What is it?
Charity crowdfunding (or donation-based crowdfunding) is the funding of charity projects through small donations made by many people over the internet.
How does it differ from other types of crowdfunding?
The big difference between charity crowdfunding and other types of crowdfunding, whether reward, investment, or lending, is that in charity crowdfunding there is no return.
In reward-based crowdfunding, as its name suggests, users make contributions in exchange for receiving the product for which the project organizer is raising money.
In equity crowdfunding, an entry is offered as an “investing member.”
And in lending crowdfunding, an interest rate is offered on the money contributed.
As you can see, the only type of crowdfunding that does not offer a clear, tangible return is charity crowdfunding. And I say clear and tangible because I personally disagree that charity crowdfunding offers nothing in return. The fact that what you receive cannot be monetized doesn’t mean it doesn’t exist. And the fact that you receive something in return, even if it is just feeling good about yourself for a second, does not mean the act stops being charitable. But in any case, that’s another topic that was already discussed in this other post:
Let’s set aside my own personal opinion on the matter and focus now on general consensus. It seems evident that charity crowdfunding starts at a significant disadvantage compared to the rest. Let’s analyze, then, what its main advantages and disadvantages are.
Main advantages and disadvantages of charity crowdfunding (or donation-based crowdfunding)
DISADVANTAGES
Rewards:
Obviously, the main and most noticeable one is that it lacks the primary appeal the others have, which is offering you something in return. In fact, much of the success of (non-charity) crowdfunding campaigns lies in how attractive the reward offered is.
Personal benefit
But no less important is that the project organizer also receives something in return, which is nothing other than bringing their project to life. In many cases, this likely means earning some financial benefit as well.
Direct communication
This way, the project organizer finds crowdfunding to be a direct avenue—one that didn’t exist before—to secure the funding they need. Direct funding from their own consumers, sparing them the tedious effort of finding and convincing investors through traditional, usually complicated channels.
Real insight into demand
By seeking direct funding from their own consumers, they also get a more reliable test of the actual demand their product generates. If demand exceeds expectations, they will receive proportional funding to produce it; if, on the other hand, demand falls short of the minimum needed to develop the product profitably, the organizer is under no obligation to produce something they cannot, since they haven’t reached their goal, and the people who chose to contribute are not charged.
Personal profit
On the other hand, anyone creating a crowdfunding project of this type usually has a profit motive behind it, whether to make a one-time gain or because they want to build a career and make a living from what they are launching. This leads to maximum dedication, allowing them to invest all their effort into it, both in time and money. The result is a more polished, well-crafted campaign, and therefore a higher chance of success.
Investment
In charity crowdfunding, since it is usually a need for funds where any amount can help, there is a tendency not to invest as much time or financial effort, either because funds are scarce and urgently needed, or because organizers must also dedicate time to their responsibilities outside the project.
Leaner platforms
Along the same lines, charity crowdfunding platforms themselves tend to be leaner, as they usually focus their competitiveness and efforts on reducing or even eliminating service fees, which results in far more limited promotion, advisory, and outreach services.
Misguided approach
The general issue with charity crowdfunding is that it has tried to copy this model without being able to benefit from its advantages, while failing to develop its own model with its own strengths.
ADVANTAGES
Intangible reward
Although it may seem contradictory, the main advantage of charity crowdfunding is that it does not offer a (material) reward. And the reason is that it doesn’t need to.
Higher demand, greater reach
Other types of crowdfunding need to find people interested in the reward they offer. We can say that most people don’t share the same tastes, and therefore the size of their demand—whether large or small—is clearly limited by each individual’s personal tastes and interests.
On the other hand, we can be sure that most people are good and want to help. Some more, some less, but most people are capable of empathizing with those who suffer and need help.
Whether we can get them to take the step and collaborate is another matter, but what is fairly clear is that the size of the interested audience is clearly larger and more universal, and therefore, an advantage from the start. An advantage yet to be tapped, but later on you’ll understand why I mention it.
Greater flexibility
On the other hand, projects don’t necessarily have to have a specific start and end. While a specific financial amount might be needed to carry them out, along with a deadline to achieve it, it’s also possible that this isn’t always the case. You might need a specific amount for an emergency medical procedure, and therefore you’ll need a specific amount and have a deadline to achieve it. But you might also need to build a water well, so you need a specific financial amount, but don’t necessarily need a deadline to achieve it.
Or on the contrary, perhaps you have a deadline but no specific financial goal, because if, for example, you want to bring medicine somewhere by a certain date, the more money you receive, the more medicine you’ll deliver. You might even have neither a specific financial goal nor a necessary deadline, since if, for instance, you are an association helping refugees, the more money you raise, the better you can help, but you don’t know for how long you will need it.
Specific emergency or ongoing over time
This multitude of possibilities is a major advantage that other types of crowdfunding don’t have. While it’s true that when you have a specific financial goal and a deadline, the sense of urgency tends to mobilize collaborators more, staying active over time means you can receive ongoing, recurring help. This means donors can contribute money on a recurring basis, which isn’t possible in other types of crowdfunding where you drop in, make your one-time contribution, get your reward, and the project ends.
Self-reinforcing
This advantage of sustaining contributions over time brings us back to the previous point, where I emphasized that charity projects have a potentially larger audience. If you’ve collaborated with a charity project, it’s probably easy for you to also empathize with other charity projects on the platform.
Whether you can collaborate with all the ones you’d like is another story. Obviously, everyone has their own finances, and no matter how much you want to, you may not be able to collaborate with all those you’d like. But perhaps you can with another one, or several of them. This can also happen with other types of crowdfunding: you come in for the reward you’re interested in, and maybe you discover another one you might like. But maybe not; maybe you see the rest and none interest you. This is less likely to happen in charity crowdfunding by its very nature, since, as I mentioned earlier, whether you end up collaborating with more projects or not, whether you’re able to or not, you’re definitely more likely to empathize or at least wish to collaborate with the others.
Recurring contributions
Which leads us to another advantage of charity crowdfunding yet to be tapped. If donations can be sustained over time and it’s very likely you’re interested in helping other projects, why not offer the option to become a “member” and collaborate regularly with the causes you care about?
A new approach
The real advantage is that the process can be reversed. You don’t necessarily have to be drawn to a charity project first and only then decide how much you want to collaborate with. Instead, the process can be reversed: think first about how much you can and want to collaborate with, and then decide how to distribute it every month, every week, or every year.
That is the great advantage: most people are caring and want to help others. They just need the tools and flexibility that adapt to their means and needs. And that’s something charity crowdfunding can do.
The advantages of charity crowdfunding on Kukumiku
That’s why at Kukumiku.com we are very aware that we need to focus on these advantages, giving projects the freedom of goal and time to achieve it, while giving donors the ease and freedom to collaborate and choose how they want to do it: how much, how, and for which projects.
And not only that: we also propose an innovative online formula to boost both outreach and the funds raised by projects that wouldn’t fit into other types of crowdfunding.
The online charity raffles and their great advantages, which you can read more about in the linked article.
In this way, we strive to build an inclusive space and sustain both projects and collaborators over time—whether individuals, companies, or organizations—creating a place that strengthens, empowers, and maintains the participation of as many people as possible toward the inspiring goal of building a more humane and fairer world for all.