Published on March 7, 2014
Using Crowdfunding in Higher Education What is crowdfunding and can it be used effectively in higher education? Dayna L. Boyles-Carpenter
Project Abstract Crowdfunding has become a hot topic for many development professionals in the United States, accounting for $2.7 billion dollars raised in 2012. Estimates for 2013 were even higher. It appeals to many fundraisers because it leverages the social networks of donors to generate funding for projects and organizations. With the proliferation of crowdfunding sites and the recent success of campaigns on platforms like KickStarter and IndieGoGo, development programs in higher education are beginning to take notice. Questions persist about how the platform translates to fundraising in higher education and if it has the potential to become a sustainable addition to the tool kit of annual giving programs.
Project Introduction How can crowdfunding be used by higher education institutions? Understanding crowdfunding principles and practices Applications to donor renewal and retention Cannibalization of unrestricted annual giving programs
Project Context and Relevancy UMBC launched its crowdfunding program in June of 2013. Development professionals in higher education are starting to experiment with the crowdfunding model, but its use in higher education is so new that not a lot of research exists. This research will serve as a resource for development professionals in higher education prior to their launch of a crowdfunding project.
What is crowdfunding? crowd·fund·ing ˈ kroudˈfəndiNG / noun 1. the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet. "musicians, filmmakers, and artists have successfully raised funds and fostered awareness through crowdfunding" (Oxford Dictionaries, 2014)
History of Crowdfunding Originated from crowdsourcing First platform launched in 2001 Musicians and artists Grassroots political fundraising • 2008 Obama Campaign • Blue State Digital • Raised $272 million from over 2 million, mostly small, donors (Gerber, Hoi, and Kuo, 2013, p. 2., Howe, 2009, and Parry, 2009).
Crowdfunding is Growing Fast $5.1 Billion 2013 $2.7 Billion 2012 $1.5 Billion 2011 (Gerber, Hui, and Kuo, 2012, Jarrell, 2013, Danmayr, 2014, and Hanselman, 2014)
Four Primary Crowdfunding Platforms Donation Lending Rewards Equity (Danmayr, 2014, and ScaleFunder, 2013)
Two Types of Funding Models Threshold Model • Funds held in escrow account until the goal is reached. • If goal not reached, contribution is refunded to donor. All-or-Nothing Model • Project owner keeps all funds raised, regardless of whether or not the project goal is reached. (Valanciene and Jegeleviciute, 2013, p. 41)
Motivations of Crowdfunding Donors Digital Natives vs. Digital Immigrants Want to believe that their contributions matter Feedback loops Goals Challenged Specific Attributed to an individual vs. group Reciprocal relationships Rewards/Perks Wash’s Completion Bias Social Loafing (Howe, 2009, p. 261, Brabham, 2013, Gerber and Hoi, 2012, Wash, 2013, Danmayr, 2014, and Klaebe, 2012)
Frameworks for Analysis Rosso’s Concentric Circle Constituency Model Danmayr’s Archetypes of Crowdfunding Models Kihlstedt’s Four Phases of a Capital Campaign
Rosso’s Concentric Circle Constituency Model
Danmayr’s Archetypes of Crowdfunding Type of Crowdfunding Platform Offered Business Model Platform Setting Target Group for Platform Users (Danmayr, 2014)
Kihlstedt’s Four Phases of a Capital Campaign The Quiet Phase The Campaign Kickoff The Public Phase The Campaign Closing Celebration (Kihlstedt, 2009, p. 178-179)
Methods and Context Developed a 37-Question Online Survey Emailed to institutions known to be using crowdfunding Listservs Fundlist CampusCALL LinkedIn Higher Education Fundraisers Crowdfunding Users Group The Annual Giving Network Crowdfunding University
Survey Participants University of Connecticut Hartwick College Towson University St. Mary’s College of University of Bridgeport Cornell University Penn State University University of California, Santa Cruz Temple University Washington State University Middlebury College University of Maryland Baltimore County Maryland St. Joseph’s College DePaul University University of Queensland Augsburg College Worcester Polytechnic Institute University of Cincinnati Salem College Anonymous
Results & Findings Institutions were motivated to explore crowdfunding: To drive alumni participation rates To engage student and young alumni donors To explore all available revenue streams To be more donor-centric and to connect donors with their impact on students To build a culture of philanthropy
Results & Findings When did your institution first launch its crowdfunding platform? 2010 0% Other 10% 2011 5% 2012 5% 2014 35% 2013 45%
Results & Findings
Results & Findings
Rosso’s Concentric Circles Constituency Model Applied to Crowdfunding (Adapted from Temple, Seiler, and Aldrich, 2011, p. 20-21)
Danmayr’s Archetypes of Crowdfunding Platforms Crowdfunding Types Most colleges and universities are using a donation- based model Others use hybrid approach with rewards-based model Business Model Crowdfunding Platform Setting Target Group (Danmayr, 2014)
Crowdfunding as an extension of major gifts? Planned or Principle Gifts Major Gifts Annual Giving Crowdfunding Prospects (Adapted from Temple, Seiler, and Aldrich, 2011, p. 45)
Capital Campaigns (Revisited) The Quiet Phase The Campaign Kickoff The Public Phase The Campaign Closing Celebration (Kihlstedt, 2009, p. 178-179)
Crowdfunding and the Millennial Generation Will inherit $140 trillion between now and 2052*. Respondents shared a goal of engaging younger and recent graduates. 15/20 respondents were using crowdfunding to help support student organizations and grassroots student-generated programs. Passionate about causes, not necessarily about organizations or institutions. (GiveCorps, 2014)
A fully integrated approach Don’t count out traditional vehicles Direct mail Calling programs E-solicitation Crowdfunding as online giving page Replacement for PURLs Giving Days or Challenges
Perks & Incentives Contributors are attracted to projects offering tangible products and services. Sixty-five percent of respondents were not offering perks or incentives. Fair-market-value Management Experiential vs. Tangible
Recommendations Define Your Campus Needs Build an Army of Advocates Educate Project Owners Identify the Project Crowd Define a Timeframe Plan for Success Utilize Metrics Stay Flexible
Cautions Crowdfunding should not replace traditional annual giving strategies. Oversaturation of constituency. The dangers of third-party sites: Hard credit vs. soft credit vs. no credit Loss of brand control Proliferation of start-ups Crowdfunding is not just for young people. “Crowdfunding is not a silver bullet . . .” (K. Williams, personal communication, 2014). (Greenberg, personal communication, 2014 and McDonald, personal communication, 2014)
Conclusions Crowdfunding in higher education can: Help drive alumni participation rates Broaden fundraising constituency bases Serve as a lead generation and data capture tool Educate students and young alumni about the impact of philanthropy Provide a seamless experience for newly acquired donors as they transition to be long-term and/or major gift donors
For more information, please contact: Dayna Carpenter Director of Annual Giving, UMBC 410-455-3377 firstname.lastname@example.org www.linkedin.com/in/daynacarpenter/ This presentation was submitted as partial completion of the requirements for the MS in Strategic Fundraising and Philanthropy degree program at Bay Path College.
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