Fundraising vs. Crowdfunding: what's the difference?
By: Malini Bhattacharya
Published On: June 02, 2018
After the internet revolution, people’s lives (or at least, extra soft copies of their lives) have moved online.
And as India and her people warmed up to the internet its unprecedented power to erase boundaries and bring people closer together, another innovation shook the Indian consumer market. The smartphone arrived, and arrived in glory. Overnight, it seemed, everyone had a smartphone and therefore, access to the internet, and soon, a profile on Facebook , if not on Instagram, Twitter, and Snapchat, and WhatsApp installed to stay in touch with friends all over the world for free! The pocket-friendly smartphone and the easily accessed, affordable internet plans supplemented each other so young India’s social, cultural, and even political lives went online, and it looks like they are there to stay.
What is fundraising?
When you fundraise, you state your cause (your reasons for raising funds, or your need) and ask for help with funds (or other resources). People voluntarily give to your cause, or your campaign, with the understanding that funds given are “gifts” given in empathy with your need and are not to be paid back.
Fundraising is nearly as old as the human communities that took civilization forward after money was invented and brought into populist use. The earliest fundraising initiatives, often to celebrate religious festivals or to build places of worship, were contributed to by affluent members of community. That tradition has held through centuries, although tremendous variety has appeared in the causes that people and nonprofits fundraise for with success.
For a complete overview on fundraising, here’s a free Fundraising 101 guide!
What does offline fundraising in the modern world look like?
For the average nonprofit, it means spending months and endless man hours per year writing proposals and grant requests for pools of philanthropic money, or limited endowments that can come from corporate social responsibility funds. These funds are not only competitive to get, but often do not help cover all needs, including operational costs and the needs of a specific change-oriented campaign that the nonprofit is running.
Door-to-door fundraising too goes on; this is just what it sounds like, with canvassers going to people's homes and workplaces, or even soliciting the public on the streets. When fundraising began to make a move offline, it made a big save in terms of labour, and another in terms of overhead costs.
How much of fundraising has really gone online?
Organizations in both the West and in India collect fundraising revenue in donations made both online and offline. A Charities Aid Foundation report from 2015 shows that only about 10% of all contributions made to charity in India were made online (they attribute such a small fraction of donations made online to the fact that most Indian donors were older and not internet savvy). At about the same time, a study examining the giving habits of donors in western societies showed a similar finding - 90% of all funds that nonprofits were collecting came in the form of donations made offline, through cash or check.
Interestingly, an observation that applies to everywhere in the world as far as fundraising is concerned is that many new and young donors will donate online. As giving strays to the offline space, charities have one more risk at hand: the median online donor is more generous than their offline counterpart, and donates more cumulatively over a lifetime than multi-channel givers and offline giving loyalists.
Let’s just say that fundraising is still going online. The process isn’t over yet, but in the next decade or so, we will see a rise in the number of people who consistently make donations to charity online. And nonprofits, individuals who fundraise, philanthropists, social sector workers, and donors are all learning the ropes, as we write, about how online fundraising can be perfected and refined so everyone involved can have a rich and rewarding giving experience.
This is where crowdfunding comes in.
Crowdfunding has already been conceptualized and developed and honed by innovators and users for it to have come into its own as a unique and useful method of online fundraising. Crowdfunding is the biggest subset of fundraising, once all offline and online modes of traditional and new age forms of fundraising are taken into account.
But what is crowdfunding?
Crowdfunding is an alternative method of raising funds, done online, with a large number of donors, each typically contributing a relatively small sum, coming together to meet a big goal amount. Crowdfunding campaigners promote their projects on social media and commonly ask their friends, relatives, fans, supporters and virtual friends for donations. The most successful campaigns go viral through social media sharing, with strangers donating to the cause.
Crowdfunding is also:
Quick: The average crowdfunding campaign (in the brief history of crowdfunding) runs for a period of 30 - 44 days, and meets their target or surpasses it within that time.
Flexible and impactful: You can crowdfund from anywhere with a smart device and an internet connection. And you are able to to reach donors anywhere in the world.
Easy: With crowdfunding, you begin your fundraising mission by asking your primary network for donations. These are people you already know, and know well! Your friends, relatives, colleagues, and neighbors will only be too happy to give to your fundraiser, and asking them is going to be much easier than asking total strangers for a donation. Also, all of this can be accomplished with just a few clicks, as long as your social media content templates asking for help are create. You work much harder fundraising offline.
Low-cost: Even when you have paid the service fee to your platform, you’ll have spent less crowdfunding for your cause than going door to door or organizing a gala or a sale to raise funds for the exact same need. There are practically no overheads, and you’ll not be paying any staff to help your fundraise.
Risk-free: If you are fundraising with a keep-it-all platform (we recommend this for healthcare crowdfunding especially), you can keep all funds you raised (barring the service charge), even if you couldn’t meet your target. There’s no risk, with crowdfunding, that your effort to raise funds will go all to waste.
Good for donor relationships: The people who make donations to your campaign get to know your cause, and through your cause they know your story, details about your life, and anecdotal information which presents to them a real human’s struggles. You build lasting relationships of trust and amity with the people who give to your cause, which is a wonderful thing for a campaigner who may crowdfund again.
We often get asked what one can crowdfund for. The short answer is that you can crowdfund online for anything, just as in days of yore you could fundraise for anything unless the raised funds were used illegally. Funnily, crowdsourced funds have been used to sponsor war efforts, notably the Indo China war of 1962, and the American Civil War’s Confederates a century earlier. But in the modern world, you can go online and solicit crowdsources funds for things as crazy as these:
- Buying a potato salad (this is true!)
- Buying winter uniforms for children in India’s hills
- Educating adults or children
- To open a cafe
- To start a library
- To put your play on the stage
- To take time off from your day job as you write your first novel
- For healthcare (most of the world’s population still has no health coverage, and crowdfunding can be a boon)
Not an exhaustive list, by any means.
How to do crowdfunding rightBuild buzz: The best, most successful crowdfunding campaigns are run by people who excel as planners. Months before the campaign goes live, it is a good idea to start letting your supporters know that you will be beginning to raise funds. This will not apply to medical crowdfunding, but nearly all other kinds of campaigns can only gain from the positive buzz that surrounds your campaign and puts potential donors in a place to make informed giving choices before it goes live. Here are some things to keep in mind.
Pick a platform: This very important step that kick starts your crowdfunding endeavor is often just brushed over by a lot of first-time campaigners. The choice of platform is crucial because different platforms can be better at lending support to separate cause categories, have varying pricing structures, and diverse policies to help you find donors outside of your immediate network. You can compare crowdfunding platforms in India here.
Create the best fundraiser you can: Write a telling story. Upload vivid photos. Get a friend to shoot a video about your project and find an editor to prim it up. Create a lucid and basic version of your full fund utilization plan and put it up. Do not leave any information field on the fundraiser microsite blank. This is your chance to tell the world why you are crowdfunding, so make the most of it!
Share with faith: And also share smartly. Devise a strategy rather than posting at random times. Know the people you are reaching out to and tailor your appeals for help. Feel no hesitation about asking a second time. Remember to tell your friends on social media to also share your campaign so you can reach people from extended circles of acquaintance.
Show your gratitude: Thank your donors when you receive a donation. While this is intuitive, it may slip your mind to thank them again when your campaign closes and you have met your target. When you have scaled your targets and utilized your crowdfunded endowment, remember to send donors a little thank you note and show your gratitude again.
If you have a clear goal and a strong will, it is very hard to go wrong with crowdfunding India. Reinforce yourself with a good friend or two to help out with the crowdfunding enterprise, set aside a few hours everyday to give to your cause, think positive, and you’re ready to go.
We wish you victory with crowdfunding!