“Fundraising vs crowdfunding” – Have you ever thought what is the difference between these two terms? Well, let me explained everything about it.
Some people think that there is no difference is fundraising and crowdfunding. And they use these terms intelligibly. But there are some differences in both the process.
In my current blog, I will discuss fundraising vs crowdfunding. You will get more clarity.
Fundraising VS Crowdfunding
Well, the main purpose of fundraising and crowdfunding are the same. That is, to drive funds.
Fundraising means raising funds for a particular purpose. Fundraising can be done even without crowdfunding. But crowdfunding can be a part of fundraising.
What is the difference between fundraising and crowdfunding?
Fundraising is all about raising funds from people, here it usually does not include contributions from too many people. Whereas, in crowdfunding, the intention is to drive more funds from the crowd.
Lets, see other differences also and know more about fundraising vs crowdfunding.
Fundraising VS Crowdfunding – 5 Key Differences Between Fundraising and Crowdfunding
Let’s focus on some differences here. You will get more clarity if you understand them.
1. Anyone can contribute money in crowdfunding but not in fundraising
The word ‘crowdfunding’ itself says that its intention is to collect money from the crowd. That means anybody can contribute money to crowdfunding.
But when it comes to fundraising. It depends on the purpose and on the fundraiser if he wants to raise funds from particular people or from anybody. So, sometimes not everyone can be able to donate money in the fundraising process.
For example, if a fundraiser is raising funds for his business and he wants investment from some particular group of people then other people can’t donate here.
2. Many times each donor is expected to contribute more when it comes to fundraising
Fundraising usually has fewer donors compared to crowdfunding. So, fundraisers expect more amount of money from each donor.
This usually happens in projects or businesses. Businessmen raise funds with a help of fewer donors but expect more money.
But in crowdfunding, there is no such thing. The purpose of crowdfunding is that to raise money from more people so that they can meet the target. It does not matter how much one donates.
3. Crowdfunding campaigns can be run by anyone if one has a good idea or plan
If you have a good idea or if you want to publish your book or it can be any other idea, you can opt for crowdfunding. There are many crowdfunding websites where you can launch your own campaign.
But fundraising usually needs a strong reason to raise funds. People will come forward and help you in fundraising when people trust you. And in crowdfunding, even any random people will donate money.
For example, if you want are planning to fundraise from other businessmen then other people should have more trust in your idea and in you then only other businessmen will give funds to you.
4. Donors usually do not expect anything in return while crowdfunding but may expect in fundraising
When it comes to crowdfunding, donors will not expect anything in return from you. But in fundraising sometimes donors expect something in return.
You can run campaigns online for crowdfunding and people who donate will not expect anything. But if you are raising funds from the people that you know, they may expect something from you.
Let me explain with an example here. If you have an innovative business idea in mind and run a crowdfunding campaign online then people will donate money without expectations. But if you try to approach family, friends or other business people in return they may expect profit share.
5. Crowdfunding is less time consuming than fundraising
Crowdfunding involves many donors who can help you to accomplish the target soon. But if you follow the traditional fundraising method then that will be more time-consuming to accomplish the target.
You can easily use crowdfunding websites online to collect more money from the crowd. But in the case of fundraising from a small group of people, it will take a lot of time.
So, the time factor is also different in the crowdfunding and fundraising process.
Useful Advantages of Crowdfunding and Fundraising
Let’s see some important advantages of these two. You must know all the plus and minus points of crowdfunding and fundraising. Then you can choose the best suitable option for you to drive funds.
5 Advantages of Crowdfunding that You Must Know
1. Crowdfunding reduces the burden of donors. As there are so many people who will be contributing money then people can donate according to their capacity.
2. There are no upfront fees in crowdfunding.
3. You don’t need to pay any interest on the amount that you collect from the crowd. But if you take a loan from the bank you need to pay interest and you need to return the whole amount as well.
4. You should share your idea. For example, if you have any tech-related idea and want money for that then you should share your idea to raise funds from crowdfunding. At this time people will give feedback on your ideas.
5. You can build a good network with a lot of people in the crowdfunding process.
5 Main Advantages of Fundraising
1. You will improve your communication skills as you reach out to business people, friends, and family for fundraising. This will help you in future days also to build good relations with your people.
2. Frudraisng can be done even by selling some products.
3. Fundraising will create a sense of community. If you are raising funds for a particular reason among a particular group of people then it will make a strong bond and build a good community.
4. There are so many opportunities for fundraising. Such as walkathons, organizing events, get together etc. These are easy to understand.
5. If you approach the right people you can drive more funds from a few persons.
Disadvantages of Crowdfunding and Fundraising
Let’s discuss the disadvantages here. Make sure that you do not ignore the disadvantages of crowdfunding or fundraising because you may face problems when you try to raise funds practically.
And knowing these disadvantages will help you to prepare well while raising funds.
5 Disadvantages of crowdfunding that you must understand before starting your campaign
1. In many cases if you don’t reach your target then money will be refunded. For example, if your target is 10 lakhs and through the campaign, if you have raised less than this target then you will not get that amount. It will be refunded to donors.
2. As you should share your idea on a crowdfunding site to collect money, all people can see that idea. People may steal your idea if you do not copyright.
3. Not all the projects get approval on crowdfunding sites.
4. Before publishing your campaign on crowdfunding sites, you need to do a lot of effort. You need to create interest so that people should start contributing when you launch it. And it may need some time and money.
5. If you already have a good reputation in the market and if this project fails then it may affect you in a bad way.
5 Disadvantages of Fundraising that You May Face While Raising Funds
1. Many times donors expect some profit or anything else in return. For example, if you are raising funds for start-ups people may expect more profit. You should take care of their needs and expectations.
2. Many times fundraising consumes too much time than your expectations. And if you are doing this for the first time then you should wait for late results.
3. You should have a unique story or reason to collect more funds. People invest funds for creative and unique reasons.
4. You may need many volunteers for the fundraising process. For example, if you are planning to raise funds by selling products then you need volunteers to join you and sell more products.
5. You should build trustworthiness to drive more funds. It needs effort in the beginning.
Which one is better for you to collect more money?
Crowdfunding and fundraising, both processes are very useful to drive funds. But both have their own plus and minus points.
You can find many easy ideas to raise funds. But you have to analyze that which type of strategy will work well for you if you want to raise funds. First of all, your purpose for raising funds and the target should be very clear.
If you want to raise funds quickly and the amount then you can choose crowdfunding. So, it will depend on your situation and need.
So, if you are thinking about crowdfunding vs fundraising, analyze all the differences that I’ve mentioned above. Then choose the right option for you.