Entrepreneurial Finance Projects Raise more than $800 for Local Charities
By Ed Brennen
Crowdfunding — or the act of raising money from the masses for a project, business venture or charity through websites like Kickstarter
— has exploded in the age of social media. According to the research firm Massolution
, crowdfunding was expected to raise $34.4 billion worldwide in 2015, more than double the $16.2 billion raised in 2014.
In his research on the rising tide of crowdfunding, Michael Ciuchta
, assistant professor of marketing, entrepreneurship and innovation in the Manning School of Business
, looks at why some campaigns are more successful than others and how factors like messaging, gender and even physical attractiveness influence people’s decision to contribute.
“Crowdfunding is becoming more and more prevalent as a source of money for entrepreneurs,” Ciuchta says, “so it’s important for students to understand how it works.”
That’s why Ciuchta introduced a new crowdfunding group-project this fall in both his undergraduate and graduate entrepreneurial finance courses. In groups of three or four, students were required to launch a fundraising campaign for a Lowell-based charity through the website CrowdRise
Combined, the 12 groups in the two classes raised more than $800 (and counting) for charities like the Lowell Association for the Blind, the United Teen Equality Center and the Lowell chapters of the Boys and Girls Club, Habitat for Humanity and the Humane Society. While the money raised pales in comparison to, say, the $5.4 million raised
by UMass Lowell’s 2015 commencement speaker LeVar Burton for Reading Rainbow, Ciuchta says that wasn’t really the point.
“It was a learning experience for them,” he says. “It’s a finance class, so they already do a lot of spreadsheet work and analysis. But I wanted to emphasize that finance is also about real-life interactions and asking for money. That isn’t always really comfortable and requires you to maybe step out of your comfort zone, so that was a big motivation for the project, as well.”
Spreading the Word
Graduate student Hithaishi Raghu Gowda, who completed her MBA this fall, had never used a crowdfunding website before. While she was impressed with the ease of setting up a campaign for the Lowell Humane Society, she says effective advertising proved to be the biggest challenge.
“We advertised on social media, distributed flyers and sent emails and messages to family and friends but still could raise only $145 for the Society,” she says. “My biggest takeaway from the project is that raising money is difficult using any medium.”
Besides sparking an interest in nonprofit or social entrepreneurship work, Raghu Gowda says the project showed her how crowdfunding could benefit future business endeavors.
“It’s the best platform for an entrepreneur who has a great idea and wants to raise funds,” she says. “It’s also one of the best ways to meet strategic investors, test your product and evaluate the market's reaction. With this background, I now know the process and the time it takes.”
Senior Bobby Fisher, whose group raised $170 for the United Teen Equality Center to buy computer memory sticks for its students, says donations took off once people felt a personal connection to the cause.
“When I first posted it on my Facebook and Twitter accounts, it didn’t even get any likes, which was really surprising to me,” says Fisher, who then added a post explaining why UTEC’s work is so important to him.
“I have struggled in the past, and I have been at a point where I could not see opportunity. It was just dark, and then somebody in the community provided me with a light that actually allowed me to see opportunity that I didn’t see before,” Fisher says. “Many of these individuals at UTEC are in the same position. So when I made that connection, that’s when everything started to come through.”
In addition to devising a marketing plan and giving a PowerPoint presentation on the outcome of the campaign, each group was required to produce a short video about its charity to include on its fundraising page.
“A lot of them had never done that type of production work before and I wanted them to get some experience creating a multimedia appeal,” says Ciuchta, who adds that he may tweak the project in the future to spur more competition between the groups.
While the projects were limited to donation-based crowdfunding, Ciuchta says he would also consider non-charitable campaigns in the future. He says equity crowdfunding, which gives donors a small stake in the company or product they are supporting, will continue to grow with the recent signing of the Jumpstart Our Business Startups (JOBS) Act.
“From an entrepreneur’s standpoint, crowdfunding opens up a source of capital that they would not have had access to before. And for the investor, I think there’s this wanting to feel that you’re a part of something,” says Ciuchta, who joined the Manning School in 2014 from the University of Central Florida. After earning his MBA from the Wharton School, he enjoyed a successful career in corporate banking before earning his Ph.D. in organization theory/strategy from the University of Wisconsin-Madison and joining the world of academia.
“It was an amazing activity,” Fisher says. “I’m really grateful for the amount of expertise that Prof. Ciuchta has in the market, and for the fact that he wouldn’t just give us the answers. He made us chase our answers until we understood it.”