Crowd Funding: The Impact Equation

Small Amounts, Large Participation

The term crowdfunding has become one of the most googled words in 2013 – which makes sense since the former President of Google Enterprise, Dave Girouard launched a crowdfunding  service called Upstart a year ago. He isn’t the only one – it is estimated that there are currently well over 300 crowdfunding sites globally.

The business model works like this:

Small amounts donated + Large amounts of donors = Enough to start something cool

This formula has allowed bands to fund the albums of their dreams and might allow Veronica Mars fans to get the movie they have been waiting for. But is that the limit of the potential? Or does the business model and platform have the ability to morph into something bigger?

Future business model could look like this:

Sizable donations + Business/consumer donor pool = Massive community impact

This might be hard to wrap your head around because crowdfunding in its current form is working and working well. Kickstarter, Indiegogo, and Kiva have all experienced tremendous success, mostly because the concept is simple. Explain your idea in a compelling and creative manor, and hope individuals and in some cases, companies will invest in your idea (and you).  And the more compelling or entertaining the plea (usually always through a video), the more funding seems to follow.

See below for the first project I invested in – simply because I loved the approach and their storytelling ability.

Small Amount, Good Intentions

Nonprofits have been using the crowdfunding  concept for years to raise money for community projects, but the platform was never open – donors had to contribute via the nonprofit’s website.  But now nonprofit crowdfunding platforms have started to emerge. StartSomeGood allows for fundraising for nonprofits and helped Boston Strong reach a campaign goal for its wristbands. And piggybackr helps kids raise funds for projects they are passionate about.

But Crowdfunding has yet to be embraced by established nonprofits that rely upon traditional donor cultivation to reach their fundraising goals.  Their Resource Development departments spend countless hours developing strategies to attract and engage new donors. To them, crowdfunding has the potential to steal long-term donors away and push them back towards campaigns and one-offs that don’t achieve impact or work towards a sustainable giving model. Marketing and community awareness teams love the possibility of using word-of-mouth and a true grassroots model to fund a project that is creative and can garner media and community awareness easily. But these projects can be time suckers, costly and can generate attention but not always ROI, which causes concern among senior leaders.

Big Amount, Big Intentions

But are there bigger opportunities that satisfy bigger goals? Instead of large numbers of small donors, what if we could persuade a large number of large donors to invest in solving a big problem for good?

Let’s look at a bigger problem. Educational gaps in urban areas continue to be the driving force behind explosive dropout rates and failing economies. And if we know one thing about educational outcomes – there is a pattern.  Children of parents who have dropped out of high school are more likely to drop out themselves.

And my city – Cleveland – has reached a point of academic emergency.

How can crowdfunding play a part in the solution? What about funding a movement that helps erase educational gaps for children born in 2014 in urban Cleveland? Research shows that children from inner city areas enter kindergarten 12 to 14 months behind their suburban peers – because they can’t afford or don’t have access to high quality preschools that prepare them to enter kindergarten ready to learn.

The Impact Story Problem

Raise enough funds to ensure all children born in urban Cleveland in 2014 had access to one full year of high quality early learning leading into kindergarten.

• There are an average of 15,000 children born in Cleveland every year
• The average cost of early learning education for one child for one year is $7,000
• This means that we would need to raise $105,000,000

Quite a fundraising goal?  Yep. Impossible?  Nope.  Look at it this way — the company Allerta raised a total of $10,266, 845 in less than a week for Pebble, an ios/Andriod based Smartwatch.

What if the companies and families with means in Cleveland focused some of their charitable gifts to this crowdfunding project?

• There are currently 21 manufacturing companies in Cleveland, OH that are sitting on the Fortune 500 list.
• The combined revenue for three of the largest – Parker Hannifin, Eaton Corporation and Sherwin Williams is roughly 36 billion annually.
• Two of Cleveland’s wealthiest families have donated more than 108 million to local hospitals and colleges in the past ten years.

Not such an unsolvable problem now, is it? And consider the ROI:

• Give 15,000 children the educational exposure needed to start kindergarten ready and prepared
• Add in the County initiative that donates $100 to those same children for a college fund (that can grow and accrue)
• Break the cycle of intergenerational poverty.  If the children born in 2014 even see a graduation rate 10 percent higher than what it is now, the long-term effect could be monumental.  Educated parents push their children to achieve educational success.

And so the new cycle begins.

Now I’m not suggesting that my simple-minded math equation will actually work – as it is conceptual in theory. But I am suggesting that we start to look at crowdfunding platforms to tackle massive community problems in many different ways.

With large scale impact now a part of the equation, our Resource Development team has a fundraising goal they can stand behind, our Marketing department has a news story that CNN and Good Morning America would fight over and our community has a budget able  to eradicate massive social problems.

Now that’s a crowd I think we could all follow.