Crowdfunding can be a great way to raise money quickly from a broad group of supporters. Whether your charity wants to launch a crowdfunding campaign for the first time or seeks a new platform, experts recommend taking time to carefully assess your options. With more than 1,000 crowdfunding platforms out there, this will require research.
“The same due diligence that you would do for any other vendor you should be undertaking for any of these crowdfunding platforms,” says David J. Neff, vice president of consulting at Clearhead, a firm that works with nonprofits and Fortune 500 brands on digital strategy.
Here’s a list of questions adapted from the Office of the Ohio Attorney General that you should ask before selecting a crowdfunding platform. Mr. Neff and other experts offer guidance on how getting answers to these questions can help you avoid many common crowdfunding pitfalls.
1. What fees will the website deduct from each contribution? This varies widely among crowdfunding platforms. “Make sure to understand what the fee covers and doesn’t cover,” says Miriam Kagan, senior principal at the online fundraising platform Kimbia.
Check whether the fee includes the the credit card processor’s charge. Some platforms offer donors the option of giving slightly more to cover the fee so that charities don’t bear the burden. Nobody should be paying more than 10 percent or so in fees, including the credit card processing fee, Ms. Kagan says.
Mr. Neff suggests charities assess the fees on several sites and compare them to the fees they pay for donations through their own online donation page.
2. Will a charity receive donors’ information? When and how? “One of the big pieces of successful crowdfunding is the crowdfunders’ ability to engage, communicate, and be transparent and open about the status of their campaign, the struggles that they’re having, anything that might come up,” says Rose Spinelli, a crowdfunding consultant.
Donors should be able to get some data from every platform, but there are variations. Determine how much detail you want about crowdfunding supporters and if the platform can provide what you need.
Some sites allow charities to access donor names and other data whenever they want, while others may make charities pay to get names or wait a certain number of days after an event is completed to access the data.
Especially if you’re looking to use the platform for more than just a one-off campaign, find out how easily you can transfer data back and forth with your database, Ms. Kagan says. If the platform doesn’t have some kind of open API, or application programming interface, which developers can access to integrate the information into other software applications, it could be a challenge to work with the data.
“Any platform that is not sharing that data with you or doesn’t let you download the data is one to avoid,” says Mr. Neff.
3. How will the website use a donor’s information? Is a privacy policy in place? Even if the site explains what it will do with donor data, it behooves every organization to contact a potential platform and ask this question. Says Ms. Kagan, some sites believe that information is not yours alone; they believe it is theirs to sell or use for remarketing — possibly without the donor knowing.
When reviewing a platform’s terms of service, privacy policy, or data policy, Mr. Neff suggests having someone with legal knowledge help. “Make sure the policies fit with your organization’s culture and what you’re comfortable with,” he says.
4. When will contributions be deposited into a charity’s bank account or mailed to the charity? Some platforms deposit money directly into an organization’s account when payments are processed. Others take in all the money and then write a check. Some platforms have a waiting period, or will issue a check only once a month, for example. In some states, solicitation laws require funds to be deposited in the charity’s bank account within a few business days.
“The most important thing to understand is if you get the money directly or not,” Ms. Kagan says. “If you don’t get the money directly, find out when do you get it, how frequently, in what format, and if there are any limitations on getting that money.”
5. What happens to contributions to campaigns that don’t meet a certain threshold? Some sites process the donations and pay the charity only if a campaign meets its fundraising goal. Others will let the charity keep what it earns, regardless of whether the goal is met. Some give charities the choice. Make sure you understand your options.
6. What steps does the website take to prevent solicitation fraud? Ms. Kagan suggests that charities find a platform that gives options to set up controls and set guidelines for how people can raise money on their behalf. Some platforms may not permit charities to approve the fundraisers. In those cases, the nonprofit should find out if it will have access to data about fundraisers.
Look for platforms that are compliant with Payment Card Industry Data Security Standards and that have a history of mitigating problems like credit card fraud, she says. Find out if the platform has a clear way for people to work with the payment processor if any issues arise.
7. What kind of accounting will the website provide to a charity? If questions arise, what procedures are available for the charity to challenge the accounting? Any platform should tell a charity how much people gave and how many donations came through, Ms. Kagan says. Some platforms may provide direct access to this information. If a platform doesn’t, find out if there’s an easy way to get it.
8. Can the website handle the volume of visitors and transactions? If you anticipate that you’ll have a high volume of visitors and transactions — especially if you’re planning a giving day or a big time-limited campaign — you’ll want to consider platform stability and scalability, Mr. Neff says.
A platform should tell clients how many visitors and how many transactions per minute it can handle, says Ms. Kagan. She suggests that a charity look at its busiest online fundraising day (probably December 31), multiply the number of visitors on that day by two, and ask the provider if it can handle this volume.
Research and compare platforms using a site like similarweb.com, which shows on average how many monthly visitors a website attracts. “If the number is abysmally low, that’s a red flag,” Mr. Neff says.
9. What kind of assistance does the platform provide? Some third-party platforms are dedicated to nonprofits, while others host a broader range of campaigns. The accounting rules are different for for-profit groups, and a site may not have expertise in serving nonprofits even if it welcomes them, Ms. Kagan says.
Organizations should determine the support offered for technical issues and general inquiries. Some sites have staff dedicated to nonprofit clients. Find out if there is a dedicated person or team to help walk you through your first campaign, Mr. Neff suggests.
10. How much customization is allowed? Should we build our own? Ms. Kagan acknowledges that a site that bears a charity’s brand is ideal. “That doesn’t mean building it from scratch, but rather using somebody that allows them control over what kind of fundraising projects are started, who’s fundraising, where they can review it — versus a platform where anybody can start a [campaign] for any reason, and then it just issues a check [to the organization].”
A customized online fundraising site may make more sense for large charities that will be able to direct enough traffic to the site, Mr. Neff says. If that’s not a sure thing, he suggests using a more well-known site and “going where the crowd is.”
Ms. Spinelli suggests finding “white-label software,” which allows an organization to apply its own name and logo to a crowdfunding application and generally requires little knowledge of coding. Once installed, these programs enable nonprofits to offer crowdfunding while keeping donors on their own websites. Tilt is one example of a white-label crowdfunding company.
11. Can we find references for the site? Mr. Neff suggests finding a platform with an educational component, like helpful tips, blog posts, nonprofit case studies, and other resources.
And Ms. Spinelli says the best way to find out about various platforms is to go to online forums and to talk to other people who have run campaigns on the sites you’re considering. Crowdcrux, for example, is a site where you’ll find discussions about all things crowdfunding.
“Crowdfunding is hard,” Ms. Spinelli says. “Do your homework.”
