Crowdfunding in the digital age

Crowdfunding became an increasingly visible giving vehicle during the COVID-19 pandemic. As of March 19, 2020, at the onset of the pandemic in the U.S., $1,548,755 had been raised on GoFundMe by 10 crowdfunding campaigns in this country alone, according to the Lilly Family School of Philanthropy.

Although stories and research have addressed how individuals have raised funds on crowdfunding platforms and the ways for-profit and nonprofit organizations use the platforms, fewer reports provide details about crowdfunding donors and their behavior with this platform. The Lilly Family School of Philanthropy’s release of Charitable Crowdfunding: Who Gives, to What, and Why? adds insights to deepen our understanding of these donors.

Crowdfunding—the raising of capital from a large and diverse pool of donors via online platforms—is not a new concept. Although the digital era accelerated its growth, the concept dates back to at least the 18th century when author Jonathan Swift created the Irish Loan Fund to support poor, hardworking tradesmen, much as the 20th century social entrepreneur and Nobel Prize winner Muhammed Yunas did with Grameen Bank in 1976.

Today, with more than 2,000 for-profit and nonprofit crowdfunding platforms globally, this landscape is complex and, at times, confusing. For example, it can be difficult to differentiate between fundraising on crowdfunding platforms and on social media. Charitable Crowdfunding examined individual giving primarily on crowdfunding platforms such as GoFundMe, Kickstarter, and Patreon.

Four findings from the report stood out.

1. Although the percentage of people who are aware of crowdfunding is high (91.5 percent), far fewer people typically contribute to crowdfunding projects (31.7 percent).

2. Crowdfunding donors tend to be younger, less religious, and more likely to be single as compared to traditional charitable donors.

3. The motivations for giving by crowdfunding donors are similar to those of traditional charitable donors: belief in the mission of the organization and belief that your gift can make a difference.

4. Both crowdfunding donors and non-crowdfunding donors have positive perceptions of this giving vehicle.

These data points suggest a growing potential for this giving vehicle because it attracts younger donors, thus broadening the donor base and reflecting the changing generational demographics in the country. After all, the combined population of GenXers and Millennials is about 137 million in contrast to 94 million for the combined Boomer, Silent, and Greatest generations.

In addition, more than half of both donors to crowdfunding campaigns and non-crowdfunding donors believe this giving vehicle makes it easy for contributors to give and is a good way to highlight projects and organizations. Nine out of 10 crowdfunding donors indicate they plan to increase or maintain their charitable crowdfunding over the next three years.

Crowdfunding is part of the expanding online giving landscape. A recent Blackbaud report found that in general all online giving increased by nearly 21 percent in 2020, which represents a 32 percent increase over the previous three years, and is now 13 percent of total fundraising revenue. These factors portend a promising future for crowdfunding as part of a donor’s toolkit.

The report presented a couple of intriguing points to ponder. The report shows some hesitation among crowdfunding donors to raise money for their causes via social media. Nine out of 10 survey respondents use social media with YouTube, Facebook, and Instagram the most frequently used.

Although 54.9 percent occasionally share crowdfunding on social media, they do not ask for contributions, and 45.1 percent never share or ask for contributions on social media. Moreover, a smaller percentage (37.8 percent) ask friends or family members directly via social media to contribute; a staggering 62.3 percent do not.

Given the ubiquity of social media in our lives and the outsized presence of social media for campaigns such as the Ice Bucket Challenge (2014) and #GivingTuesday, all explanations of this disconnect are welcome.

The majority of crowdfunding donors gave to individuals via crowdfunding platforms, whether to family members, close friends, or strangers. The dollar amounts given differ with $79 to a family member or close friend and $10 to a stranger.

When asked specifically about giving generally during the COVID-19 pandemic, 38.5 percent of all donors gave to strangers and 47.2 percent of all donors who typically contribute to crowdfunding campaigns gave to strangers.

The data suggests that crowdfunding may expand, or appeal to those who already consider the traditional notion of philanthropy to include giving to individuals. As a result, the general notion of charitable giving for tax benefits may become far less of a motivating factor for some donors.

At the same time, issues around accountability and transparency concern more than half of crowdfunding donors and non-crowdfunding donors alike, which may hold some donors back from using these platforms.

Crowdfunding allows donors to make charitable gifts on their own time, in real time, in a way they prefer, and often to individuals whom they may or may not know. This giving vehicle broadens both our understanding of who gives and who receives those gifts.

You can view the full report here. Please read it and share it across your networks.

Andrea Pactor retired from the Women’s Philanthropy Institute at the Lilly Family School of Philanthropy in 2020. She served as project consultant for this report.