How Business can Benefit from Crowdfunding

When the behaviours underlying crowdfunding are applied in the workplace, employers can reap benefits for staff engagement and team morale, while raising big dollars for charity.

We do what we see other people doing.

This is the evidence from behavioural science literature that is brimming with examples that our individual choices and decisions are strongly influenced by those around us. When we perceive something to be a ‘social norm’, we are more likely to choose to participate in it. It is this social behaviour that is the reason why crowdfunding has become such a global phenomenon in such a short period of time. By looking at the success of crowdfunding, and the human behaviours associated with it, we can take some valuable lessons that can be applied to how we raise funds for social causes, and how we can increase staff engagement with our workplace giving programs.

First, a little bit about crowdfunding.

After the 2008 global financial crisis, entrepreneurs and early-stage businesses found it hard to raise funds through normal bank-lending channels so they needed to find capital elsewhere. Fuelled by the strength of social networks on the internet, the traditional ‘beg, borrow and steal from family and friends’ approach suddenly became much easier; suddenly it was possible to gain the trust of complete strangers and ask them for financial support. Crowdfunding, in the organised form that we now know it, was born.

The internet made it possible for communities of individuals to pool their money to fund projects they all cared about. And boy, did we throw our money at a lot of projects! From 2009 to 2012, rewards-based crowdfunding saw a 524 per cent annual growth rate., the global market leader in donation-based crowdfunding, has channelled over US$815million from 4.9 million individuals to nearly 50,000 projects around the world since 2009. That’s amazing.

So what is the reason for this incredible growth rate? The answer is simple - crowdfunding takes advantage of how we, as humans, love to make crowd-based decisions. We want to be part of a team. We want to unite with others to have an impact greater than ourselves.

We all want to be part of something bigger.

When we are part of a community who are giving our resources to a common cause, whether it is time or money, we receive so much more than what we put in. When we give in this way, we get the reassurance that we’ve made a wise decision based on how many others have also made the same decision. When we give in this way, we are part of select group who want to achieve something together – we share in the progress, we share in the challenges, we share in the success. Through crowdfunding, we get to be part of something bigger than us, and all at the push of a button. Bargain!

So what can we take away from all of this? Simply put, when giving to charity is perceived as the social norm, we are simply more likely to give. Giving is a social act. By harnessing the social nature of giving, charities can draw on the power of peer effects to create a domino effect of action – when others see people giving, they will do the same. In fact, research shows that not only will we do the same, but that when donation amounts are made public, we will quickly conform to the group norm. These lessons are encouraging; it is clear that we want to change the world, and we want to do it together.