As the technology becomes more popular, we begin to see various companies and organisations using NFTs for various purposes. Earlier this week, e27 published an interview with Singapore-based Ryde to understand their ride-to-earn programme and how they aim to build an efficient and advantageous membership programme with it.

In recent months, we have also begun to see artists, activists, and institutions utilising NFTs to fundraise for their projects. Leading media companies such as Straits Times raised over S$21,000 in an NFT auction to fundraise for The Straits Times School Pocket Money Fund; in fact, during the ongoing situation in Ukraine, its DAO’s sale of a simple NFT of the country’s flag managed to secure US$6.75 million in wartime funds.

But things are not always rosy. There are certainly examples of failed fundraising projects that can serve as a lesson for the rest of us.

If you are considering using NFTs as a means to fundraise for a cause or a project, what are the factors that you need to keep in mind? What can you do to ensure success? Most importantly, what can you learn from those who have failed?

e27 speaks to David Tng, Head of Growth, TZ APAC, the leading Asia-based ecosystem adoption arm for the Tezos blockchain, to understand more about fundraising through NFTs. Considered one of the most advanced and energy-efficient blockchains at the moment, the Tezos blockchain has been a go-to for many of the world’s most prominent NFT projects, including the largest fundraisers.

Also Read: Demystifying NFTs and DeFi

Why NFTs are great for fundraising

Before we can understand how to run a fundraising project using NFTs successfully, first we need to understand what makes this so attractive. The first advantage to come to mind was cost-effectiveness, followed by transparency and security.

Apart from that, NFTs open up the opportunity for a project or a cause to connect with a passionate, global audience who are even more willing to spend generously. In our interview, Tng cites a report by The Giving Block, a crypto financial platform that works with organisations to help them set up crypto wallets. The report reveals that the average crypto donations can go as high as US$10,000 while the average traditional donations are only around US$130.

“The number of donors is also increasing rapidly, around 15 times in 2021,” he adds.

But that does not mean fundraising through NFTs is completely risk-free. Tng warns against the potential of a backlash by citing the case of a recent fundraising effort by the World Wildlife Fund (WWF). Earlier this year, the UK chapter of the organisation released Tokens of Nature, a series of NFTs depicting endangered species.

The controversy began when experts criticised the organisation’s decision to work with Polygon. Despite being perceived as the more environmentally friendly option, digital currency economist Alex de Vries noted that Polygon “is responsible for some of the pollution generated by the notoriously energy inefficient Ethereum” and questioned WWF’s decisions. This eventually led to WWF discontinuing the initiative.

“Brands have to assess whether their values align with the technology on blockchain that they use. That’s something that they definitely have to figure out,” Tng stresses.

The failure of WWF reminds us of the key principle of fundraising through NFTs: In order to be able to attract potential donors, first, you need to understand them well.

When it comes to understanding your audience or potential NFT buyers, according to Tng, there are several questions that you need to answer:

1. What is the purpose of NFTs in this initiative?
“Why does this initiative require the use of NFTs and not other means of fundraising?” he asks. Tng also highlights the importance to decide the role that the NFT plays here: are they meant to build awareness, or are they a form of reward mechanism?

2. What does the NFT represent for the buyer?
Tng gives the example of Breast Cancer Awareness Month, an initiative where donors can show their contributions to the cause by displaying a pink ribbon on their online and offline presences. If you are fundraising by using NFTs, you also need to figure out a symbol that can represent buyers’ contributions. It can be in the form of an artwork, a symbol, or even access to a community such as a private group on Discord and Telegram, or an invitation to dine with the artist. “So there is a compelling reason [to contribute] that you can’t find elsewhere. This is actually the reason why they’re using NFTs; so it has to be very clear what the NFTs represent,” he stresses.

Tng says, when organisations are reaching out to TZ APAC for potential collaboration in a fundraising project, these are the questions that they will always ask. As with the case of WWF, where the organisations mistakenly associate themselves with a platform that is hurting their own brand, failure to understand the needs of the potential buyers may threaten the livelihood of the project.

Also Read: ‘NFTs provide new ways to handle IP management, empower content creators’: Inmagine CEO Warren Leow

“They have to be very clear because it is all going to be on social media. It is all going to be transparent. They need to have a strategy,” he stresses.

Another important point is to understand the fundamentals of the technology itself, as it can help organisations prevents mistakes, and be responsive in correcting the mistakes that they made. The Ukrainian NFT fundraising project is also a great example of the matter. According to Tng, the Ukrainian government earlier announced that they were going to do an airdrop of tokens to any person who had donated to the cause, but this ends up creating a backlash as they were not being clear about the purpose of these tokens.

“But something that they did well is that they realised the mistake quickly and cancel this plan. They are aware that they did not do enough research and were not really clear about the purpose.

There was also the matter of choosing the right blockchain to facilitate this effort.

“It really depends on the organisation which blockchain they are most aligned with. Whether it is Ethereum, Solana, or Tezos … There are some that are more energy-efficient, but there are also others that drive other values with them as well,” Tng says.

Getting the word out

As with any novel technology, education remains an important homework that stakeholders need to work on. In the case of a decentralised platform, it becomes even more crucial as users should be able to make informed decisions on their own.

Apart from that, there is also a need for organisations to continuously update the progress of this fundraising project through social media channels, particularly whenever the fundraising has reached a new milestone.

“I think organisations have to be aware of that and uphold themselves on a similar or even greater level than the traditional means of fundraising because now every single step of the way is visible to the public … There is an increasing need for communication,” Tng stresses.

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