe an English major had a really valuable experience in their geography course – and now they want to give back to that area, instead. That’s the type of information that isn’t likely to be in your institutional database. For prospective/future major donors – we have the potential to track their interests from the first time that they contribute to your organization. Lastly, I think we all worry about over-saturation of our message in a relatively closed network of alumni, parents and friends. However, turning the message over to second-level/non-professional fundraiser can provide a new voice to the ask. It’s no longer the professional fundraiser or the institution asking for the gift . . . It’s your son, daughter, friend, or peer. Continuing on that vein of thought - Some universities (including UMBC) have had very successful second ask campaigns. We already know that our current donors are our most valuable future prospects. As donor populations evolve over time, it will be important to engage current and future donors in a pattern of recurring giving (think of regular giving instead of annual giving).
- $1.1 MM from over 1,500 donors Far exceeded their expectation Used video stories, on-campus activities, outreach from class agents and ambassadors Pool of $375,000 in challenge dollars was contributed by a small, generous group of Trinity alumni and parent challengers to provide added incentive to donors on Giving Day. • At Giving Day headquarters in Mather Hall, students wrote personal thank-you notes to donors and photos were taken of students with messages about what makes Trinity special to them. • Online, members of the Trinity community used the hashtags #TrinGivingDay and #AllinforTrin in the weeks leading up to Giving Day and on April 30 to post photos and messages of support for Giving Day and in celebration of the student experience.
- Florida State University mobilized online ambassadors to surpass their 36-hour goal by over $20,000. Their annual giving staff achieved this with only 3 months of (very strategic) planning. They had set a goal to raise $161,000 to celebrate the university’s 161st Anniversary. (January 23/24 – 2012) FSU had a strong philanthropic culture – receiving tens of thousands of gifts in 2011 – but, only about 1 percent of those gifts came in online. They realized that there was a significant opportunity to secure gifts in that space. They did their homework and found that gifts from online donors, on average, tend to be nearly twice the size of gifts made through other direct response means, like direct mail or phone. They also often have higher household incomes and greater lifetime giving potential. The 2012 Nonprofit Social Networking Benchmarking Report estimated the value of a Facebook fan is more than $214. They used approximately $10,000 in advertising and promotion – mostly through direct mail. In the weeks leading up to the campaign, they produced YouTube videos and used social media to engage supporters and build excitement. They also conducted some traditional fundraising through face-to-face contact and over the phone – both to secure donations and to ask for support of their friends. They found that, “going viral” is dependent on an organization's relationship with their online ambassadors. People consider to be online ambassadors or “influencers” tend to use multiple social networks, maintain blogs, and create their own videos or photography. They also have the ability to influence the online behavior of other internet users. They also made a concerted effort to engage students in the campaign. They identified student leaders who had the ability to enlist a larger group of students to spread the word about the campaign. They provided them with cards that included QR codes so that other students could scan them, taking them right to the site. In the first few hours the campaign had raised $25,000 – they leveraged early fundraising success as an excuse to reach out to their online ambassadors with a update. They put a lot of planning into the campaign – prepackaging messages and updates for each version of social media that their online ambassadors could share easily. Staff at FSU shared that the campaign changed the way they thought about “word of mouth”. 57 percent of people shared that they had heard about the Great Give through Word of Mouth – with only 2 percent listing Facebook and the FSU website as their source. - But they estimated that more people were thinking of a personal note through Facebook or a text message were being considered as “word of mouth”. At the close of the campaign (at midnight, January 25) – just 36 hours after kick-off – they campaign had raised more than $186K and introduced nearly 300 new donors to the university.
- Reinventing the traditional online giving experience.
- Launched in June of 2013 Focused on Student Organizations – In the first year, we waited for student organizations to come to us. In the coming year, we’ll be conducting outreach to student organizations who receive only partial funding from our Student Government Association (any group with restricted membership – think of: dance or singing groups with an audition component of their membership). 323 Total Donors 456 (8.5% of First-Time Donors) $16,838.50 (Average gift of $52.13) In the first six months of this year, we’ve already raised over $22,500+ from 214 donors, with an average gift of $105.36. This is already a 34% increase over last year in dollars – and we’re well on track to surpass our donor goal as well.
- Event Tie-In’s – The crowdfunding platform is a great way to have a branded page linked to event giving. You can send the link prior to the event (perhaps someone who is unable to attend will make a gift in lieu of their attendance), use it during the event with QR codes, or send it after the event along with a attendee survey. Our Alumni Association held an Engineering & IT Happy Hour with a scholarship fundraising focus – and we linked a branded page for their event. Project pages can be tied in with direct mail and calling efforts. Customized URLs can be created for departments and can be linked into letters, etc. for a specific fundraising campaign. This can help to cement the relationship between a direct mail or e-campaign and the gifts that are received by your organization. Personalized pages can be created for high-end donors who have unique needs. They can search a site like GiveCorps with their name or another code as a key word or search term and give to their project in a way that is quick, easy, and mobile-friendly. The shopping cart functionality makes online giving quick and easy. Team and/or Board and Chapter-based Giving Initiatives . . . Very recently, UMBC’s Chapter of Young Alumni committed to making $10/month, recurring gifts to the Alumni Association. Usually, we struggle to get the chapter leadership to commit to an annual gift – making phone calls and sending last minute appeals in May in June. This year, everyone has signed on early and their combine efforts will fund an entire student scholarship for 2016. -- This has transformed some $20 and $50 donors in $120/year donors – and has the added benefit of crossing over fiscal years, which helps us with alumni participation percentages.
- I’m going to give you a peek at some of what we’ve been doing at UMBC with the crowdfunding platform. It’s been great for us because its enabled us to share stories about giving opportunities in a very different way. Crowdfunding projects aren’t tied to the same types of timelines and scheduling constraints as more traditional appeals because the voice of the solicitor changes from the institution to a student/a faculty member/or an alum. The scrolling donor roll on the side of the page (and on each project page) shows potential donors who has already chipped in their support. And finally (switch to next slide)
- We have a way of saying “yes” to more of our student organizations and initiatives that have very worth causes – but lack a more clearly delineated audience. Our university has a robust student life presence. There are over 260 different student organizations – and not all of them have a Foundation account to accept gifts through. Yet – they are fundraising! They are holding bake sales in our Commons Building and they are securing gifts from their parents and family to help them travel to spring break trips. Many of the people who were contributing to these causes saw themselves as donors . . . Yet, they weren’t being receipted or recognized by UMBC as donors. Through a partnership with our Office of Student Life – we are now able to offer student organizations a platform to efficiently raise funds – while also giving them the opportunity to see the full fundraising process. They are involved in setting goals, forming the story and case for support, and even in thanking and stewarding their donors.
- The crowdfunding platform has helped us put the message in our student and faculty’s hands.
- UMBC’s GiveCorps page offers the opportunity to incorporate video – which can be a great way to tell your organization’s story. Mini Baja shows their scope of work – and one of their working cars “on the road”. The Pep Band did a fun out-take that worked like an info-mercial And a number of the Alternative Spring Break projects linked to the trip organizers who spoke about the work they would be conducting over Spring Break.
- Most good platforms share some common elements: Meters that show visual progress towards goals Donor Recognition in the form of scrolling donor honor rolls Quick and easy ways to share the message through social media
- Athletics Team-Based Giving Our university has over 900 Foundation accounts. Listing them all on our traditional online giving would be nearly impossible. We feature 3-5 giving priorities for the institution as a drop-down, and for all remaining funds and initiatives – individuals are required to write in their specific priority. The page isn’t branded – and we had some feedback from donors and other campus partners that people were worried about their gifts not being directed to the correct allocation. A project page like you see here helps to alleviate some of that concern. The page is clearly branded, and donors are confident of where their funds are being directed. This page surpassed its goal in less than a week when lacrosse alumni heard that the current team was in need of new shot clocks for the 2015 season.
- Memorial/Tribute-Based Projects We had a beloved member of our staff pass away a few years ago. He had directed a popular program on our campus and alumni from that area came together to endow a scholarship in his name. The crowdfunding platform gave them an opportunity to leave a lasting legacy for someone who had shaped their college experience.
- Event based fundraising – can be linked to event invitations, can be shared at the event, and can be featured in post-event communications . . . . We’re sorry that you couldn’t make it. Consider contributing today . . . .
- Provides a great “first” giving experience – many donors will make initial “test” gifts to see how organizations manage relationships and resources. Happy donors who feel good about their first experience with an organization are much more likely to contribute again in the future. I learned, just last week, that Michael Bloomberg’s first gift to Johns Hopkins was $5 in 1965. Recently, he committed $350 Million – taking his cumulative giving to the institution to $1 Billion. You can’t afford to ignore low-level donors – crowdfunding helps provide a better donor experience from the ground-up. Illustrates comprehensive donor impact – Because the crowdfunding model closely mirrors the major gift/donor experience, donors have a seamless entry point into your organization. Often, they are asked by someone they know. The project-based nature of a crowdfunded campaign can also translate into a project that can be tracked with very transparent results. The donor can see their gift at work for the project/student organization/athletic team that they donated to. In many cases, you can encourage your project owners to update donors throughout the fundraising cycle and to take ownership of the stewardship process. Broadens fundraising constituency base – Involvement = Investment. Countless donor behavior research studies have shown that the more involved an individual is, the more likely they are to donate – and the more likely their donations will be substantial. The crowdfunding platform provides donors with the ultimate volunteer experience at a low barrier to entry. They become your army of advocates. Crowdfunding also provides the ability to let donors self-identify their interests – and we can meet them in that channel . . . If you know that someone is a consistent scholarship donor, you can market similar projects and funds to them. Crowdfunding is an investment in your organization’s future. It has the ability to educate students and your campus community about impact of philanthropy while they are on campus. This reduces the amount of education you need to provide for donor acquisition. Students have the ability to witness the impact of donor support, first-hand. I’ll close by saying – some worry that crowdfunding will cannibalize regular annual giving funds – especially in the world of higher ed development where we focus so closely on alumni participation. I think a better way to look at it is to consider the additional donors who might be motivated by project-based marketing and strategy – who haven’t been motivated by other communications. The donors who like giving to unrestricted funds will likely continue – but, you might also pick up project-based donors who you can inspire to make second-gifts to unrestricted funds. Crowdfunding platforms allow you to market components of unrestricted funds in ways that can be more difficult through direct mail.