Crowdfunding etiquette: How to give wisely

posted Jun 24, 2013, 12:01 PM by   [ updated Jun 24, 2013, 1:02 PM ]
More people are turning to the internet to raise money. But can funding passion projects of friends and family ruin relationships?

'Tis the season for feeling completely financially tapped out.

But even after the gifts have been exchanged and the holiday dinners purchased, the pressure to give hasn't ended. In fact, thanks to technology, the pleas to spare some change for those in need now stretches on all year - with many of the requests coming from friends and family.

Those who keep the company of creative types may already be feeling the pinch after a year of Kickstarter and Indiegogo requests from friends seeking to fund their projects and ideas.

Kickstarter, which allows fundraisers to solicit micro-donations to fund creative projects - also known as "crowdfunding" or "crowdsourcing" - hasraised over $380m from thousands of donors. Indiegogo hosted the fundraiser that raised over $700,00 (£432,980) for the sending a beleaguered lunch lady victimised by bullying.

It's also become more common for individual web sites to solicit donations for all sorts of big requests - from supporting the families of Sandy Hook victims to fixing one's mangled mouth.

"If you need $10,000, targeting the masses is smart," says Farnoosh Torabi, a personal finance expert and host of Financially Fit on Yahoo. The social-media element of Kickstarter, in which fundraisers can solicit money through appeals on Facebook and Twitter, makes it easy to spread the message.

"It can generate a lot of enthusiasm and excitement," she says.

While asking for money used to be the source of embarrassment, online giving "has taken the fear out of it", says Rhyan Romaine, a non-profit consultant and professional grant writer. "It makes it easier for people to ask for money when they're protected by this online barrier."

But for those on the other end of the ask, there's a risk of crowdfunding fatigue. Not to mention the pressure that comes with evaluating and donating to passion projects put forth by friends and loved ones.

"It can get tricky and you can end up overextending donations into thousands of things," says Romaine. In her personal life, she says, many of her friends are involved in charity projects, and sifting through them can be tricky.

"There's a bit of a quid pro quo. If I have a friend asking me to support a cause, I typically expect to be tantamount to what they gave my pet cause," she says - while noting that she's also vulnerable to requests that exert "a real pull on my heartstrings".

But mixing finances and friendships have never been easy.

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Crowdsourcing v crowdfunding

Crowdsourcing is the practice of turning to the masses - usually over the web - to request information, services or products. For instance, a journalist seeking to interview married couples with different opinions about politics might turn to Twitter to make that request.

After the super storm hit New York and New Jersey, Occupy Sandy started a website asking for donations of bleach, spray paint and other cleaning supplies.

Crowdfunding is a type of crowdsourcing that focuses just on soliciting financial donations.

"Two words on the subject of money between friends: 'Be careful'," says Philip Galanes, author of Social Q's: How to Survive the Quirks, Quandaries and Quagmires of Today. In that book and the Social Qs column for the New York Times, he says technological trappings don't eliminate underlying sources of conflict that have existed for centuries.

The most important thing to remember, he says, is that no one is forcing you to give.

"Invitations to a pal's wedding or to help crowd-source his root canal are not invoices" he says in an email to the BBC. "We always have a choice - even if it requires climbing a Kilimanjaro of guilt to say no to a friend's request for cash."

But how to choose? In evaluating which projects to give fund, perspective donors should keep a few things in mind, says Romaine. A successful project has "clear goals and objectives," she says, as well as specific steps en route to that goal.

In terms of showing support, it's often enough just to pitch in a little bit.

"The idea is you're going to crowdsource - they aren't looking for major contributions," says Torabi. A $5 or $10 gift will add up when others give as well. And that small donation has large has symbolic value. Just in the act of giving, you're showing support and encouragement, she says.

There is always a chance that a crowdsourced donation won't result in a finished project. But there's also the chance that your hard-earned money could do more when donated to a friend's $500 dance project than an established ballet academy's $5m dollar endowment.

"If all you're giving for the whole year is $50, you might want to give to your friend because that's a real direct impact," says Torabi.

No matter how much you give, the money you give should be though of as a gift - not an investment.

"We tend to get angry watching someone else fritter away our hard-earned dollars. Or we can't help feeling that the recipient 'owes us' now - a sense of indebtedness that's often not returned," says Galanes.

For those still on the fence about giving, it's ok to hold off.

After all, another opportunity should present itself soon enough.