Abridged excerpt from book “51 Questions on Social Entrepreneurship“.
Donation-based crowdfunding is a way to source money for a project by asking a large number of contributors to donate a small amount to it. In return, backers may receive token rewards that increase in prestige as the size of the donation increases; for small sums, the contributor may receive nothing at all.
It’s the easiest form of crowdfunding to set up (i.e. no legal requirements).Let’s look at some of the key features, pros, and cons to understand it better.
Crowdfunding for Donation
- Anyone can provide funding for a campaign
- The contribution is a “donation,” often rewarded with perks or benefits—but not equity
- There is no financial return for contributors
- Anyone can contribute from anywhere
- There is no limit to the number of funders or amount of funding requested
- You can make a direct appeal to customers, friends, and family for small to mid-range amounts
- Social entrepreneurs can deliver value through non-monetary perks (i.e. they can find ways to create value for the funder, without a prohibitive cost to the social enterprise)
- You can build community, marketing, and branding in addition to raising funds
- It can serve as a way to test out an idea, concept, features, or pricing by getting customer feedback through interaction with the campaign, comments, orders, etc.
- You can validate the concept and attract other forms of funding (i.e., venture capital, impact investment, angel funding, friends and family, etc.)
This is an abridged excerpt from the book, “51 Questions on Social Entrepreneurship” by Neetal Parekh. You can learn more and buy the entire book—which is told as a story of three aspiring social entrepreneurs and which dives into key aspects of social entrepreneurship including defining the space, legal structures, securing funding, and measuring impact at 51questions.com