Crowdfunding – Free Market Solutions for Social Causes

crowdfundingpicIf you’re like me, you’ve probably contributed to a couple of crowdfunding campaigns before. I love the idea of crowdfunding. It feels great to direct your support to projects in which you are interested, and to be able to contribute an amount that works for you. It’s like a more visible and interactive way of fundraising and donating. Crowdfunding started out mainly as a platform used for deliverable content like films and music but recently, it has expanded to include personal and cause-oriented projects such as helping victims of natural disasters or supporting the adoption of a child. Essentially, crowdfunding has become a free market solution for social causes.

GoFundMe seems to be the premier platform for cause-oriented crowdfunding, but IndieGoGo can still claim it’s place as the first personal and non-profit funding platform. IndieGoGo recently decided to make a move for GoFundMe’s crown by building a new site called Generosity on what was formerly known as IndieGoGo Life. Generosity will offer a few competitive pricing features that should set it apart from GoFundMe, giving supporters and the supported alike some options with which to play.

The great thing about crowdfunding for a cause is that it’s totally voluntary. Anyone with a cause needing funding has the option to use GoFundMe, Generosity or any other crowdfunding site that might be available to them. Anyone looking to donate can give as little or as much as they wish to whichever causes and campaigns they find to be worth supporting. It lets people vote with their dollars for the social causes in which they believe.

Another nice feature of crowdfunding is that it always lets supporters know what the campaign’s funding goal is, and how close the goal is to being reached. Many of the campaigns to which I have contributed gave breakdowns of their expenses and specifically stated what they would be spending the money on. If a campaign raises more than the intended amount, a tentative outline will generally be provided as to how excess funds will be used. Most campaigns will refund supporters if the full goal is not met. Letting supporters in on all of these details about your campaign adds a welcome transparency to the whole process.

For government sponsored social causes – and even for traditional, privately sponsored non-profit causes – it’s often difficult to know how your money is being used. In the case of government sponsored social programs, you have absolutely no choice whatsoever about how much money you give and to which causes your funds will be applied. That is all decided for you. It’s a little better with private non-profits because you will at least know who you are giving to and how much, but still there is usually not as much transparency and flexibility as is offered by many crowdfunding campaigns.

Campaigns are incentivized to be transparent in order to earn the trust and support they need to be successful at reaching their goals. It is therefore in the best interest for a transparent campaign to be run efficiently and responsibly so as not to blatantly and visibly betray the trust of its supporters.

Sites like GoFundMe and Generosity effectively put power back into the hands of average people. They allow ordinary people – who don’t have the means to go through the extraordinary hassle of starting up a legally recognized non-profit organization – to raise money for their own favorite causes. After all, collecting donations for one-off campaigns and smaller projects is generally outside of the average person’s ability and resources. Crowdfunding supporters are granted all of the ease and convenience afforded by online services. Crowdfunding platforms index and organize campaigns, streamlining browsing and making it easier to find specific campaigns. Once you have discovered it, supporting a particular campaign is as simple as logging into your account and pressing a few buttons.

The growing popularity and viability of crowdfunding may demonstrate a fundamental shift in the way people are thinking about raising money. These campaigns only accept voluntary donations and are hosted on the internet, a venue where users have come to demand transparency and are rightfully hesitant to give people their trust. Because those who donate to causes in which they believe are putting a fair amount of trust in the people running the campaign, a campaign that doesn’t respect its potential supporters enough to be transparent is doomed to fail. Effectively then, campaigns are competing with each other for trust. In addition to that, the story about IndieGoGo’s attempt to compete with GoFundMe through Generosity indicates that the platforms hosting the campaigns are also incentivized to provide powerful, easy to use, cost-effective services.

Crowdfunding success stories have shown that people are willing to voluntarily support causes in which they believe and to which they feel they can give their trust, if they are given the opportunity. They have also shown that causes that are willing to respect their supporters will be rewarded for doing so. Crowdfunding is a disruptive free-market phenomenon that could completely reshape the way we look at paying for social causes by distributing cost, increasing transparency and incentivizing responsibility and efficiency.