10 Crowdfunding Characteristics that are Challenging Higher Education

With direct mail, telemarketing and email yielding ever-declining fundraising results, the promise of crowdfunding is attracting the rapt attention of college and university development programs everywhere.

Finally, it seems, the panacea has arrived. Crowdfunding appears to be the perfect approach for our burgeoning young alumni populations that have, until now, largely shunned the more traditional approaches to annual giving solicitations. We’re excited by evidence of the next generation’s philanthropic spirit when we learn they’ve helped a veteran stay in his home, made possible a kidney transplant for a little girl and kept the inner-city animal shelter open.

Colleges and universities want in. Besides, if they don’t, students and faculty will simply launch their own crowdfunding campaigns through Kickstarter or other programs. When this occurs, gifts aren’t captured in the campus database of record, donors aren’t recognized, receipts aren’t issued and donors don’t receive a tax deduction. Non-sanctioned campaigns may also misrepresent the institution while spending takes place outside the university financial system.

Crowdfunding is thought to be the new, exciting arrow in the annual giving quiver.

But before college and university development programs dive in, senior leaders need to understand the mighty challenges crowdfunding is bringing to well-established fundraising programs that focus on long-term relationships and results.

Here are 10 characteristics of crowdfunding that campuses must consider – and eventually overcome – to successfully realize the panacea’s promise.

1. Crowdfunding focuses on urgent, deadline-driven and very specific needs

The typical case for campus annual giving programs – unrestricted support, general scholarships, college programs, undergraduate research, etc. – doesn’t easily lend itself to crowdfunding’s unique focus on short-term fundraising for specific urgent needs. Campuses must wrestle with crowdfunding’s ever-finer micro-designations that may include a specific student’s medical bills, new trombones for the marching band or a set of goal posts for the rugby club.

2. Crowdfunding depends on the volunteers’ fundraising agenda

Crowdfunding campaigns bubble up not from the annual giving office but from students and faculty with big and heartfelt ideas. To attract such grassroots fundraising movements, development shops brand their crowdfunding program and essentially hang out a shingle to encourage participation. Most campaigns align with the university’s mission and image and have a philanthropic purpose.  Some do not.

3. Crowdfunding requires focused training

Campus groups know they want to raise money through crowdfunding, but they typically lack the know-how and best-practice experiences.  They need training, guidelines and yes rules. Too many requirements and red tape, however, can drive a group to run their own campaign outside the university’s program. Campuses contemplating crowdfunding must realize it is far from a turn-key process. Doing it right requires staffing resources on par with telemarketing support.

4. Crowdfunding depends on compelling stories through video

Crowdfunding reminds veteran fundraisers that compelling stories outsell statistics every time. Successful university crowdfunding programs provide video support to campus groups to help pull at the heartstrings of defined audiences.

5. Crowdfunding depends on personal social networks

Crowdfunding follows the old fundraising adage, “People give to people.”  Thus, a motivated student seeking support for clean water in Africa will likely include his family, friends and neighbors as part of his social network. A gift from a benevolent uncle, for instance, is motivated more by his relationship to his nephew than his loyalty to the institution. Crowdfunding donors are more likely non-alums than alums, meaning limited impact on alumni participation rates for US News and World Report rankings.

6. Crowdfunding currently lacks a coherent renewal and upgrade strategy 

Say a 25-year old graphic design alumna makes her first gift to a university through a crowdfunding campaign to help send a group of graphic design students to a professional conference. A focused annual giving program would work to renew and upgrade a donor’s interest in subsequent months, but this becomes a challenge when the new donor was acquired through a one-time crowdfunding campaign. Will this newly acquired donor respond to a different appeal through direct mail, telemarketing or other broad-based strategy?

7. Crowdfunding challenges university financial systems and accountability 

The business and finance office may be reluctant to set up short-term gift accounts with balances anywhere from $500 to $10,000. Spending authority and procedures also come into play, especially with student organizations involved.

8. Crowdfunding campaigns may not win the favor of deans and other leaders seeking priority-driven support 

Deans and unit-based development staff with specific targets and priorities may have a neutral or dim view of short-term crowdfunding results. While they may appreciate their students involvement in philanthropy, crowdfunding campaigns don’t likely line up with targeted fundraising priorities. Micro-designations may be viewed as competitive to a unit’s “real needs.”  

9. Crowdfunding campaigns have a low-cost image that make cost-sharing difficult

We read about the fifth grader who raises $75,000 through a Kick Starter campaign at virtually no cost.  Idealistic student groups that attract relatively small amounts of money through crowdfunding are in no mood to hear about the direct and indirect expenses related to their campaign.   Neither are deans and other budget managers who don’t see dollars flowing to their priority projects.

10. Crowdfunding requires a significant commitment of time and capital 

Launching and managing a university’s full-fledged crowdfunding platform and running perhaps 25, 50 or 100 campaigns a year requires significant resources. While upfront software costs have decreased, they still may take years to recoup. Ongoing expenses including dedicated professional staff, student employees, space needs, video production, ongoing software licensing fees, etc., make crowdfunding a new budget line to grab attention.

It’s early in the game. The most established crowdfunding programs are three years old, and they, along with others newer to the scene, are continually learning and adapting to fit college and university fundraising models.

But is crowdfunding a square peg to the university’s round hole? Can the charming, more free-wheeling characteristics of crowdfunding fit within higher education’s more structured setting?  Will it eventually net any substantial and priority-driven philanthropy? Does crowdfunding build relationships, lead to larger gifts, and add to the overall culture of philanthropy?

It’s early.  Jury’s out.