Crowdfunding for Non-Profits: Opportunities and Challenges

Crowdfunding for Non-Profits: Opportunities and Challenges

Amir Manzoor (Bahria University, Pakistan)
DOI: 10.4018/978-1-7998-1760-4.ch020
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Crowdfunding has been applied to equity investments as well as in a preproduction consumer purchase model. Crowdfunding is projected to become a $US90-96 billion industry by 2025, and is being touted as a valuable tool for fundraising for charitable non-profits. For leading non-profits around the globe a critical question is whether charitable crowdfunding is a threat or an opportunity for them. This chapter demonstrates that charitable crowdfunding represents a powerful new fundraising tool for leading, start-ups and not for profit organisations. This discussion contributes to the financial knowledge, specifically in the online crowdfunding and non-profit organisations and concludes that non-profit organisations through crowdfunding has the potential to expand the donor base.
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Crowdfunding Phenomenon

Crowdfunding is an attractive alternative to traditional funding even for individuals. Crowdfunding is so popular that the campaign sponsors can achieve their funding goal in a very short period. It takes a lot of preparation before the launch of crowdfunding campaign to achieve funding goal. Sometimes, celebrity power can also help achieve funding goal. Take example of music legend Neil Young. He started his crowdfunding campaign and was able to achieve his $2.4 million funding goal in just one day (Ursery, 2014). For small businesses, crowdfunding is a great source of alternative funding. These businesses, musicians, and real estate are the major beneficiaries of crowdfunding (Hogue, 2015; Fisk et al., 2011). In 2014, more than 60% of small and medium businesses (SMBs) in USA alone were looking at alternative sources of funding including friends and family.

For not for profit organizations as well, there is enormous potential to secure financial resources and to leverage the power of the crowd to achieve organizational outcomes by using crowdfunding platforms, such as:

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The US Jumpstart Our Business Startups (JOBS) Act of 2011 allowed smaller investors to purchase shares of a company and some US states enacted their own legislation to allow exemption for intrastate crowdfunding. Several states (including Georgia, Michigan and Washington) were actively seeking actions to shape crowdfunding industry to suit today’s needs (Ursery, 2014). The JOBS act allowed the use of small amounts of capital from a large number of individuals to finance a new business venture over the Internet.

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