There are many ways to apply crowdfunding in the government space. This case study highlights the U.S. Department of State’s utilization of an online crowdfunding platform (CFP) to launch the Alumni Engagement Innovation Fund 2.0 (AEIF 2.0). Through this fundraising platform, exchange program alumni were able to work on innovative solutions to the world’s toughest challenges. Over 30 projects from around the world, including from the United States, were selected for AEIF 2.0: Accelerating Social Impact. By participating in the crowdfunding projects, these alumni found alternative funding and investment options beyond the U.S. government, told their stories, built the capacity of their organizations, engaged local communities, and developed sustainable solutions.
What is crowdfunding?
Crowdfunding is “an alternative form of finance where money can be raised online through a… platform from friends, family, extended networks, and because of Title III of the Jobs Act, investors” (Crowdfunding Diplomacy: The Next Frontier for Government).
Crowdfunding allows government agencies to marry innovation with the mitigation of risks by developing “strategic partnerships with partners who know how to innovate…and who have built-in platforms and systems to do so” (Crowdfunding Diplomacy: The Next Frontier for Government). In short, it gives government agencies the chance to promote forward-thinking projects while still being efficient and effective with allocated resources.
Crowdfunding is accessible to anyone. Depending on the selected CFP (there are over 800), there may be certain restrictions based on the type of investment and accreditation. It is important to understand there are different types of crowdfunding, the most common type being rewards-based crowdfunding. Donors in rewards-based crowdfunding exchange monetary investment in a particular crowdfunding campaign for recognition or an incentive related to the project. For example, if you donate money to an independent film, you may receive a producer credit in the film. This type of crowdfunding has allowed researchers, entrepreneurs, and social activists to engage in the world of crowdfunding.
How does crowdfunding work?
Best Practices in CrowdfundingPhase I (Strategic Plan)
- PURPOSE- Decide if crowdfunding is appropriate for your agency.
- AUDIENCE- Consider your audience. Your audience will help shape how you plan the crowdfunding campaign. At the Department of State, our audience included exchange program alumni from around the world; your audience may include science researchers, doctors, inventors, etc.
- THEME- Create a theme that fits the purpose of the campaign and your target audience.
- PROMOTIONAL STRATEGY- Integrate social media and press products into your communications strategy with both your target audiences and donors. Traditional and social media can be extremely beneficial in pushing the message and engaging participants and potential donors. Press releases and blog posts announcing the initiative and individual projects are effective in reaching target communities.
- TIMELINE- Create an internal calendar for your agency to communicate with both partners (CFP and participants) in a strategic plan.
ROLES & RESPONSIBILITIES- Identify a point of contact with each operational task associated with managing the crowdfunding project. For example, you will need someone to accept and manage the projects, and also someone to develop the narratives for the promotional materials and select graphics to visually create the stories.Phase II (Select your Crowdfunding Platform)
Determine whether your agency will pay for the CFP service or forge a public-private partnership. The U.S. Department of State partnered with CFP RocketHub® as the engine to drive the crowdfunding because they incorporate a significant educational and training component into their interactions with users. This education allowed for former participants of exchange programs from across the globe to maximize the power of fundraising through a CFP. As part of their partnership with the U.S. State Department, RocketHub® offered their services for free.
Address the option of a co-brand with your CFP. RocketHub® offered co-branding with the U.S. Department of State which helped the alumni audience from State Department-sponsored exchange programs recognize the webpage. They created separate virtual spaces using branding techniques such as graphics and the agency seal.
Run technical tests from start to finish to ensure the user has a smooth technical experience. Because technical issues can be inevitable, check if the CFP can provide technical assistance to your participants. Our vendor provided prompt technical assistance and customer service to users, which is crucial when dealing with audiences who are not familiar with crowdfunding.
Research the CFP that best aligns with your mission. CFPs are generally aligned around different topics and not all platforms are one size fits all.
Consider currency fees and exchange rates if the target audience is overseas.
Determine the processing fees that the CFP charges from net profit.
Communicate the fundraising structure to your target audience. Some CFPs have an “all or nothing” fundraising structure. For our program, we allowed the users to keep all of their profits, with the exception of processing fees.
Review the pros and cons of the different crowdfunding platforms to select the one that best fits your target audience. At State Department, our target audience came from all around the world and a vendor with large global reach and international connections was a boon.Phase III (Training)
Train potential participants via webinar if they are in different geographic locations.
Communicate to participants that they should clearly state which rewards donors will receive for their contributions.
Implement an education piece into your strategic plan since crowdfunding is a newer concept in the public sector.
Reach out to your CFP to develop a Web series or online chats to go over basics; it allows target audiences to visibly see how the CFP works and can be inexpensive.
Advise participants to incorporate social media platforms in their outreach campaigns.
Use word-of-mouth and grassroots communications to help participants engage with potential donors.
Establish clear and reasonable funding goals for participants.
Equip participants with best practice guides.Phase IV (Execute)
Support participants’ efforts by highlighting their work on your organization’s own platforms and newsletters.
Segment your market when reaching out to donors, and identify key stakeholders for each cause or initiative to encourage donations.
Stay engaged with participants and keep them abreast of developments in the crowdfunding arena during the campaign.Phase V (Measuring Success)
Measure the success of your campaign by tracking social media and amounts of money raised. Many CFPs have privacy policies, so they may not be able to share personal data such as the rate of donations or profiles of donors. Should there be any restrictions, incorporating internal benchmarks will help when measuring the success of the campaign.
Crowdfunding is a great way for government agencies to help promising entrepreneurs to fundraise to address societal challenges. Through public engagement, crowdfunding can empower people to support their own innovative projects.For more information on crowdfunding and AEIF 2.0 at the U.S. Department of State, contact the ECA Press Office via email.Edit