Don’t Call Crowdfunding “Paying It Forward”

This is a repost from my LinkedIn blog. I will be adding posts that pertain to crowdfunding here on The Crowdfundamentals blog, in case you miss them the first time.

Are you in the habit of describing crowdfunding as a “pay it forward” phenomenon? While generosity among strangers plays a part in the psychology behind why people give—one crowdfunding platform’s name even borrows from the “pay it forward” concept—the science behind the two are different.

I discovered this after reading an op-ed piece in the New York Times several weeks ago entitled “The Science of Paying it Forward.” I fully expected to find research that squared with the phenomenon we have seen in so many successful crowdfunding campaigns. According to the authors, however, when people pay it forward, another type of thinking kicks in.

“We found that receiving and observing generosity can both significantly increase your likelihood of being generous toward a stranger, but that if you observe a high enough level of generosity, your willingness to help suffers — you become a “bystander” who feels that help is no longer needed.”

Hmm. If that were true, why would we see the kind of consistent and stratospherically soaring numbers so many campaigns experience above and beyond their original ask? And this extravagant giving doesn’t just apply to product-based successes like Ouya, in which people continue to give because they want to make a pre-purchase early knowing the price will likely increase later. (I would have used Oculus Rift as an example but better not to go near that can of worms.)

Nor did it apply to the Veronica Mars Project. Rob Thomas was only asking for a mere $2 million and was rewarded with almost $4 million more in return for an opportunity to….see a movie for which Warner Bros stood to benefit. (I still remember staring in stunned silence as I watched the funding numbers ticking higher and higher on my computer screen in real time.)

And what about Karen Klein? That was some vacation her backers were determined to give her.

Seeking clarification, I contacted co-authors Milena Tsvetkova and Michael Macy at Cornell University and asked if they took crowdfunding into consideration when creating the study, noting a reverse phenomenon seemed to be in play. Tsvetkova kindly wrote back right away. She attributed what occurs in a crowdfunding campaign to something called “signalling,” which is decidedly different than paying it forward.

“As more people contribute to a campaign, others perceive this as a signal that the campaign is an important and worthy one.”

That certainly rang true.

As did her follow-up theory:

“It is also possible that the crowdfunding website is setup so that the more people contribute to a campaign, the more likely you are to notice that campaign. This leads to a process of ‘increasing returns,’ which says the more popular something is, the more popular it becomes.”

What’s the upshot here? Though both pay it forward and crowdfunding both induce in us a desire to be generous, the psychological incentives, and the outcome, can be in opposition to each other.

Regardless, it turns out participating in either paying it forward and crowdfunding have one effect in common: both make people happier. Just last week there was yet another op-ed piece that caught my eye and served as a dollop of icing to both theories. It turns out giving stimulates prosperity! According to the piece, spending money on oneself barely moves the needle, while spending money on others causes a significant increase.

“Why? Charitable giving improves what psychologists call “self-efficacy,” one’s belief that one is capable of handling a situation and bringing about a desired outcome. When people give their time or money to a cause they believe in, they become problem solvers. Problem solvers are happier than bystanders and victims of circumstance.”

So whether your desired form of giving is to pump a stranger’s parking meter with quarters or help a bullied bus monitor catch a break, you my friends, are the ultimate winners!

How To Choose Social Media Platforms To Engage Your Crowdfunding Audience

How you choose social media platforms to engage your crowdfunding audience is crucial. Whatever you do don’t try to be active on all of them.  You’ll be a bedraggled shell of a human in your valiant attempt but it won’t get you far because you won’t be engaging, you’ll just skimming the surface and that’s not enough.  So I asked my colleague Lorie Parch, who’s got some great social media strategy chops, to break down the big boys for you so that you may choose wisely.




As of May 2013  over 1.1 billion monthly active users are on Facebook. With such vast reach, it’s unlikely that your social media strategy will not include Facebook, and you may want to focus primarily or even solely on Facebook if that’s where your audience hangs out.

Facebook’s mobile users are up hugely, to 751 million, so be sure that the execution of your social strategy for your campaign looks great on mobile devices across all the platforms you’re using as well.

If you haven’t created a brand page before, go to Facebook’s Help section; there’s a section there called “Build Your Facebook Page” and within that there’s another helpful section called “Growing Your Audience” that discusses best practices for posting.




Twitter is a “real-time information network. It has about 550 million users. There’s an art to using those 140 characters wisely, though that’s a class in itself. But there’s no shortage of information about best practices. To get started using Twitter for business check out Twitter’s “basics” section, which covers things like hashtags, establishing your brand personality, how to tweet well, and measuring how well you’re doing on Twitter. The platform also has special information for small organizations and for nonprofits and organizations. Because Twitter has such a large reach, like Facebook it should probably be part of your strategy to gain more followers and increase awareness of and donations to your crowdfunding campaign.

(If you’re wondering if the people you’re trying to reach use the social platforms you’re thinking of targeting, check out this excellent report from the Pew Internet & American Life Project, published in February 2013. It has great insights.)



Figures vary when it comes to the growth and numbers of users on Google+, which just turned two (it was launched in 2011). In January 2013, reported that Google+ surpassed Twitter as the second-largest social media platform, with 343 million users. That means that, if you believe the people you’re trying to reach are on Google+, you should consider including the platform (as well as YouTube, which Google owns) in your strategy as well.



With over 225 million users worldwide, LinkedIn is clearly a powerhouse and your strongest networks are likely to be on this site—those that are specialized to your industry or profession. With nearly two-thirds of LinkedIn members located outside the U.S., this platform may be a particular boon to those with a globally-focused campaign.  Given that LinkedIn is a professional networking site, it may be more useful in making your professional network aware of your campaign without explicitly asking for donations.

Pinterest & Instagram


Though each of these platforms is a powerhouse in its own right, in order to keep this information succinct, we’re lumping them together since they are both highly visual platforms: Pinterest allows you to “pin” and share photos/images on “boards”, while Instagram features photos and now short video.  So if your campaign is very visually driven and/or the audience you’re targeting for finding donors is, you may want to consider one or both of these.




The Pew report found that just 6% of Web users use Tumblr, which was recently bought by Yahoo, so it remains to be seen if the service will change in some way, including being integrated with Yahoo, which has a very large user base. If you’re targeting a very young audience, though, for your campaign, it may be worth trying Tumblr to reach them. According to Pew, 13% of those 18-29 are blogging on Tumblr.”

 Lastly, it’s worth mentioning something pretty obvious but still very important: “Social” isn’t limited to online. So don’t forget to consider and cultivate the opportunities you have to reach out in person, by phone, by text, or by email to people you know in casting the widest net possible.

By Lorie A. Parch a Los Angeles-based writer, editor, and social media strategist. She runs 828 Communications, a small content strategy and creation firm.


The Heart and Soul of Your Crowdfunding Campaign is You: How to Make Us Fall in Love with Your Project

Do you answer yes to two out of three of these questions?

  • After reading a great article or book, you’ve been known to do a Google Image search of the author or the subject to see what that person looks like.
  • You have become absorbed in (decently made) documentary films even though they’re on topics you’re not particularly interested in.
  • Upon finding an awesome blog or website, your next click tends to be on the About page.

If so, there’s a reason for your behavior, which is very normal by the way. Humans have an endless capacity for other people’s stories. It’s why we travel. Why we want our presidents to be worthy beer-drinking partners. In its most dubious form, it’s why reality shows are so captivating. In a more exalted sense, we humans are constantly trying to satisfy our hunger to connect.

Stories orient us. Like a map a story can help you make sense of your environment. The promise of a rotating march of stories is why I became a journalist. I get to ask personal questions about you and you eagerly answer me! How cool is that? And furthermore, however nominally, narrowly, or fleetingly, I can honestly say that I’ve fallen in love just a little bit with each of my subjects.

So what does all this have to do with crowdfunding?

There are a lot of variables that go into what makes a successful campaign, many of which we’ve talked about on these pages. But the one non-negotiable puzzle piece, the one without which your project is doomed to become a statistic? It’s YOU. Whatever you do not omit the story of you. Said another way: Be clear about your idea.

People do not intentionally obfuscate. The sad irony of humans, narcissists notwithstanding, is that even though we love to peek into the lives of others, we’ve internalized the notion that people do not care a whit to peer into ours. Why? That’s whole other tangent but let me say that it’s simply not true.

I’ve viewed many projects that on first blush looked promising, but I soon clicked off. Failing to decipher your message quickly makes me lose interest. Ever been to a party talking to someone whose eyes begin wandering around the room? It makes you feel blown off. That’s how it feels to read a campaign pitch that’s bereft of detail. Stories—your ideas—paint pictures. Take away the details and you’ve left me with a flimsy outline. Outlines create vacuums into which people will fill their own story: that you don’t care much about your own idea.

This terrific book discusses in data-driven terms, sprinkled with fascinating case studies, (stories!) the anatomy of what makes ideas stick.


In it, Chip and Dan Heath lay out the critical elements of a “sticky” idea:

1. Simplicity

2. Unexpectedness

3. Concreteness

4. Credibility

5. Emotions

6. Stories

No matter if your project seeks funding for a poetry chapbook, a barbequing innovation or an app, as you craft your pitch make sure you check off each one of these elements. Think some of these don’t apply to your project? Think again. That’s your job; to think in advance of all the questions your readers may have and to keep us under your spell as you respond to them.

Remember: Allowing us to fall in love with you and your idea will go far in persuading us to fund your project.


Photo Credit: Danilo Rizzuto



Sorting Through the Many Definitions of Crowdfunding

The term “crowdfunding” is being bandied about like crazy these days—and that’s not for nothing. According to Forbes, this year Kickstarter is set to raise more money than the National Endowment for the Arts.

The problem is that when it’s talked about there is often no differentiation between crowdfunding models. So, I’ll break it down for you here.

Donation- and Reward-based Crowdfunding
These are the models that The Crowdfundamentals concerns itself with. Though they are are used interchangeably, there are in fact distinctions. In donation-based crowdfunding, contributors are primarily motivated by philanthropy. In other words, you are willing to settle for the satisfaction derived from helping advance a worthy cause you believe in. Think of giving to a project that will supply fresh water to a rural area, for example.

In reward-based crowdfunding, there is a tangible return, and the perks are limited only by the imagination of the project creator. Filmmakers often award “producer credits” for their contribution, or a digital copy of the finished film. In this model, Kickstarter is probably best known for being the platform used by product innovators. The rewards they offer for your contribution is often the product itself. What creators are actually doing is “pre-selling” their product, so that they can raise the capital to manufacture that product. We’re now beginning to see a possible the chink in the armor of this plan. I won’t go into it here, but if you want to see crowdfunding growing pains in action, check out this recent New York Times article.

Other models include microfinance, of which Kiva is probably the best known. Contributors provide small loans to low-income people who lack access to banking services. It was initiated by economist Muhammed Yunus to address the cycle of poverty in his native Bangladesh, and he was awarded a Nobel Prize for it.

Peer-to-peer loans (P2P) allow individuals to borrow from a group of lenders, and it eliminates the need for financial institutions as well, the theory of which is that by cutting out that overhead, borrowers receive a lower rate while lenders earn higher returns than, say, a savings account. The Lending Circles is a good example of this model.

Which brings us to Equity-based crowdfunding, the model perhaps the farthest removed from above examples but very exciting indeed regarding the future of investing as we currently know it.

To backtrack, Obama signed the JOBS (Jump Star Our Business Startups) Act in April, 2012. It’s a provision that gives private company startups the ability to sell shares to individual investors like me, my mom, or your grandpop. Currently, only accredited investors can buy company stock. The implications of this are playing-field leveling, to say the least. It’s got venture capitalists worried that they are on the brink of their expiration date. And regular people who are either lucky or savvy could potentially invest in some nifty gadget that will make them millions.

But this is all still dependent on the Security Exchange Commission, which is currently tasked with figuring out the rules and regulations that protect investors but don’t cut this new source of funding at the knees. For more on that you can go to Crowdfunder, which is working to inform the public how to participate in this new way to raise equity and become an investor.

These are fascinating times, a growth spurt not unlike when the Internet first blew into our lives back in the 1990s. It’s going to be fun and interesting ride!