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Crowdfunding Controversies and How They Impact Nonprofits and Charities

Crowdfunding Controversies and How They Impact Nonprofits and Charities

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I've donated to some weird crowdfunding campaigns. I supported a vegan food truck, a book about metal dudes and their cats, a rescued chihuahua's hip surgery, and an iPhone case with a built-in taser. I've also donated to personal fundraisers, when my friends are raising money for a pet project or trying to pay off a large medical bill. While my favored crowdfunding campaigns might be eclectic, they all have one thing in common: I trust them.

But what happens when that trust gets broken?  We've written quite a bit on the benefits of crowdfunding campaigns here on TechSoup, including a platform comparison and a webinar called The Wisdom of the Crowd(funding). Unfortunately, some recent controversies show there is a dark side to this potentially powerful fundraising tool: crowdfunding scams. When a campaign isn't what it appears, it not only hurts the individual supporters and donors involved, but also other crowdfunders.

In other words, nonprofits and charities that are raising money for good purposes shouldn't be punished for the more nefarious crowdfunding campaigns.

There needs to be transparency and expectations that not only protect donors, but also other individuals and organizations who are involved in crowdfunding campaigns.

The HealBe Scandal

This is important in light of a recent controversial crowdfunding campaign. A company called HealBe launched a campaign for a device called the GoBe, which promised all sorts of cool e-health benefits. According to HealBe, the GoBe could count calories burned during a workout by measuring glucose levels in the bloodstream without even breaking the skin. Basically, it goes above and beyond the current fitness wearables out there, like the FitBit and the Up, by giving an accurate count of calories consumed and burned.

That sounds so incredible that it almost couldn't be real, right? Um, right. HealBe, at least, hasn't presented any compelling evidence to show that their product works. PandoDaily blew the lid off the HealBe campaign after it reached $730,000 in funding. James Robinson, the author of the article, wrote:

"And so, keen to be the first reporter to cover this marvelous piece of technology, I started asking questions. What I discovered was something far from the slick, Bay Area start-up Healbe purported to be. Rather, I found a publicity-shy company, operated remotely from Russia, promoting a device unsupported by any medical or scientific evidence whatsoever."  

I highly recommend reading Pando's series of articles on the Healbe campaign for a good example of how NOT to be transparent in crowdfunding.

The Crowdfunder Bill of Rights

By promoting transparency, the Crowdfunder Bill of Rights helps address some of the potential problems with crowdfunding campaigns. David J. Neff of Lights. Camera. Help. along with Miriam Kagan of Kimbia have put together the Bill of Rights directly for donors and nonprofits. Over on NTEN's blog, Neff writes that the Bill of Rights will generate trust and transparency between nonprofits and their donors. On Kimbia's blog, Kagan writes, "The most successful relationships between NGOs and their constituents are based on transparency and trust."

You can read the full Crowdfunder Bill of Rights on the Kimbia blog, but a couple points stood out to me:

  • Clear Timelines and Goals. Don't overpromise anything and be honest if you can't meet those goals. If you're promising a magnet for every $10 donation and your magnet maker is delayed for whatever reason, communicate that immediately to your donors.
  • Show a Clear Connection. You must show how the money that you're fundraising is going to actually be used. The food truck campaign I supported had mock-ups of what the food truck would look like and pictures of sample menu items.
  • Report Back. This one is huge. You have to keep your donors regularly updated on the progress of your campaign or project. How many kittens have you rescued with the money donated so far? When can we expect an iPhone case that not only protects our phones, but also sends a mega-jolt of electricity?  Share pictures, updates, quotes from people involved in the project or benefitting from it, etc.

Neff and Kagan are looking for feedback on the Bill of Rights so if you have ideas, head on over to their respective blogs (NTEN and Kimbia) and leave a comment.

Platforms to the Rescue!

An easy way to avoid any potential crowdfunding snafus is by using a trusted platform. These platforms have templates, so you can easily provide images and videos demonstrating your campaign in action.

We covered a few of the biggest crowdfunding platforms in a blog post. One of the platforms, CauseVox, is new to the TechSoup donation program. CauseVox is tailored for nonprofits and charities with 24/7 customer support for crowdfunding newbies (and pros!).  Teespring is another crowdfunding platform available through TechSoup.

Indiegogo is a favorite among nonprofits and charities. Not only does Indiegogo offer discounts on fees, you can also get a badge on your campaign that says you're a verified 501(c)(3) nonprofit (which, according to an Indiegogo rep I spoke with, helps with garnering donations). They've also hosted some successful nonprofit campaigns: Aid Afghanistan for Education and Peace raised over $10,000 on its Indiegogo campaign.

This HealBe campaign has been an unfortunate event for Indiegogo's reputation. It's hard to say what kind of lasting effect (if any) the campaign will have on the platform; it will be interesting to see how this whole thing shakes out. It's clear, however, that there needs to be some sort of regulation in place to protect both donors and nonprofits.        

Image:  lendingmemo

Ginny Mies is a Content Curator at TechSoup Global.

  • Thanks, I'm really interested in Crowdfunding developments and appreciate your coverage of it!