You may have heard the terms “crowdfunding” and “peer-to-peer fundraising” thrown around a lot lately. While many people use the terms interchangeably, they are actually two separate (albeit, similar) fundraising techniques.
Today, we’re breaking down the differences between crowdfunding and peer-to-peer fundraising. Keep reading for definitions, diagrams, and more.
What is Crowdfunding?
Crowdfunding is a fundraising technique that can be used by individuals and nonprofits. It makes use of social networks and social sharing and brings communities of people together around a single cause.
Let’s run through two crowdfunding scenarios:
How Individuals Use Crowdfunding
In our example, Fred Fundraiser needs to raise money to pay for his wife’s medical expenses. To ask for donations, Fred sets up a crowdfunding campaign. The campaign must have an end date and a financial goal as well as a description of what Fred is raising money for. He also adds photos and videos for supporters to view.
Then, he shares his fundraiser via social media sites like Facebook and Twitter and sends out emails to his friends and family members.
These messages all contain the link to Fred’s crowdfunding campaign. His friends and family members can then donate to his crowdfunding campaign, leave messages of support, and share the campaign with their own networks.
Throughout the campaign’s duration, Fred can post updates along with photos and videos to keep supporters in the loop.
Once the campaign is over, Fred sends out thank-you emails and letters to let everyone know how much he and his wife appreciate their donations.
How Nonprofits Use Crowdfunding
A nonprofit’s crowdfunding campaign is typically tied to a tangible event or project. In our example, The ABC123 Organization needs to raise money for the public phase of their capital campaign to build a new gymnasium in their community.
The organization sets up their own crowdfunding page and includes information about the project as well as photos and videos of the individuals who will benefit from the project.
The nonprofit then shares the campaign across their social media profiles and emails their current donors and prospects about the fundraiser.
As people donate, a fundraising thermometer fills up, demonstrating how close the nonprofit is to their goal.
The organization should provide updates and thank donors as the donations come in.
Once the campaign is over, the nonprofit should acknowledge all of its supporters with personalized thank-you letters.
Here’s an example of a nonprofit’s crowdfunding campaign.
The Habitat for Humanity Global Village is an example of a crowdfunding campaign that uses visuals and a detailed description to encourage people to support their cause. As you can see from the image, the crowdfunding page includes large social sharing buttons and a fundraising thermometer—typical of most crowdfunding platforms.
- Crowdfunding can be used by individuals and nonprofits.
- Crowdfunding involves the fundraiser (the nonprofit or the individual) making a direct ask for donations.
What is Peer-to-Peer Fundraising?
Peer-to-peer fundraising, also known as social fundraising, is a technique only used by nonprofits. Organizations enlist the help of loyal supporters who fundraise on the nonprofit’s behalf. A peer-to-peer fundraiser is also usually tied to an event, like a walkathon or marathon.
A typical peer-to-peer campaign goes like this:
- The nonprofit chooses a peer-to-peer platform and identifies key supporters.
- The organization reaches out to those supporters to see if they’d be interested in fundraising.
- If the supporter is interested, they set up their own individual fundraising page with the nonprofit’s help.
- The supporter then solicits donations from their friends and family members, who donate via the supporter’s individual fundraising page.
- The funds from each individual supporter are transferred to the nonprofit’s main fundraising page, where the collective total is displayed with a fundraising thermometer.
- Once the deadline or goal has been reached, the nonprofit hosts the event (usually an active one) and thanks supporters and donors.
You can think about peer-to-peer fundraising as a type of crowdfunding. Peer-to-peer fundraising is like crowdfunding with an extra level of fundraisers/supporters in the middle.
Here’s an example of what a peer-to-peer donation form might look like.
As you can see in the example, this donation form is short and concise, including only the necessary information. Plus, there is a convenient fundraising progress bar that shows donors how much has already been raised. The progress bar is helpful because it helps supporters decide how much they should give.
So what’s the bottom line?
Well, if you’re part of an organization, your nonprofit can launch a crowdfunding campaign or a peer-to-peer fundraising campaign.
If you’re an individual who needs to raise money for a personal cause, project, or event, crowdfunding is the best way to go. If you want to fundraise on behalf of a nonprofit, do some research on peer-to-peer campaigns and try to get involved!
Either way, these two methods are some of the best when it comes to social fundraising. With the right tools, you (or your nonprofit) can effectively raise more money and connect with more donors!