Crowdfunding Helping Nonprofits Reach More Donors

April 28, 2014
By Paul Wenske, Senior Community Development Advisor


Neighbor.ly, a Kansas City-based crowdfunding startup, allows local funders a chance to support civic projects they care most about.

When John Gordon Jr. wanted to buy farm land where boys in his urban Kansas City youth program, BoysGrow, could grow their own produce for resale, he turned to a crowdfunding startup that helps nonprofits raise money.

“We had to borrow available farm land each year,” Gordon said. “We wanted our own place where the boys could work year-round and learn entrepreneurship.” Among other products, the boys make their own salsa and ketchup.

So with the help of a homemade video showing the youth hoeing fields and operating a tractor, BoysGrow teamed with Neighbor.ly, a crowdfunding business founded three years ago, to create an online marketing campaign.

BoysGrow raised more than $30,400, enough to buy its own small farm. “The ability to reach donors you might not otherwise get is pretty awesome,” Gordon said of the campaign’s reach.

Traditional needs

Crowdfunding is one of many technologies that are increasingly being used in community development to address traditional needs, such as fundraising, at a time when money remains tight.

“The model is still evolving,” said Jase Wilson, one of the founders of Neighbor.ly. “Crowdfunding is not new. It’s basically like passing the hat around. But the online platform allows us to reach a larger audience.”

Wilson said that audiences can include large lenders, such as banks and foundations that can match individual online donations.

He said Neighbor.ly—which has funded nearly $2 million in projects in 36 communities in Kansas City and across the country—plans to raise investments through bond markets, and is exploring ways lenders can qualify for credit under the Community Reinvestment Act.

Growing awareness

Crowdfunding is gaining attention for its potential to raise capital from a large variety of stakeholders using three main models: donations, lending and investments made in exchange for equity, profit and revenue sharing.

Neighbor.ly has given presentations on crowdfunding to the Federal Reserve Banks of Kansas City and San Francisco. It also made a presentation at a symposium in Washington, D.C., sponsored by the Federal Reserve Board.

Federal Reserve Board Governor Jeremy C. Stein noted at the March 24 Reserve Board symposium that it is important for the Fed “to keep our finger on the pulse of financial innovation” and the changing dynamics in the financial services sector.

“To the extent that crowdfunding has the potential to bring new capital into low- and moderate-income communities, we want to be involved in helping the learning process along,” Stein said.

Gordon, however, cautioned that crowdfunding is not as simple as merely “creating a website and watching the money roll in.

“You still have to be proactive and professional,” he said. Still, he said, the process is delivering on what BoysGrow needed: funding.