Pulse of Philanthropy: Crowdfunding Fails Those in Greatest Need

Several years ago, one of my children wanted to spend a year of high school studying in Chile through a Rotary Youth Exchange. As one of six children, he knew that his parents were more focused on paying for college than giving him money to live in another country. Thus, our son worked at a fast-food restaurant every day after school and all weekend long, saving every penny. 

Yet as the time to leave approached, he was still short. To make up the difference, our son turned to crowdfunding: the practice of raising small amounts of money from a large number of people.

Websites such as GoFundMe, Indiegogo and Kickstarter allow people to ask for money from the public at large. Budding entrepreneurs use crowdfunding to build a prototype of their invention. Charities use it to raise money for projects. Teachers use crowdfunding to pay for classroom supplies. Undiscovered musicians use it to produce an album. Increasingly, though, crowdfunding is being used by people who need money during a time of crisis.

There are many stories in the media of communities coming together through crowdfunding to help people in need – so many, in fact, that you might believe crowdfunding has become an important part of our social safety net. Yet researchers from the University of Washington have concluded just the opposite, noting that “research on charitable crowdfunding has shown that, despite its popularity, it exacerbates social inequities, providing financial relief primarily to privileged recipients.”

The journal Social Science & Medicine recently published a study titled “Crowdfunding as a Response to COVID-19: Increasing Inequities at a Time of Crisis.” The researchers looked at 175,000 fundraising campaigns set up on GoFundMe in which struggling people were asking for money for basic needs such as food, rent and funerals as a direct result of COVID-19. The study noted that “overall, campaign success was extremely rare, and performance across multiple indicators was overwhelmingly poor.”

Despite the media attention on the rare success, the typical campaign with a goal of $5,000 had a median of only two donations, collecting a meager $65 in total. 

“Strikingly,” the report said, “42.3% of all campaigns in the COVID-19 dataset received no donations at all, and more than 90% did not reach their campaign goal.”

Not surprisingly, a campaign’s likelihood of success is closely tied to the wealth of the surrounding community. 

“Higher income and education levels in the county where a campaign was created are associated with a higher number of donations in all models,” the researchers wrote.

In many ways, crowdfunding is nothing more than a digital version of an old-fashioned barn raising: a community coming together to help one of its own. With my son’s year in Chile, the donors to his crowdfunding campaign were exclusively family members and friends. Similarly, my wife and I have been asked by numerous family members and friends to help with personal crowdfunding campaigns during times when they were experiencing a financial crisis. At its best, crowdfunding is a beautiful example of people giving back to help those they love.

The challenge, of course, is that crowdfunding works only if the person seeking the financial assistance has a network of family members and friends with money to spare. For a struggling person who lives in a low-income neighborhood where everyone else is struggling as well, crowdfunding is useless. The researchers concluded that because “most crowdfunding solicits donations from existing social networks, it has the potential to exacerbate economic and social marginalization and widen inequities.” Put more simply, “the populations most in need of crowdfunding support may be the least likely to access it.”

In February, Tim Cadogan, the CEO of GoFundMe, wrote an open letter to Congress saying, “Our platform was never meant to be a source of support for basic needs.” Yet increasingly it’s being seen as just that: some sort of slick, high-tech replacement for human-service programs. Unfortunately, crowdfunding fails miserably for the overwhelming majority of people who are in states of real financial crisis.

The next time you help a friend in need through crowdfunding, remember that there are many others in the same situation who don’t have financially secure friends such as you. To find a list of nonprofits that serve struggling families in Door County, visit GiveDoorCounty.org and click on “Find a Charity.” Make that crowdfunding gift to the person you love, but then make another contribution to a charity that will help those who are not lucky enough to have you as a friend.

Contact Bret Bicoy at [email protected].