Recently, Dr. Stoddard asked the Community and University class to compile our individual research that we have done for the DWAC. My research focuses on how the DWAC can carry out a successful crowdfunding campaign, a feat that less than half of the campaigns on major crowdfunding sites accomplish. Whether the statistic is high or low is irrelevant, because I realized an important underlying theme throughout my research: success is created by the campaign owners, not by the backers. This theme inspired me to construct a concise crowdfunding survival guide for those daring souls who are interested in either aiding the DWAC’s crowdfunding efforts or starting a project of their own.
Equation 1: Passion + Promotion = $$$
Surely, the backers are the ones who ultimately decide whether a campaign’s goal of $5,000 is met. Yet backers, much like money, do not simply pop out of thin air. They must be recruited through the promotion, hype, and overall excitement surrounding the project. A project with no advertising, no communication, and no passion is as boring as it is invisible to the public.
Equation 2: Passion ǂ Purpose, but there is a correlation
In order for the project to be funded successfully, there needs to be some aura about it that makes it exciting and interesting. Whereas excitement stems from the campaign owner, the project’s content does play a role in the interest it stimulates. Sometimes, there is no way around this—the $5,000 for that goat-breeding clinic may not be the subject that drives a person’s hand into his wallet. However, if a person can provide a passionate, thrilling, and intricate explanation that the fate of the world depends on those goats to be bred, then they have my attention. The take-home message: As a backer, I want to fund a project that gives me goose bumps. Energy works in mysterious ways, and if a project does not seem important to the majority of the public, then it may need to be spiced up or rethought. (Note: this is why the Pitch-then-Plan methodology is a drastically important step before any crowdfunding takes place).
Proper prior planning and punctuality
Crowdfunding is not meant to be a consistent source of income. Instead, the best crowdfunding efforts are those that are raising money for a specific purpose within a set time frame. Because there is an element of time involved, the campaigners must work out the intricacies of the project before the crowdfunding portal is developed.
The significance of location
There are general differences among the various crowdfunding sites. In the past, the main differences were based on the type of project and the target crowd of the campaign. Nowadays, however, each crowdfunding site contains a virtual hybrid of various types of projects and backers. If a campaign owner follows the aforementioned suggestions, then the site of the crowdfunding campaign should not differ too drastically in the campaign’s predicted success. Having said that, I compiled a table of three major crowdfunding websites and listed some statistics and general comments about them.
Not surprisingly, there is no witty title for this section. Initially in my research, I easily overlooked any of the legal aspects of crowdfunding. It turns out that taxes are an important crowdfunding topic. I am not an accountant, nor do I have any true legal experience, but I did find some tax information for 501(c)(3) nonprofit organizations that are interested in crowdfunding. Funds raised on certain crowdfunding websites may be subject to taxes. On sites such as Kickstarter, an organization can potentially classify the donations as a nontaxable gift. Nonprofits must be aware that, although they are exempt from federal income taxes, they may be subject to taxes on unrelated business income (UBI). The IRS defines UBI as “income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis of the organization’s exemption.” As long as the crowdfunding endeavors of an organization do not fall under the IRS definition of UBI, then the campaign owner will not have to include the donations on a Form 990-T. However, there may be other details to the tax system that I am unaware of.
This post does not contain all of the pieces to the crowdfunding puzzle. However, reviewing these guidelines can potentially transform a mediocre outcome into something to take pride in. With more time and elbow grease devoted to the project, campaigners will be much more adamant about its success.
Bray, Ilona. “Using Crowdfunding to Raise Money for Your Nonprofit.” Retrieved March 31, 2014 (http://www.nolo.com/legal-encyclopedia/using-crowdfunding-raise-money-your-nonprofit.html).
Graf, Jason. 2013. “CrowdFunding, The Ins and Outs.” Retrieved March 31, 2014(http://crowdfundbeat.com/the-ins-and-outs-of-crowdfunding/).
HandsOn Suburban Chicago. October 25, 2012. “Review of Online Fundraising Websites.” Retrieved March 30, 2014 (http://www.volunteerinfo.net/blog/?p=1046).
Internal Revenue Service. 2014. “Unrelated Business Income Tax.” Retrieved March 31, 2014 (http://www.irs.gov/Charities-&-Non-Profits/Unrelated-Business-Income-Tax).
Kassan, Jenny. February 5, 2013. “The Ins and Outs of Crowdfunding,” Retrieved March 31, 2104 (http://goodfoodfestivals.com/blog/chicago/the-ins-and-outs-of-crowdfunding).
Kickstarter. 2014. “Kickstarter and Taxes.” Retrieved March 31, 2014 (https://www.kickstarter.com/help/taxes).
Kickstarter Coaching. February 1, 2014. “Top Websites.” Retrieved March 29, 2014 (http://kickstartercoaching.com/Top_Websites.html).
Table created by Joseph Hornak, April 1, 2014.
Logos were acquired from the official websites of the respective organization.