How to change the world with $10

More people are donating small amounts directly to their favorite causes online, bypassing the big philanthropies and changing the culture of giving.

Cover Story

Not long after her book, “Carry On, Warrior,” started climbing to the top of The New York Times bestseller list, Glennon Doyle Melton remembers sitting at home, feeling overcome by gratitude and love, and trying to figure out how to channel that energy to benefit the world.  

Ms. Doyle Melton is the author of the popular blog Momastery. She gets a lot of e-mail from readers sharing their hopes and struggles and asking for advice. So that night, Doyle Melton decided that the next e-mail she got, she was going to do something to help.  

She went to her inbox and opened a message from Sarah Nielsen, who at the time was the executive director of a small home for teen mothers in Indianapolis called Project Home Indy. Ms. Nielsen told Doyle Melton that she had just turned away a young mom with a baby boy because the organization didn’t have enough money to bring them in for the year.

“Sarah was brokenhearted, and she said she just wanted to write me,” Doyle Melton recalls. “I wrote back to her and said, ‘Give me your phone number. I’m going to call you.’ ”

The two women talked. Doyle Melton learned that it would cost $83,000 to give the young mother and her baby shelter for the year. So she decided to jump into what is one of the fastest-growing trends of both the philanthropic and business start-up worlds: crowdfunding.

On a basic level, crowdfunding is when a person or group raises small bits of money from a large number of people, usually over the Internet. About $6 billion traded hands like this in 2013; in 2014 that number was $16.2 billion, according to the market research firm Massolution. That number is projected to double again this year.  

But crowdfunding can also mean something more. While the majority of crowdfunding dollars still go to for-profit ventures – everything from a company needing funds to develop a smartphone 3-D scanner promoted on the website Kickstarter.com, to a brewing company asking for funds on Indiegogo.com – some $3.06 billion in 2014 went to social causes, according to Massolution. An additional $1.97 billion went to films and the performing arts.

While that makes up only a fraction of the $350 billion in annual charitable giving in the United States, many in the philanthropic sector see crowdfunding changing the fundamental nature of giving. It is not only a new way of raising money: It is altering the way people conceive of, and then engage in, doing good. 

“Crowdfunding is a kind of democratization of giving,” says Jacob Harold, president and chief executive officer of GuideStar, an information clearinghouse for the nonprofit sector. And as such, charitable crowdfunding is creating new relationships between donors and recipients, new questions for traditional nonprofits, and new risks as the lines blur between institutionally vetted charities, for-profit organizations, and even government agencies. 

It’s also turning ephemeral online networks into the sort of tangible communities that many people in today’s Internet age say they crave. 

•     •     •

This is what Doyle Melton realized that night, talking with Nielsen about the young mom who didn’t have a home. “I thought, ‘I have this community of women [through Momastery]. This is what it’s for,’ ” Doyle Melton recalls.

She and Nielsen wrote about the teen and Project Home Indy on Doyle Melton’s blog. They asked readers for financial help. But they wrote that nobody was allowed to give more than $25. They said they believed in the power of small things with great love. 

Doyle Melton published their post. And then she banned her husband and kids from her bedroom, pulled the covers over her head, and refreshed her browser every four seconds. 

“I don’t handle drama and stress and feelings in an even-keeled way,” she says.

They raised more than $80,000 in six hours.  

“The support, the love that people showed to this mom they didn’t know – it was incredible,” says Lakshmi Hasanadka, cofounder and current executive director of Project Home Indy.

Since then, Doyle Melton and her team have held similar Love Flash Mobs, as they call them, for dozens of other women and organizations. They have created their own charity, Together Rising. And this past October, the group raised nearly $500,000 in 24 hours to support both a maternity center in Haiti and midwives helping refugee women and children in Berlin. The average donation was $22.

“The world is good,” Doyle Melton wrote on Momastery the following day. “People care.... We are not alone. We are part of something bigger than ourselves.”

This intimate connection, both with other donors and with a cause, is one of the keystones of the charitable crowdfunding movement, says Rob Wu, founder and CEO of CauseVox, an online crowdfunding platform dedicated to social good. “Donors are making crowdfunding very social, ” he says. “It’s emotionally reactive as well as easier.... No longer is philanthropy just for major donors. Some people have heard of The Giving Pledge, where a bunch of rich people give their wealth back to causes. Crowdfunding is like that for the rest of us.”

•     •     •

In some ways, of course, crowdfunding for charity is not new. A generation ago, if a family’s home burned down, neighbors might pass around a coffee can at the local gas station to collect money to help them. On a wider scale, child-sponsorship campaigns urged television viewers to give a dollar a day to feed a boy in Ethiopia, or give clothes to a girl in Guatemala. 

But the coffee can had a limited reach – only people within a small geographic area even knew about the fire. And the big nonprofits with their sponsorship campaigns did not really offer donors direct connections with recipients. That dollar a day didn’t actually buy food for the child on TV: It went into a big pot of programmatic and bureaucratic funding, which (in theory, at least) provided food and clothes for children in similar situations.

Crowdfunding expands the neighborhood coffee can collection into the cyberworld. On social media sites like Facebook and Twitter, these sorts of small-scale, personal-giving campaigns can have dramatically more reach. They can also take the children’s sponsorship concept further, using technology to connect small-scale donors with actual people in need. Meanwhile, the technology behind crowdfunding can make it a lot easier to get specific information about where the dollars are going.  

That, says Cody Switzer, assistant managing editor and director of digital products for the Chronicle of Philanthropy, is important for nonprofits in this data-driven era – particularly when it comes to younger donors. “Especially Millennials,” he says. “They don’t want to give a donation unless they know what it’s doing and where it’s going. There is an expectation of having much more information.”

Kevin Conroy, chief product officer for GlobalGiving, one of the oldest crowdfunding sites, says this is all part of a bigger shift in the philanthropic landscape. “In the 1980s and ’90s, nonprofits pulled on heartstrings to get donors to give,” he says. “There was a lot of guilt involved. The industry as a whole has been trying to make a shift. [Now] donors are partners in making change. Crowdfunding gives you a way to see how that partnership can be real.”

And with this partnership, Mr. Conroy says, nonprofits are better able to innovate. Just as everyone who gives a few dollars to an inventor on Kickstarter realizes that the business might not take off, donors giving to new development initiatives on a crowdfunding site know the effort might not work. But they believe in trying. Crowdfunding, proponents say, can take the notoriously slow-moving nonprofit and development world and bring it into the fast-moving, innovative 21st-century economy.

Indeed, this is what prompted Mari Kuraishi and Dennis Whittle to come up with the idea of GlobalGiving in the first place. It was the late 1990s, the height of the dot-com boom, and the two were working at the World Bank – not an institution particularly known for nimble innovation.  

As Ms. Kuraishi explains it, the World Bank is set up to give huge loans. “And at that scale you really don’t want to fail,” she says. “It’s not just embarrassing; it’s a heavy responsibility. The funds are guaranteed by the public sector. In a way, it’s irresponsible to fail at that scale. So we tended to fund things tried and tested.”

But nobody else was taking chances on new development ideas, either. So Kuraishi and Mr. Whittle, who were in charge of the bank’s strategy and innovation, came up with the idea of holding an “innovation marketplace” contest, in which any bank employee could pitch an idea to fight poverty. The winners would get World Bank funds to put their concepts into action. 

It was a resounding success. Two years later, they opened up the competition to outsiders. Anyone, they said, could come to Washington, D.C., to the World Bank atrium and pitch ideas for saving the world. On the day of the contest, villagers from Rwanda stood next to NASA engineers, all as equals, all trying to explain to judges why their ideas deserved backing.

But, of course, only a few people could win. So Kuraishi and Whittle began thinking about a secondary marketplace – somewhere people could shop their ideas to smaller donors. The pair left the World Bank, and in 2002 – two years before the launch of Facebook – they introduced GlobalGiving.  

On GlobalGiving.org, people can browse small-scale development projects from across the world, searching by region or cause, and then give donations online. Projects range from providing fruit trees to 25 households in Uganda, to giving groceries to older women in India, to building eco-friendly homes for Lakota families on the Pine Ridge Indian Reservation in South Dakota.

But it was not an easy start. The dot-com boom had just turned into a bust, and it was difficult trying to tell investors what they were doing. “In a sense, the whole field has grown up around us,” Kuraishi says. “It’s much easier to explain what we do [now]. People get the idea of small amounts of money being contributed by many people and the idea that you might be funding untested things.”

Since 2002, GlobalGiving has raised nearly $200 million from nearly 500,000 donors, supporting about 13,000 projects. 

“We’re about getting more people engaged in the business of development,” she says. “Whether it’s community leaders in Liberia who wouldn’t otherwise be visible to donors here, but who are doing really important work for communities, or the $10 donor who got a [GlobalGiving] gift card and is starting to develop a connection to a project. That act of engagement just has a lot of potential.”

•     •     •

But with this potential comes a lot of questions. For the past few decades, mistrust has been growing across American society about institutions – including those that are part of the nonprofit sector. Although pollsters regularly find that Americans’ faith in charities is greater than their faith in government to solve problems, a recent Chronicle of Philanthropy poll found that about 35 percent of Americans have little or no confidence in charitable organizations.  

Crowdfunding is often presented as a way for donors to bypass cumbersome nonprofits in favor of seemingly authentic, direct relationships with beneficiaries.

“It’s anticorporate,” says Salvador Briggman, author of the blog and podcast CrowdCrux, which follows the crowdfunding industry. “People don’t connect with brands. They connect with other people.”

While this can, indeed, tap into a powerful grass-roots sort of good, it is also risky, says Lucy Bernholz, who runs the Digital Civil Society Lab at Stanford University. She talks, for instance, of a GoFundMe campaign earlier this year that raised nearly $100,000 in 24 hours to help families whose homes and belongings were lost in a fire in San Francisco’s Mission District. It was an incredible outpouring of neighborly support. But there was also no system to track what happened to the money.

“There is absolutely no 501(c)(3) organization in the mix,” she says, referring to the tax status of most nonprofit groups, which carries a host of reporting obligations. “People used to say that on the Internet, nobody knows if you’re a dog. On a crowdfunding platform, nobody knows and nobody cares if you’re a nonprofit.”

This means that, despite the appearance of authenticity, with many crowdfunding campaigns little certainty exists about where the dollars are going. Although some platforms, such as GlobalGiving, have significant vetting processes and enough reporting requirements to ensure beneficiaries would qualify for 501(c)(3) status, many others don’t. GuideStar’s Mr. Harold says his organization has counted 171 online giving platforms of different varieties. 

“There’s a lot of activity,” he says. “And when there are that many, it’s really hard for any one of them to achieve economies of scale ... not all of them are totally trustworthy.” 

Harold says he has not seen any cases of outright fraud. But many platforms are so small that they don’t have resources to do proper vetting. This means it can be hard to determine who – or what – is behind different projects.

As Ms. Bernholz says, there might be multiple projects on one platform all promising the same thing. One might be sponsored by a nonprofit, one by individuals, and another by a business. 

Examples also exist of government agencies crowdfunding their own work – a move that some worry blurs the line between government responsibility and individual philanthropy. Last month, for instance, the Obama administration coordinated a Kickstarter fundraising campaign for Syrian refugees – the first charitable campaign hosted by the powerful online platform.

The initiative took in nearly $1 million within 24 hours for the United Nations’ refugee agency. But critics called the effort a public relations move that distracted from other US policies related to refugees, and questioned whether the administration should be fundraising for causes that foreign aid dollars should cover.

Lindsey Hortenstine is familiar with these arguments. As the spokeswoman for the office that provides legal help for indigent defendants in New Orleans, Ms. Hortenstine was involved in the decision earlier this year to combat a million-dollar budget shortfall, caused by cuts in state and city funding, with a crowdfunding campaign.

It was not an easy decision, she says. Orleans Public Defenders is a government agency, serving the constitutionally mandated requirement of making sure that everyone in the criminal justice system has access to a lawyer. It struck a lot of people as wrong – offensive, really – that the public defenders would have to fundraise to do their jobs. They worried about creating a precedent of state and city governments shirking their responsibilities. 

But the office decided that a crowdfunding campaign might serve the dual goals of raising money and bringing new attention to their budget problems. They worked with Mr. Wu, of CauseVox, and set up a project page. “We wanted to make a stink,” Hortenstine says. “And I think we ended up making a pretty big stink.”

The campaign got significant media attention. It quickly raised $80,000 – not nearly enough to cover the million-dollar shortfall, but an important amount for the office. More important, Hortenstine says, it raised a lot of questions, with many donors saying they were giving because of the emergency, but also demanding that the government take more responsibility.

Still, the idea of government agencies crowdfunding worries Bernholz. “Crowdfunding is very fickle,” she says. “I don’t want, as a citizen, my schools dependent on the whims of the donor, my foreign aid dependent on the whims of the donor. That’s why we do things as a community and a society.”

The technology and data behind crowdfunding platforms raise even more questions. As with Amazon and Google, algorithms help shape what users see on fundraising sites. The more people use a particular platform – and the more they interact with Facebook friends who use their own platforms – the more algorithms govern what pops up on their screens. In other words, one’s concept of social needs is shaped by technology in a way that is still fairly murky and unregulated, says Bernholz. 

“These are big questions,” she says. “Is there any visibility into these algorithms that should be public?”

•     •     •

Crowdfunding may be at its best when it spawns the kind of immediate giving that only the Internet can allow. John Hecklinger, chief program officer of GlobalGiving, envisions a future in which beneficiaries will be able to give instant feedback to donors, and perhaps even make instant requests, enabled by mobile technology.  

For instance, a school in the West African country of Burkina Faso might be able to put out a request for lunch – today. And people in New York City might be able to use their phones to buy it and then get reactions from the schoolchildren and teachers as they eat. There are questions and ethics to ponder, he says, but the potential is huge. 

Doyle Melton, for her part, imagines a continuing flow of generosity, where beneficiaries become givers and givers are beneficiaries.  Around the holidays, her team sets up a program called Holiday Hands on her blog. Families who need a bit of help put in a request – a toy for a child, for instance, or new clothes for older relatives. Other families sign up to help. More people always sign up to give than get, Doyle Melton says.

A couple of years back, a woman put in a request for her daughter, Gabbie, who was having trouble making friends at school. The girl had special needs and, at
7 years old, was just starting to realize she was different, her mother said. She asked Doyle Melton’s readers to send Gabbie mail, which the girl loved opening.

A year later, the mother showed up at one of Doyle Melton’s speeches. She stood up in the audience and said that her daughter had received thousands and thousands of letters. But something else had happened, too. In some of those letters, children explained how they also struggled to make friends and were feeling lonely and hurt at school. Gabbie wrote back to them. Thanks to crowdfunding, she had become their mentor. ρ