Habitat for Humanity: Crowdfunding Lessons

We have officially opened up our office in Atlanta! In honor of our new hometown, I’m sharing a few things that we can learn from Habitat from Humanity. Prospective crowdfunders should take heed of these important lessons.

The following is an excerpt from “Equity Crowdfunding: Transforming Customers into Loyal Owners”:

Crowdfunding Homes

Georgia has long been home to the evangelical Christian community. Back in 1942, a farmer named Clarence Jordan declared that segregation went against his Christian values. On a Habitat for Humanitysmall farm in Americus, Georgia, a rural community about two and a half hours south of Atlanta, Jordan began Koinonia Farm, an interracial community where Christians could work together for a better life.

More than 20 years later, a successful businessman named Millard Fuller decided he needed to take a long break from his business career in Montgomery, Alabama. He and his wife, Linda, had long believed in the idea of Christian service. The Fullers decided that their multi-year sabbatical should include visits to various Christian communities in the South, where they could spread the gospel while staying with similarly minded Christians. During his 1965 sojourn to Koinonia, Millard Fuller and Clarence Jordan struck up a close personal friendship. They developed a concept called “partnership housing”. The Koinonia farm community would work together with local charitable groups to build housing for those without funds.

Fuller and his wife went to work on this new concept. The idea was that houses would be built at cost and the recipient of the house would not be charged any interest. A fund was set up called the “Fund for Humanity” that would be responsible for fronting the money needed to purchase materials to build the houses. The Fund could be used to build even more houses, as new homeowners paid their house payments and supporters made no interest loans through the Fund.

In 1968, after three years of planning, 42 home sites were cleared and a community park was built (in today’s parlance this would be called a subdivision). Homes were constructed and sold to families without profit being generated and with no interest on the loans. This project was the foundation for what was to become Habitat for Humanity.

By 1973, the Fuller family was fully invested in this plan to provide families with accessible housing while spreading their Christian ideals. The Fullers even moved to Zaire to build houses for more than 2,000 people. After three years, the Fullers returned to the United States, having successfully expanded the program into what is now known as the Democratic Republic of Congo.

Finally, in 1976, the Fullers gathered their supporters to officially begin the organization “Habitat for Humanity”. This organizational meeting, held in late September, has changed the lives of thousands.

But the real growth came when Habitat found a successful backer. In 1984, former U.S. President Jimmy Carter and his wife Rosalynn officially began working with Habitat. Their first project was in New York City, and the impact of a former President working hand-in-hand with volunteers to build housing was immediate – especially under the glare of the New York media coverage. Money began flowing in, as well as thousands of volunteers.

Habitat’s continued success springs from its ability to leverage Christian supporters who are all interested in participating in one of two ways. First, there are a large number of people who are interested in simply donating money to Habitat. This money can be used to purchase materials and land to develop. Second, there are a number of people who prefer to volunteer for the organization. Sometimes this is because they don’t have the money to donate. But often it is because they want the rewarding experience of participating in a humanitarian project with other people.

People with a variety of construction (and non-construction) skills are in high demand at Habitat. But even people who are unable to provide skilled home building labor are very welcome. There are a number of projects (think painting) that require little skill. But other volunteers enjoy gaining new skills while working on these projects. Using experienced volunteers as teachers, new volunteers can learn to build roofs, install drywall, lay flooring, dig foundations, and even install plumbing and electrical systems.

The result is that Habitat for Humanity has built more than 600,000 houses, which provide shelter for more than three million people in five continents. Over 3,000 different communities have enjoyed the benefits of Habitat’s mission.

Habitat uses a very open process to choose the families that receive homes. Instead of just focusing on Christians or people of any particular racial group, Habitat utilizes very open criteria. Each local affiliate gets to choose the families that will receive homes based on the level of need, and their willingness to become partners in the program. Additionally the local affiliates are also required to look at people who are willing to repay the loans – after all these are people who will be supplying the capital to continue the project.

Each local community has its own “Fund for Humanity” that is used to fund future construction. If a family wants to go ahead and sell their house during the period of the mortgage, the affiliate has a first right of repurchase – it can simply buy the home back by paying a price equal to the equity that the homeowner has paid and the mortgage. This prevents homeowners from simply “flipping” homes that were built on the backs of Habitat volunteers using money that was donated by Habitat supporters.

Locations with higher income levels also contribute to the cause by having some of the money go to housing projects abroad. This falls in line with the religious concept of tithing, in which you contribute a certain amount of income to support those in greater need. Habitat embraces this ideal by shifting funds from higher income parts of the world to lower income areas.

In addition, some slight refinements have had to be made for the international operations. For example, in the United States homeowners pay no interest on the loans that they receive from Habitat. On the other hand, in some developing countries, interest is charged in order to deal with that particular country’s high rate of inflation. The theory is that there should be enough money for a new house to be built for every house that has already been built.

The use of the Jimmy Carter name has been instrumental in the growth of Habitat. Beginning with the 1984 New York project, Habitat has had an annual “Jimmy Carter Work Project Blitz Build.” This project is now called the “Jimmy and Rosalynn Carter Work Project.” In 2008, in the aftermath of Hurricane Katrina, volunteers headed down to the Gulf Coast in order to restore 60 houses and build an additional 48 for victims of the hurricane as part of the Carter project. At the same time, more than 1,000 building industry professionals were busily supervising tens of thousands of volunteers to build 263 new homes across the United States.

The star power behind Habitat does not begin and end with Jimmy Carter. For example, the Bon Jovi song “Who Says You Can’t Go Home” has been used to support the organization. In the music video, the band is shown building houses in Philadelphia with Habitat volunteers. The video highlights Habitat’s efforts, while at the same time enhancing the image of Jon Bon Jovi as an active participant in the local community. It also burnishes Jon Bon Jovi’s reputation as a man of faith, resulting in (amongst other things) more music downloads and concert ticket sales. The video has inspired many more volunteers to get involved in the organization.

But of course, as organizations grow, problems often emerge with the original founder –  and Habitat is sadly not an exception. In late 2004, the Board of Directors began to become fed up with Millard Fuller’s behavior. According to a former female employee of Habitat, Fuller had made “suggestive comments and inappropriate touching” while she was driving him to the Atlanta airport. Although the Board investigated Fuller for sexual harassment, they did not find any proof that his conduct was inappropriate. However, Fuller began to make public comments that did not reflect well on him, or the organization. By early 2005, both of the Fullers were dismissed, in response to “a pattern of ongoing public comments in communications by the Fullers that have been divisive and disruptive to the organization’s work.”

It later emerged that President Carter was involved in trying to hush up the entire affair. According to reports, Carter asked Fuller to simply retire with his salary intact. However, Fuller could not stop talking to the media, and the Board was forced to dismiss him.

There are several lessons that emerge from the Habitat story. Those lessons fall into three categories:

1)      Different types of contributions are important to the success of any organization;

2)      A strong vision and leadership are necessary for an organization to get off the ground; and

3)      Validation from third-party endorsers makes all the difference.

First of all, Habitat benefited greatly from its use of a division of labor. You have financial contributors, who are obviously very important to any organization. But with Habitat you also have a large reliance on the volunteer population. The use of volunteers, both skilled and unskilled, is nothing new to charitable organizations. But Habitat is uniquely successful because it allows people to see a project through from beginning to end. By offering this complete, immersive experience, Habitat takes people out of their normal “vacation” routine and puts them into a situation where they can develop new skills and enjoy the fruits of their labor. But much more importantly, volunteers are learning to build a house with other people. The result is that you have a network of individuals who look forward to their “vacation” every year with their newfound friends.

The bonds that develop between members of the volunteer Habitat community are striking. Bound together by the concept of volunteerism and Christian faith, members often maintain lifelong friendships. This creates a very powerful volunteer network that can be activated for emergencies like Hurricane Katrina. By providing volunteers a sense of owner-ship in the organization, Habitat also fosters volunteer loyalty.

Successful crowdfunding campaigns are about more than simply getting money from contributors. They are about getting people emotionally invested in the success of a project by providing an immersive experience. The successful projects also draw-in participants who have deep interests, but not necessarily the talents to pull off the project themselves. And the most powerful crowdfunding campaigns engage the contributors for the long-term, creating a commitment to following and connecting with the project (and the community created by the project) month after month, year after year.

Second, despite Millard Fuller’s disappointing downfall, much was gained from his vision. He helped develop a house-building project in a small interracial community in Americus, Georgia and then duplicated his success in Africa. Once he learned that it could be done, he began to move his project to the next level. This included dividing the organization into affiliates – local organizations that could work on these projects in their respective communities. He also maintained his original vision as the organization grew. Although a requirement to pay a small interest rate would probably not disqualify anyone from purchasing a home that was built by Habitat, Fuller maintained the 0% interest rate. It was an integral part of his (and the organization’s) Christian philosophy. That concept, coupled with the first right of refusal for the organization to repurchase a home if the owner wanted to sell, has permitted Habitat to continue on firm financial footing to this day.

Contributors attracted to crowdfunding campaigns are usually mesmerized by the vision of the person behind the pulpit. A powerful vision delivered by a strong leader is the quality that attracts crowds. Communicating centralized unifying themes is a key element that drives a successful campaign.

Finally, the organization would not have grown to its current proportions without the backing of former President Carter. His involvement starting in 1984 garnered widespread attention for the organization and its humanitarian vision. Although the organization didn’t change its approach after Carter got involved, one thing is certain: the glow of the former President’s celebrity helped push Habitat to new heights. Quite simply, without Carter and his ongoing involvement, the organization would not have become the single largest creator of housing. Of course, it is telling that Carter was forced to be involved during Fuller’s downfall. Because the Jimmy Carter brand was so wrapped up with Habitat, he had to play a much larger role in unwinding Fuller’s relationship with the organization.

Carter’s backing also led to the later involve-ment of celebrities like Bon Jovi. Not only does Bon Jovi’s involvement attract younger volunteers, it also enhances the Bon Jovi brand. Everyone knows that Habitat for Humanity is a faith-based organization that provides affordable housing, so Bon Jovi’s reputation benefits from the relationship.

Third-party validation is important to the crowd. To ultimately have a successful campaign, having the endorsement of outside parties is critical. A powerful message alone isn’t enough if people don’t know whether or not they can trust you. Gaining the confidence of crowd-leaders is important. Successfully receiving the imprimatur of people with a large following gives a crowdfunding campaign a critical boost. If you are one of those leaders, much like Jimmy Carter, you will have to protect your reputation by doing whatever possible to ensure success for the crowd.

Jonathan Frutkin
Jonathan Frutkin is CEO of Cricca Funding, LLC. He’s written a new book called “Equity Crowdfunding: Transforming Customers into Loyal Owners” which was published in May, 2013.

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