Many people, who want to raise money online, often face dilemma of choosing the right type of activity and platform to finance their personal and good cause projects. They’re not sure if what they need is a fundraising or a crowdfunding platform. Working for a money collection website, I needed to quickly become an expert in this field. So today, I’d like to share some insights with you which I hope can help you understand the differences/or similarities between the two types of activities and choose the right website to fund your project.
So, let’s start with some definitions:
Historically, it’s been linked to raising funds for nonprofit organisations and political campaigns. It was done so via hosting offline fundraisers, events for people to attend and make donations via checks or bank transfers. Today, thanks to technology and people’s digital behaviour, fundraising has been brought online. Which not only makes donating quicker and easier but more importantly, allows for more transparency and accountability.
However, what’s interesting is the growing tendency for individuals, especially the technologically savvy millennial generation, to get more hands on in online fundraising activities such as raising money for a non profit organisation, supporting an individual in need or a community project.
It’s a relatively new concept and the arrival of technology has turned it into a popular way of raising money for personal projects and business ideas. As the name implies it requires a crowd, a group of people, to provide financial backing for the project to take off. It’s a very similar activity to fundraising as it’s goal is to raise money but with more participants.
Crowdfunding campaigns usually have a specific timeframe, a deadline by which target amount needs to be met. Often many websites, will cancel the project funding if the target is not reached. This does not apply to fundraising campaigns. There can be targets as an indication of how much money is needed but they are absolutely not binding.
Unlike online fundraising, crowdfunding can be a associated with donations and making a profit.
Here are the different types of crowdfunding website and ways investors get involved:
- Equity based– investors provide funding in return for shares in the business
- Debt based– people lend you money (easier to access than a bank loan)
- Pre-order based– you pay for a product/service
- Donations based– you make donations with no profits (just like fundraising)
Initially, fundraising was a traditional offline way of raising funds and the arrival of crowdfunding became the extension of fundraising with the ‘online’ aspect and the social media support of campaign sharing. Today, thanks democratisation of technology and connectivity the difference between fundraising and crowdfunding becomes a bit blurry. Anyone can raise funds for anything or anyone they hold dear!
The biggest difference is that fundraising is always non for profit, meanwhile crowdfunding can be both.
Regarding your projects….
If you’re interested in raising money to:
- support a charitable cause
- run a marathon for a cause
- help an individual in need (ex. to rebuilt a burnt down home, get them off the streets, help finance a life changing/saving surgery, help mourning family)
- support your local community (ex. help finance local sports club or activity)
- help animals
- personal projects (ex. personal fundraising for your expenses or a humanitarian trip to build a school in Nepal)
- pay for tuition
You can use easy, transparent and secure donation based crowdfunding websites like Leetchi.com, which can help you finance any project, except for a business venture with shares).
If you’re interested in finding investors to finance your business start up or pre-order your product (that’s in the making) than the crowdfunding activity and platform would be the best. Consider using equity and rewards based crowdfunding platforms.