How artists can raise money for social causes with NFTs
A common thread that binds the artist community together is the will to give back. The same is true of many creators of non-fungible token (NFT) projects, such as Beeple, whose work allegedly raised $6 million for the OpenEarth Foundationand artist-led NFT communities which CowgirlDAOwho reportedly donated more than $70,000 to abortion access organizations this year.
Web3 unlocks a new set of tools that enable artists to build complex online support around shared values. “We raised $30,000 in minutes,” said CowgirlDAO founder Molly Dickson of her first NFT drop Computer Cowgirls. That kind of immediacy, Dickson said, wouldn’t be possible “if I was just penny-pinching friends and family to raise money.”
Dickson launched a second NFT collection earlier this year in response to a leak from the US Supreme Court that indicated Roe v. Wade, the landmark ruling recognizing the right to abortion, was likely to be overturned. The collection earned about $44,000 for Fund Texas Choice, a nonprofit that covers travel accommodations for out-of-state abortions. Income from secondary sales continues to grow.
If you’re a creator interested in raising money for social causes through an NFT project, here are some tips from those who have raised money with their art.
Starting
According to those who have navigated NFT fundraising efforts, the first step to a successful launch is coming up with your concept. Current events, social justice issues, and personal connections can serve as inspiration for your collection.
“My focus is always on using art as a tool for storytelling – especially BIPOC stories – about women’s rights and girls’ education,” said Maliha Abidi, artist and founder of WomenRise NFTs. “That’s what I want to continue to do no matter what space I walk into.”
WomenRise, a profile picture (PFP) NFT collection of colorful artwork, highlights diversity among women globally. The project donated approximately $120,000 to organizations support girls’ educationincluding the Malala Fund founded by Nobel laureate and education advocate Malala Yousafzai.
Industry experts add that it’s important to consider practical issues as well, such as whether you want your collection to be PFP-focused like WomenRise, a one-of-a-kind piece of art or a completely unique execution. For example, each NFT in the Computer Cowgirls collection was put together by Dickson individually rather than using a computer algorithm.
Launch of the project
After the artwork is created, generating buzz in your community is key to raising awareness. While marketing tactics are important, both Dickson and Abidi were able to capitalize on the goodwill of their existing followers without hiring a PR firm for the initial drop. Instead, they released their projects on the popular NFT platform OpenSea and spread the word via Twitter, Instagram and other social media platforms.
“We try to put the project out there and represent ourselves as best we can,” Abidi said. “We’re very focused on making sure we have a social media presence.”
It’s often a good idea to inspire your followers with a mission-driven narrative before inviting collaboration around a “road map” – a popular term in the Web3 space for building a long-term strategic plan.
“We’re constantly reaching out, connecting with other businesses and looking for bonds to build in this community and this space,” Abidi said.
New branches of activism can be created from newly formed relationships. For example, Dickson’s community of buyers evolved into CowgirlDAO, which now works together to vote on profit sharing and establish necessary legal payment rails to donate crypto. This organic development helped propel CowgirlDAO forward as a fundraising community, eventually with more formal structures.
Attract donors
Some charitable NFT projects offer special benefits to holders referred to as utility, which can come in the form of private Discord channels, live events, and virtual meetings for community members.
NFT holders can find satisfaction in knowing they are making a positive impact. Joint meetings, whether virtual or in person, can also be a meaningful way to connect supporters around a common mission.
Owning a sought-after piece of art can also be a motivating factor for experienced collectors, especially if a project has built-in rarity features in the collection.
Experts we spoke to encourage socially-minded collectors to find a project they trust that is connected to a cause they are passionate about. Dickson explains that both donors and project founders can learn and adapt as the creation, coining and fundraising process unfolds, leading to a collaborative exercise in community building.
“Web3 gave me an outlet to raise money that I didn’t have,” Dickson said. “If we have a whole new way of raising money that activates people who weren’t activated before, that’s pretty amazing.”
Legal considerations
Starting an NFT project comes with many legal considerations, especially when you add elements of fundraising.
First, there must be careful navigation around payment structures. Dickson and CowgirlDAO are setting up the proper structures through Endaoment, a tax-exempt nonprofit that facilitates crypto donations to charities. The Ethereum-based platform enables donors to connect to a crypto wallet and donate almost any crypto or digital asset, which is then exchanged into USDC (a stablecoin pegged to the US dollar) via the decentralized exchange Uniswap and deposited into a selected fund’s smart contract.
Free crypto fundraising platform givepact, a finalist in the Web3 Pitch Fest, is also slated to launch a crypto donation solution in 2023.
That said, artists who wish to form a decentralized autonomous organization (DAO) as Dickson did may also consider seeking legal nonprofit status as a supplement to the DAO structure. By doing so, a community can accept traditional donation methods in addition to crypto methods, a benefit for social causes looking to expand their Web3 payment options.
“We have both on-chain rails and off-chain rails,” said Christian Narvaez, co-founder of Web3 Familia, a Latinx educational community that has both a nonprofit operating arm as well as an LLC arm that earns revenue. At the same time, the founders are also building a DAO, an approach that he calls something of a “trifecta.”
“We received financial sponsorship from the Blockchain Acceleration Foundation,” explained Narvaez. Because the organization is a 501(c)(3) focused on Web3 education, Web3 Familia’s sponsorship allows it to accept traditional donations through credit cards and checks as well as crypto funds generated through its core activities. According to Narvaez, partnering with or forming a legal non-profit entity allows Web3 projects to “deal with legacy institutions that may not understand what Web3 is yet,” but still want to support your work.
Then there are laws on the purchase and sale of securities. For the most part, the sale of NFTs as artwork has been permitted in the US under the Howey Test, a four-part checklist to determine whether an asset is considered a security, which would therefore mean it is subject to US securities laws.
Currently, donating proceeds from NFT sales does not trigger any regulatory red flags. However, if your project uses NFT ownership as a membership of some kind, it is important to avoid promising positive valuation of the asset’s value. Promises of profit from other people’s efforts mimic the structure of a security, and it can attract buyers who see your NFT as an investment, not a charitable donation.
Ultimately, buyers will decide to donate to your project for different reasons. Similar to a physical art auction, some collectors will be drawn to the artwork itself while others will see the art as a nice bonus along with the opportunity to donate.
“Who knows why people are motivated to buy,” Dickson said. “All that mattered to me is that we raised $30,000 and donated it from the first collection.”
