Operational Transparency Is the Key to Effective Crowdfunding

By: Steven Kutsuflakis, CPA, Partner

Barbacane, Thornton & Company

In recent years, crowdfunding has grown in popularity as means of fundraising. Crowdfunding is a powerful tool to raise money for various charitable enterprises. But did you know that it can build your donors’ trust as well? According to a study from Indiana University’s Kelley School of Business, crowdfunding campaigns use two transparency tools to attract donors. One method is more effective than the other.


The study of over 100,000 campaigns benefiting victims of emergencies revealed both operational updates and traditional certification positively impacted campaigns. However, researchers found that each additional work‐related word in an update (operational transparency) increases donations on average by $65 per month.  Certification (conventional transparency), on the other hand, raises funds on average by $22 per month.


By offering work-related updates on the site, organizers are giving donors unique and in-depth insight into the cause, thus increasing their trust in their efforts. Updates vary by campaign but generally include reports, photos, videos, testimonials, and media coverage.


The findings of this study are especially encouraging to those looking to set up a campaign to address an acute need. Online crowdfunding platforms pave a simple way to fleet-foot response and frequent updates boost the campaign effectiveness.


If you are new to crowdfunding and are not sure where to start, we’ve outlined a couple basic steps below.


Crowdfunding Basics

  1. Determine your goal, then add at least 30%. This cushion will protect your cause from being underfunded and provide a buffer for third-party processing fees. You can also consider assigning giving levels based on your audience. If you have 1,000 active donors and want to raise $10,000, you could set your levels to cover casual ($50), strong ($100), and generous ($500) donors.
  2. Choose a platform site. Indiegogo, GoFundMe, KickStarter are the mainstream options; Causes, Fundly, Donately, and DonateKindly are the most popular choices among nonprofits. Work with providers to determine which one will be the most cost-effective and fit your nonprofit’s unique needs.
  3. Designate an owner or team to manage the campaign from start to finish. The marketing person should
    1. Design the fundraising page according to your brand. Craft a sincere but catchy mission statement; frequently post updates, including images, videos, and graphics about your cause and its recipients; and create a hashtag to point people to your campaign page.
    2. Determine a marketing strategy and promotion schedule.
    3. Use social media and email to advertise your campaign.

Remember, operational transparency via frequent updates is the key to an effective crowdfunding campaign! Preplanning your communications and dynamically interacting with your donors will give your campaign the edge it needs to connect with donors and build trust.

  1. Consider using products to incentive donors. Some nonprofits find grand success when they offer fundraising products in conjunction with their campaign. Choose meaningful items that showcase your brand and your cause.
  2. Be future-minded. Don’t forget to capture donor data. Some crowdfunding platforms offer CRM integration, making this process as seamless as possible. If you don’t have a way to automate this step or a CRM system, turn to manual entry. Capturing donor information is critical to growing your donor base. Your overall mission is best served by cultivating a relationship with your donors. Recording the data you receive from donor platforms is a great way to gain insight.
  3. Follow through on the basics. As with all your fundraising efforts, you must establish a follow-up strategy. Don’t forget to send donation receipts and thank you notes on time, within 24 hours and three days, respectively. Donors also like to receive updates, especially when you reach your fundraising goal! Each touchpoint is an opportunity to keep your organization and cause top of mind. Try your best to personalize your follow-up communications, taking into consideration their names, credentials, and donor levels. For instance, addressing a donor by the wrong name is a faux pas, but failing to thank a major donor personally is a mortal sin.


The research report, Operational Transparency on Crowdfunding Platforms: Effect on Donations for Emergency Response, was published in the online journal Production and Operations Management.