What is crowdfunding and can it be used effectively in higher

education?

Dayna L. Boyles-Carpenter

Using Crowdfunding in Higher Education

Project AbstractCrowdfunding 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 retentionCannibalization 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·ingˈkroudˌfəndiNG/noun1. 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 CrowdfundingOriginated from crowdsourcingFirst platform launched in 2001Musicians and artistsGrassroots 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

(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 DonorsDigital Natives vs. Digital ImmigrantsWant to believe that their contributions matterFeedback loopsGoals

Challenged SpecificAttributed to an individual vs. group

Reciprocal relationshipsRewards/PerksWash’s Completion BiasSocial 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

ListservsFundlistCampusCALL

LinkedInHigher Education Fundraisers Crowdfunding

Users GroupThe Annual Giving NetworkCrowdfunding University

Survey Participants

Results & FindingsInstitutions 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

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 TypesMost colleges and universities are using a

donation-based modelOthers use hybrid approach with rewards-

based modelBusiness ModelCrowdfunding Platform Setting Target Group

(Danmayr, 2014)

Crowdfunding as an extension of major gifts?

(Adapted from Temple, Seiler, and Aldrich, 2011, p. 45)

Kihlstedt’s Four Phases of 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

GenerationWill 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 grass-roots student-generated programs.

Passionate about causes, not necessarily about organizations or institutions.

(GiveCorps, 2014)

A fully integrated approach

Don’t count out traditional vehiclesDirect mailCalling programsE-solicitation

Crowdfunding as online giving pageReplacement for PURLsGiving Days or Challenges

Perks & IncentivesContributors are attracted to projects

offering tangible products and services.Sixty-five percent of respondents were not

offering perks or incentives.Fair-market-valueManagement Experiential vs. Tangible

RecommendationsDefine Your Campus NeedsBuild an Army of AdvocatesEducate Project OwnersIdentify the Project CrowdDefine a TimeframePlan for SuccessUtilize MetricsStay Flexible

CautionsCrowdfunding should not replace traditional

annual giving strategies.Oversaturation of constituency.The dangers of third-party sites:

Hard credit vs. soft credit vs. no creditLoss of brand controlProliferation 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)

ConclusionsCrowdfunding 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 CarpenterDirector of Annual Giving, UMBC410-455-3377dayna@umbc.edu

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.

ReferencesAaker, J. & Smith, A. (2010). The Dragonfly Effect: Quick, Effective, and Powerful Ways

To Use Social Media to Drive Social Change. Jossey-Bass. San Francisco, CA.

Akers, S. (2012). The Secrets of Crowdfunding: A Step-by-step Guide to Getting the Most From

Your Kickstarter Campaign. Sean Akers.

Bartlett, T. (October 2012). A Kickstarter for Science. The Chronicle of Higher Education.

Retrieved Thursday, November 28: http://chronicle.com/article/A-Kickstarter-for-Science/135058

Brabham, D. (2013). Crowdsourcing. Massachusetts Institute of Technology. Cambridge, MA.

Brinckerhoff, P. (2004). Nonprofit Stewardship: A Better Way to Lead Your Mission-Based Organization. Fieldstone Alliance. New York, NY.

Buchanan, P. (2000). Handbook of Institutional Advancement. Third Edition. Council for

Advancement and Support of Education.

Burnett, K. (2002). Relationship Fundraising: A Donor-Based Approach to the Business of

Raising Money. Third Edition. Jossey-Bass. San Francisco, CA.

Cohen, T. (February, 2013). Charitable Giving Report: How Nonprofit Fundraising Performed in

2012. Blackbaud. Charleston, SC.

Danmayr, F. (2014). Archetypes of Crowdfunding Platforms: A Multidimensional Comparison.

Springer Gabler. Steyr, Austria.

Dawkins, T. (December 2012/January 2013). Tap the Power of the Internet for Your Fundraising Campaigns.

OurChildren.

Eberhart, R. (2011). The Big Idea. Middlebury Magazine. Retrieved February 26, 2014, from

http://sites.middlebury.edu/middmag/2011/06/28/the-big-idea/

Gerber, E. & Hui, J. (2013). Crowdfunding: Motivations and Deterrents for Participation. Retrieved November

20, 2013, from http://egerber.mech.northwestern.edu/wp-content/uploads/2012/11/2014_

CrowdfundingMotivations_TOCHI_Accepted.pdf

Gerber, E., Hui, J., & Kuo, P. (2012). Crowdfunding: Why People Are Motivated to Post and Fund Projects on

Crowdfunding Platforms. Retrieved November 20, 2013, from http://distworkshop.files.

wordpress.com/2012/01/dist2012_submission_11.pdf

Gobble, M. (n.d.). Everyone Is a Venture Capitalist: The New Age of Crowdfunding. Research-Technology Management.

Gossen, A. (2013). The Case for #Crowdfunding in #HigherEd #Advancement. Higher Ed Crowdfunding. Retrieved

February 27, 2014 from http://higheredcrowdfunding.tumblr.com/

Hanselman, S. (2014). Crowdfunding in Advancement. Academic Impressions Webinar.

Howe, J. (2008, 2009). Crowdsourcing: Why the Power of the Crowd is Driving the Future of Business. Random House, Inc.

New York, NY.

Jarrell, A. (May/June 2013). Crowd Around: Expanding your donor pool with crowdfunding.

CASE CURRENTS. Vol. XXXIX No. 5. Council for Advancement and Support of

Education.

Joly, K. (July 2013). Higher education crowdfunding: After social media and MOOCs, watch out for crowdfunding. University Business.

Kanter, B. & Fine, A. (2010). The Networked Nonprofit: Connecting with Social Media to Drive Change. John Wiley & Sons,

Inc. San Fransico, CA.

Kihlstedt, A. (2010). Capital Campaigns: Strategies That Work. Third Edition. Jones and Bartlett Publishers. Sudbury, MA.

Klaebe, H. (July 2012). How to work the crowd: A snapshot of barriers and motivations to crowdfunding. Artsupport

Australia. Australia Council for the Arts.

Mansfield, H. (2012). Social Media for Social Good: A How-to Guide for Nonprofits. The McGraw-Hill Companies. United

States.

McDonald, J. (2014) Fundraising Trends 2014: Grow Your Base of Monthly Givers. GiveCorps Blog – Educated Giving.

Retrieved Wednesday, February 26, 2014 from blog.givecorps.com/fundraising-trends-2014-grow-your-base-of-monthly-givers/hsFormKey

Ossakow, D. (August 2011). Would Microphilanthropy Work in Athletics Development? Athletics Development

Frontier: Innovations. Practices. Results. Retrieved February 1, 2014 from athleticsfrontier.com/archives/1929

Parry, M. (April 2009). Colleges Weigh ‘Yes We Can’ Approach to Fund Raising. The Chronicle of Higher Education.

Retrieved Thursday, December 5, 2013: http://Chronicle.com/article/Colleges-Weigh-Yes-We-Can/5440/

Rocheleau, M. (November, 2013). ‘Crowdfunding’ effort pays off for BU student: Struggling but Innovative, a BU

student turns to ‘crowdfunding’ site to raise money for tuition and fees.The Boston Globe. Retrieved January 20,

2014 from http://www.bostonglobe.com/metro/2013/11/13/crowdfunding-pays-off

forstudent/OCbSkZLlEkQBORcR29qx6J/story.html

Sandlund, J. (May, 2013). How Crowdfunding can Reignite Alumni Engagement. TheCrowdCafe. Retrieved

February 23, 2014 from http://www.thecrowdcafe.com/alumni-crowdfunding/

Sandlund, J. (April, 2013). Why Universities Should Get Smart on Crowdfunding. TheCrowdCafe. Retrieved

February 23, 2014 from http://www.thecrowdcafe.com/editorial/

ScaleFunder (2014). Helping Intelligent Donors Invest in Intelligent Ways.

Stoner, M. (2013). Social Works: How #HigherEd Uses #SocialMedia to Raise Money, Build Awareness, Recruit Students, and

Get Results. EDUniverse Media. St. Louis, MO.

Surowiecki, J. (2004, 2005). The Wisdom of the Crowds. Random House, Inc. New York, NY.

Switzer, C. (July 2013). Young Donors Are Turned Off by Out-of-Date, Uninformative Web Sites. The Chronicle of

Higher Education. Retrieved July 22, 2013 from chronicle.com/article/Young-Donors-Are-Turned-Off- by/140455/?cid=at&tm_source=at&utm_medium=en

Tempel, E., Seiler, T., & Aldrich, E. (2011). Achieving Excellence in Fundraising. Third Edition. Jossey-Bass. San

Francisco, CA.

Thorpe, D. (2013). Crowdfunding for Social Good: Financing Your Mark on the World.

Tugend, A. (February 2014). The Effect Crowdfunding Has on Venerable Nonprofits Raises Concern. The New York

Times. Retrieved February 8, 2014 from http://www.nytimes.com/2014/02/08/your-

money/crowdfundings-effect-on-venerable-nonprofits-raises-concern.html?_rl

Valanciene, L. and Jegeleviciute, S. (2013). Valuation of Crowdfunding: Benefits and Drawbacks. Economics and

Management. Vol. 18, Number 1. Kaunas University of Technology, Lithuania.

Vanderkam, L. (November 2010). Microphilanthropy if changing the face of charity. USA Today. Retrieved January 23,

2014 from http://usatoday30.usatoday.com/news/ opinion/forum/2010-11-17

column17_ST_N.htm

Wash, R. (n.d.). The Value of Completing Crowdfunding Projects. Michigan State University. Retrieved November 21,

2013 from http://rickwash.org/papers/donors-choose-icwsm.pdf

Wiseman, R. (July 2011). Middlebury College Draws Young Donors With Microphilanthropy. The Chronicle of Higher

Education. Retrieved February 15, 2014 from chronicle.com/article/Middlebury-College-Draws-

Young/128427