Disrupting Charity: How rapid growth in crowdfunding is affecting the nonprofit sector

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The Agenda (TVO) by Tim Alamenciak | March 24, 2015

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When three-year-old Elijah Marsh wandered into the cold on a freezing February morning in Toronto, the whole city mobilized in an effort to find him. Neighbours searched city streets, while emergency responders rallied every available set of boots. Elijah took over screens and airwaves until the moment he was found—alone and frozen to death.

His story sparked the sympathies of thousands, but a local technology reporter and father of two was among the first to act. He channeled his emotion into a crowdfunding campaignon the website Tilt.com. The goal was straightforward: raise money to help pay for the toddler’s funeral.

The donations would soon outstrip the ambition of an otherwise modest idea, topping $170,000 by the end of the campaign.

“Hopefully, this money will also help [Elijah’s mother] support herself in the time that she's not able to work because of what happened,” said Justin Kozuch, 36, who started the campaign that kicked off a conversation about the changing dynamics of charity.

Related: Google Hangout with Chimp: Charitable Donations and Crowdfunding

Philanthropic giving is shifting dramatically. Digital funding platforms that allow potential donors to contribute directly to a cause quickly and easily are highlighting undercurrents that have been developing for more than a decade. The changes present both significant challenges and significant opportunities for the non-profit sector.

“It's been a challenging time for charities. That isn't a woe-is-us comment—things really are evolving,” said Nicole Nakoneshny, the editor of Philanthropic Trends Quarterly and vice-president with KCI.

Increasingly donors want their dollars to go directly toward helping the cause, rather than supporting other activities that indirectly contribute to a larger goal, such as staffing, infrastructure and marketing.

“If you have a peer-to-peer campaign saying I need money to build infrastructure, nobody will give to it. What's sexy and emotional about that? Nothing. But it's what's needed,” said Marina Glogovac, CEO of CanadaHelps, the first Canadian organization to move charities onto the Internet with its online donation platform.

Despite its high profile, the crowdfunding market is actually only responsible for a tiny portion of charitable giving. The crowdfunding economy—the total pool of dollars given to everything from charitable causes to potato salad through crowdfunding platforms—is estimated at $5-billion according to Massolution, a crowdfunding research group. By comparison, charitable giving in Canada alone reached $12.8-billion in 2013, according to Statistics Canada.

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Contributions to charity are actually trending upward, increasing 14 per cent from 2010 to 2013. The type of donor, however, is changing. Overall, there are fewer donors, but those same donors are contributing more on average.

To match the growing importance of impact, charities have changed their appeal strategy. Rather than marketing their work and asking for more money to support it, the trend is offering potential donors the perception of direct engagement.

“We're always trying to tap into exactly what this feeling of crowdfunding is,” said Doug Wayne, manager of national digital marketing for the Canadian Red Cross.

The Canadian Red Cross’ 2014 Christmas campaign is a prime example of the drive to mimic crowdfunding’s emotional appeal. A slick interactive web interface allows a donor to fill their virtual cart with items to help the less fortunate enjoy the holiday season. Clicking the icon for a hot meal ($70 for one week’s worth) puts a plate of turkey and potatoes on the table while notching up the user’s donation tab.

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“We're trying to make giving resonate a little bit more—you're not just going on a donation page and paying $30 and entering your credit card information,” said Wayne.

But unlike crowdfunding efforts, the money is distributed by an organization with experience supervising large-scale aid programs. Spontaneous giving campaigns lack an infrastructure to distribute money efficiently.

Kozuch is still wrangling with how to get the massive amount of money he raised in his crowdfunding campaign to the Marsh family.

“We're working on that process right now—there are a lot of moving parts. As I've learned, it's not as simple as giving them this incredible amount of money,” said Kozuch. “It's a very complex situation, but we’re working on it.”

As of the publication of this piece, Kozuch said he was ready to pick up a bank draft and would deliver it to the family this week.

In another case of crowdfunding, James Robertson, a Detroit man who walked 21 miles to work each day, was given $360,000 in public donations. Though the fund was originally created to buy him a car, it quickly surpassed its intended mark.

The effect of the money on Robertson’s life was profound. He moved twice after receiving threats against his life and filed a court order against his ex-girlfriend, who wanted a cut.

Crowdfunding is likely to grow even more, according to Michael Johnston, founder and president of Hewitt and Johnston Consultants, a company that advises charities on fundraising.

“We see donors across all ages are omnivorous in that they use multiple channels and approaches to help a charitable organization,” said Johnston.

 

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