The Difference Between Crowdfunding and Fundraising

December 7, 2016
6 minutes

When raising money online, nonprofits face two popular options in choosing the right type of activity and platform to finance their cause projects. The choices faced include traditional fundraising versus a modern crowdfunding platform.

Definitions

Traditional Fundraising

Historically, this has been the best "offline" source of collecting money generated from hosting fundraisers, events for people who attend and make physical donations via check or cash or bank transfers. With the advent of internet banking, fundraising in this area is online today, which made donations quicker and easier but, more importantly, allowed for greater transparency and accountability.

While going online has certainly made things better, the millennial generation, having grown up technologically savvy, have challenged the traditional method in order to get more hands-on donation buttons online.

Crowdfunding

While this concept has been around for businesses and budding entrepreneurs, its entrance into the nonprofit vertical is still relatively new. As its name implies, it requires a crowd, a preferably large group of people, to provide financial support for the nonprofit's cause to continue. This is still a very similar process, and activity to fundraising as the goal is to raise money but with more donor supporters.

The majority of crowdfunding campaigns usually have a specific timeline, a deadline in meeting the target date set. While businesses and entrepreneurs can and often will cancel the project funding if the target is not met, nonprofit crowdfunding campaigns, on the other hand, will continue. While there may be incremental targets along the way, it is always understood that whatever money was raised will be put toward the cause regardless of the overall total.

Crowdfunding is a great tool as an easy way to distribute your nonprofit's message, or when you're raising money for a one-time big event, or when you want to keep everyone informed on your overall donation's webpage.

Tips on crowdfunding

Build the buzz: The best campaigns are done by those who make the best planners. Plan months in advance. Inform your supporters (informally) that you will be raising funds for a specific event. Over time, while the campaign is being worked on, you will continue to build the momentum and anticipation via social media, email, and website updates.

Pick your platform wisely: The choice of the proper platform is crucial, as pricing, donor information, payment, and privacy processes must be adhered to.

Tell your story: Use vivid photos or videos of authentic people, places, and situations related to your cause. This is your one opportunity to tell the world why they need to care.

Share smartly: This is where it helps to tap into donors with event marketing backgrounds if your organization does not have any. Know your audience as you ramp up your campaign, both offline and online, via social media.

Show your gratitude: Thank your donors when you receive the donation. It may seem a bit intuitive, but it is important that this one step is not missed. Remember also to send a thank you note after the event with what impact their donation has made.

Peer-to-peer Fundraising

Peer-to-peer fundraising campaigns have the ability to reach larger audiences. This is because individual supporters solicit their networks for donations. These campaigns are good for time-based initiatives or a year-round fundraising request.

Peer-to-peer fundraising's main purpose is to call supporters for help in fundraising on behalf of your organization. While the option is there to complete a one-time donation, the goal of the donation page is to recruit individuals who will also appeal to their individual networks.

While a regular donation webpage displays the significance of a single donation from the individual donor, a peer-to-peer webpage would convey the impact an individual could make as a fundraiser by tier networked connections.

Individuals selecting peer-to-peer would be offered a webpage of their own to use to send out to their network connections. The donation request has now moved from an individual donation to their contacts who may align with the nonprofit's cause and donate as well.

When is peer-to-peer used

These campaigns can be run as a year-round fundraising option or as a time-based campaign, or both can be run simultaneously.

These will leverage the network of your supporter base in order to raise more in donations. They are great to tap into the network of key influencers, for example, brand ambassadors, celebrity supports, or board members. This campaign is great as it gives donors a year-round option to raise money on behalf of your organization for a variety of life events (birthdays, weddings, etc.).

Peer-to-peer is useful, especially if your cause has a lot of passionate supporters who are willing to spread the word.

Final thoughts

Initially, traditional fundraising was and remains the best offline way to raise funds. With the arrival of crowdfunding as an option, this has created a new technology-based avenue to appeal for donations.

The biggest difference is that crowdfunding knows no boundaries. Traditional fundraising for an event is generally geographically restricted. With crowdfunding, you have a global opportunity to attract interest in your cause and hopefully convert the webpage visitors to donate.

While traditional fundraising for nonprofits will remain a constant, crowdfunding can be used for both profit and nonprofit organizations. When entering into a crowdfunded webpage to make a donation, be sure to verify if the funds are going to the nonprofit's cause directly or whether a percentage of the donation will be forwarded to the nonprofit listed.

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