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Crowdfunding for Social Good

Devin D. Thorpe

Devin Thorpe

Worries About Fraud Top List Of Crowdfunding Concerns

This post was originally produced for Forbes.

In an informal survey of 192 people, only 20% agreed with the statement, “The ‘crowd’ does an effective job of preventing fraud and abuse on crowdfunding sites.” More, 23.9%, disagreed with the statement while a majority, 56.1% were neutral.

The responses were among those received to an unscientific survey I conducted for the purposes of this article in hopes of helping entrepreneurs and others better understand the thinking of the general public, or in the other words, the crowd.

The first question of the survey was to ask respondents, “What is the first word that comes to mind when you see or hear the word crowdfunding?” Kickstarter (including slight variations) was the most common word (17). Money was the second most common response (16). Fundraising was third. No other word came up ten or more times. The following word cloud includes all the responses.

The first word you think of when you hear the word crowdfunding.

Responses to the question, “How do you feel about crowdfunding?” were all over the map. Many responses were strongly positive, highlighting the benefits to entrepreneurs and investors or backers. Some interesting negative responses that can help crowdfunders understand their audience included:

“Mixed. Some seem worthy causes; others are lame and too self-serving.”

“I have good and bad feelings on crowdfunding. I’m afraid of it being too much like pan-handling on the corner, but I see how it can benefit those in need.”

“Indifferent – more likely to give to crowdfunding for someone in need than for a business.”

“I feel inundated with crowdfunding campaigns. Maybe every now and then one will cross my path that I feel is worthwhile, but I could easily miss it due to my initial instinct to ignore them.”

“Like the idea of many being able to support a good cause. Concerned about being scammed by a fraudulent request.”

“I think it’s deceiving.”

“Don’t know yet.”

“A great idea, but requires big social and profession networks. A bit discouraged.”

“OK, but exposes me to more opportunities than I have capacity to fulfill.”

“50/50. It is a good way for people to have needs met that they don’t have the ability to meet – scammers.”

“Skeptical.” (This came up several times.)

“I think it has gotten too pervasive. I have seen people crowdfunding for personal expenditures rather than for investment in a business/idea.”

“Great way to get support. But there is so much of it, it can become annoying.”

“Meh. Unsure if it works.”

“Love the idea, execution is daunting.”

“It seems gratuitous when people ask for money for themselves.”

“I would like to understand it better.”

“Good, but we need insurance for most things and can’t rely on crowdfunding for disasters.”

“It is hard to know that funds will be used the way they are intended. No follow up.”

“I like it, but feel it has already become slick, difficult.”

“I’m interested but not sure how to begin.”

“Intimidated.”

“Crowdfunding works well for issues or products that have gone viral or that already have a large following, but typically isn’t the best option.”

“Envious.”

“Concerned about the quality of opportunities.”

“Only good for companies that sell physical products, not services.”

“To be frank, like an obligation. I have had to contribute to so many friends’ crowdfunding projects that don’t amount to anything.”

“Not interested.”

“Meh.”

“Mixed feelings. I’ve seen a lot of campaigns recently that seem like people trying to escape their irresponsible choices.”

“Mixed. As a donor, giving days like Love Utah Give Utah feel frenzied to me, and too resource intensive vs. the rewards for most nonprofits I know. By contrast, I’ve supported crowdfunding campaigns joyfully when I feel like I’m funding artists, innovators, & grassroots activists & scholarships, where my early donation can jumpstart them toward their filmmaking, invention, conference or professional development, which typically are underfunded.”

“Lots of good but also abused and big opportunity for fraud.”

“Not really sure what it really is.”

“Bad.”

The survey asked respondents to indicate whether they agree, are neutral or disagree with each of ten statements. The statements and the responses are summarized in the following table.

Statement Agree %Neutral %Disagree %Average Score*
Crowdfunding is a legitimate way for entrepreneurs and other creatives to finance their work.84.413.03.21.18
Crowdfunding is a legitimate way for people in need to get help, especially when they lack insurance.61.728.610.41.44
Crowdfunding is a legitimate way for nonprofits to acquire new donors and raise more money.85.111.73.91.18
Crowdfunding is fun for the person raising money.24.756.519.51.95
Crowdfunding is fun for the backer or donor.39.648.712.31.75
Crowdfunding is hard work.69.522.1 9.11.36
Crowdfunding usually works.14.958.427.32.16
People raising money via crowdfunding sites really need the money.23.465.611.71.90
People raising money via crowdfunding sites are usually honest people.27.960.4 12.31.82
The "crowd" does an effective job of preventing fraud and abuse on crowdfunding sites.20.156.524.0 1.98

*The average score is a simple average of the agree, neutral and disagree responses assigning the values 1, 2 and 3 respectively.

Note that acceptance of personal or peer-to-peer crowdfunding statistically lags acceptance of entrepreneurial and nonprofit crowdfunding. Survey results also indicate that only 24.7% of people think crowdfunding is fun, at least for the one raising money. That is consistent with the proportion, 69.5% who says crowdfunding is hard work.

Skepticism is evident in the data. Only 23.4% of respondents said people raising money really need the money. Only 27.9% said crowdfunders are “usually honest people.” As noted above, only 20.1% think the crowd is effectively preventing fraud.

Given only a blank (not a choice from a list), the survey also asked respondents to name the crowdfunding site they most trust. Up to that point in the survey, no question had included the name of a crowdfunding site and no prompts were offered. Still, 53 people identified Kickstarter. Similarly, 41 people identified GoFundMe as the site they most trusted. Four people named both Kickstarter and GoFundMe despite the invitation to choose one.

The survey asked which sites they had used to back a project, invest or donate and provided the following list in this order: GoFundMe, Indiegogo, Kickstarter, Crowdrise, Razoo, Fundly, Classy, Fundrazr, CaringCrowd, StartSomeGood, WeFunder, Crowdfunder, None or other. The top three responses were GoFundMe (142), Kickstarter (121) and Indiegogo (64). No other sites came close. The next most common response was none.

The survey also asked which sites the respondent had used to raise money. Respondents were presented with the same list. The top response by far was none (112). The top four sites were GoFundMe (21), Indiegogo (15), Kickstarter (13) and Razoo (10).

Finally, the survey asked, “What else would you like to say about crowdfunding?” Many people expressed enthusiasm for crowdfunding. Some of the responses will help crowdfunders respond to doubts and concerns in their campaigns. Here is a sampling:

I find it confusing that charities use crowd funding for good causes, but entrepreneurs use crowd funding for profit and individuals seem to be to set up crowdfunding without checks for all sorts of things.”

“I am puzzled why I think of it as innovative when startups and companies use it but uneasy when people, even friends, use it to try to cover their excessive medical expenses.”

“It needs to definitely be a self-regulated industry or scams and lack of disclosure will run rampant.”

“I often feel like it’s the modern equivalent of Tupperware parties or multi-level marketing. A lot of pressure to donate, especially for medical expense fundraisers, even if I barely know the person.”

“[I] think it can be a good idea, but it also has potential for abuse.”

“I’m worried it’s becoming the nation’s largest insurance provider.”

“There is a lot of distraction and noise with no great way to sort the good from the awful, it is a lot like ebooks.”

“How much revenue does the crowdfunding site earn on average when raising funds for things like disaster relief, fighting hunger, or other humanitarian projects?”

“My answer for accident finding may seem callous but I want to see the underlying problem and issue solved through single payer. I feel if I give that the issue will not be as strongly felt.”

“I feel jaded due to recent experiences seeing people trying to crowdfund trips, vacations, bills they forgot about, etc. I feel like those campaigns have pushed crowdfunding into the realm of avoiding consequences, which I’m not a fan of.”

“Transparency for the donor! If I have to tell another person that 100% of their donation is NOT going to the cause (basically telling them Santa isn’t real) I’m going to scream!”

“You are at risk that the funds you donate will be misused regardless of the website/platform used. Crowdfund donations should be considered a gift that hopefully the entrepreneurs will use appropriately.”

“There needs to be easier ways to receive equity”

“It seems to be very popular but often lacks the level of scrutiny / details that I would prefer to see before investing in a product/project/company.”

“It frustrates me that people feel that others should fund their ideas. Many don’t seem to want to put in the work or use their own resources.”

“I tend to back projects of entrepreneurs rather than donate to charitable causes; with an actual business project, you can see and learn more about the idea and the progress so far and there is less opportunity for fraud. I only donate to causes through a crowdfunding site when I know the people involved personally.”

“I’d like to run a crowdfunding campaign. I’m finding though that it seems very difficult to come up with the funds to run a successful campaign in the first place.”

“I think it is getting saturated. Everyone does it. It’s lost its appeal.”

“Most small grassroots Nonprofits I have donated to on Giving days have never followed up with me after that auto-thank you to keep me informed/engaged in their work. Also, I tune out of social media on that day, because my social media is flooded with leader board tallies and hype. I’ve often wondered if giving days cannibalize or divert the donors’ regular giving, to play the leader-board games. After 3 years of LUGU, I sat out this year. Razoo was too cumbersome to make multiple donations in one sitting, and if I made donations in honor of someone I couldn’t have the NP thanks and emails go to them.”

“The rates some crowdfunding sites charge are outrageous.”

“When crowdfunding, entrepreneurs need to follow through on the promises they make to donors no matter how small their contributions might be.”

“There should be some cert of authenticity or verifiable integrity around these sites. Some campaigns are sheer fraud and hard to discern.”

“I have mixed feeling on these. I know people need help but some of the things I see are pretty crazy. I sometimes want to tell people to go fund themselves. LOL. ”

“I would like to learn more but right now I’m cautious about engaging.”

While crowdfunders may be tempted to dismiss most if not all these concerns, addressing them satisfactorily could have a significant positive impact on crowdfunding results.

Hundreds of nonprofits learned to successfully use online fundraising to reach–or surpass–their goals with my crowdfunding training. Get my free guide to attracting media attention.


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