Why Crowdfunding for NGOs is Not Sustainable

$88 million dollars. That’s about R1.14 billion rand… for a video game. This is the amount of funding received for the Star Citizen video game on Kickstarter, a crowdfunding site where ordinary people ‘donate’ their money to projects they want to see materialise. Crowdfunding is exploding all over the world, raising money for nearly anything including Greece’s debt, new businesses, new innovations, and non-profit work. As such, raising money has become a business, but what if there was a way to do it differently, more efficiently, with a higher impact?

Crowdfunding sites charge for their services which is completely understandable considering the cost of their overheads and the continual development of the platforms. Most charge using a commission-based system on donations, but for organisations such as non-profits, these charges can accumulate quickly. Commission can range anywhere from 5-15%, pushing up non-profit administration costs, reducing the impact of giving. You might as well give directly to the NGO and save them the money.

It’s understandable that the majority of South Africa’s non-profit organisations, nearly 150 000 in total, battle for funding and are looking to crowdfunding as a potential alternative funding stream. The power of the crowd is alluring. But pure crowdfunding may not be the solution NGOs are looking for. The additional commission costs of crowdfunding combined with the difficulty that comes with running an effective campaign may make this too difficult for the average non-profit. Crowdfunding is hard, the competition is fierce, and it requires all the elements of a proper and well-organised fundraising and marketing campaign. Thus the need to innovate.

Crowdfunding is a good idea BUT, here is a better one. Different.org is a crowdfunding philanthropy platform that does not rely solely on direct donations to get projects funded AND gives 100% of donations to the projects on the platform. ‘Well how do you make money?’, we often hear people ask. Simply put: we don’t. Different.org is supported by Different Life whose mandate is to maximise impact, not profit. Different Life is a financial services company that  donates 10% of its pre-tax profit to enable the system to run. This allows all donations to go to the project concerned, but here is the real innovation: ALL of the projects have three potential funding streams: direct donations (credit card, eft), a payroll giving scheme (Different Payroll Giving), and the Different Donation.

The Different Donation allows Different Life policyholders to donate their first and every anniversary premium to projects on the platform. Every year as Different Life sells policies and policies become one year older, policyholders get their Different.org wallets credited with one premium which they can donate to a project of their choice. This kind of funding has a compound effect as one year builds upon the next, and with expansion, this system could potentially make millions available each year to NGOs on the platform.

In addition, Different.org assists non-profits with marketing ideas, communications to potential donors and, in some cases, producing engaging media such as blog posts and videos to generate interest in their project. The campaign process is thus made easier by leveraging off professional marketing expertise and funding is made more secure by relying on three separate funding streams. To ensure you have donated well, Different.org also provides comprehensive feedback on all projects.

This combination of factors has ensured that nearly all the projects on Different.org have been  fully funded. Non-profit fundraising will continue to get more difficult and crowdfunding, although in its infancy, provides a new avenue for generating funds but used in its present form it may not be a sustainable solution for NGOs. Different.org’s innovation perhaps offers NGOs a longer term solution without increasing overheads.
Now if only others would copy us…then changing South Africa would happen a whole lot quicker.