NEW YORK (MainStreet) — Crowdfunding isn’t always just about the money, according to Richard Swart, who studies the market for Crowdfund Capital Partners and the University of California at Berkeley. It can also be about social engagement, about positioning, about reputation, and about doing some good in the world.
That’s why a lot of very large companies, from Chrysler to U-Haul to Dell, Honda and Coca-Cola, have begun involved in crowdfunding campaigns.
Sometimes the effort is done from the corporate office, sometimes it’s a product group or regional unit. In all these experiments the results are evaluated closely, based on all the bottom lines a company must respond to, and Swart said the results have mostly been positive.
Take Chrysler’s Dodge unit as an example. They were looking to boost sales and improve the image of their Dodge Dart, and hit upon crowdfunding as a solution. Through the Dodge Dart Registry, people who really needed cars but could not afford them could encourage donations and, if successful, get one.
“They got one million social media impressions, with a campaign involving chemotherapy for a cancer patient, and a car to get them to the hospital, or women needing cars to get away from abusive husbands,” Swart said. Consumers could sponsor parts, or contribute to the whole car.
“They actually sold 32 cars,” he said, with 30,000 campaigns. “The sales of that car went up 400% the next quarter. That was a spike, but it did bump the sales the next year or so.”
Results like that get attention. So Dell started crowdfunding sales of computers to help poorer college students. Coca-Cola Mexico crowdfunded the digging of wells in rural communities.
Honda brought in $56,000 to save American drive-ins. Dick’s Sporting Goods matched crowdfunded contributions to raise money for youth sports.
“The corporations aren’t raising money for themselves," Swart said. "It’s a new form of media engagement, and brand engagement. It’s about getting in front of customers and others.”
Crowdfunding can be used for co-investing with a charitable group, syndicating investments in products like the Dart, for matching grants as with Dick's, or to spur employee creativity, as Otterbox, which makes cell phone cases, did with a campaign called Ottercares.
“Rather than having some committee decide where to donate corporate money, they gave money to employees and told them to crowdfund it," Swart said. "The workforce wanted to make a difference and were able to extend their messaging to a larger audience."
“It’s literally bleeding edge -- only 20 corporations have done it,” Swart added, but as many as 100 companies may now have initiatives like this in the works.
He warns that it’s also not for everyone.
“It’s very strategic, not just a matter of going on Kickstarter," he said. "You have to understand the mechanics of what makes crowdfunding. Many firms lack that background.”
He suggests that experts be consulted before any effort is begun.
Swart was working as a venture capitalist when the JOBS Act was passed in 2012 to encourage crowdfunding.
“I got on a plane to see what was going on," Swart said. "I talked to the people backing the bill, the venture capital association, people involved, trying to understand it. I was at the first meeting when the crowdfunding association got organized."
Now he continues to consult and works half-time at UC Berkeley to build its crowdfunding program.
“Philanthropies are afraid this will disintermediate NGOs,” he says, but it doesn’t have to. “It changes the nature of giving. It is the next revolution in social media.”
--Written by Dana Blankenhorn for MainStreet