What is crowdfunding?

Crowdfunding campaigns are donation campaigns that raise funds by asking a large number of supporters to donate online to meet a specific project’s fundraising goal. While donation-based crowdfunding campaigns are the most common, there are actually three types of crowd fundraisers:

1. Donation-based. In a donation-based campaign, all contributed funds are gifts that the crowdfunding campaign organizer will not be expected to repay. This is the most common type of crowdfunding campaign for nonprofits and individuals. 
2. Equity-based. Businesses looking to expand sometimes launch equity-based crowdfunding campaigns. In exchange for contributing, individuals are awarded shares in the company. 
3. Rewards-based. Individuals and organizations looking for startup funds to create a product can launch a rewards-based crowdfunding campaign. Individuals who donate to these campaigns will receive a product or service in exchange for their participation. 

While these are three distinct categories, popular donation-based campaigns often offer rewards and incentives, just like rewards-based campaigns. For example, your nonprofit might decide to send free t-shirts to everyone who contributes $50 or more to your campaign. 

How is crowdfunding different from peer-to-peer fundraising?

Peer-to-peer and crowdfunding campaigns both rely on supporters to promote them to their friends and family. This means that it can be easy to confuse the two, but there are a few essential aspects of crowdfunding campaigns that make them unique:

• One central donation page. Peer-to-peer campaigns leverage your supporters’ personal networks by creating unique giving pages, allowing donors to contribute directly to their friend or family member. Crowdfunding campaigns use one central donation page and encourage supporters to share and promote the page to their friends and family. 
• Has a definitive end date. While peer-to-peer fundraisers can operate on a rolling basis, crowdfunding campaigns almost always have deadlines. This helps organizations raise needed funds over a short period of time and creates a sense of urgency to encourage supporters to get their donations in quickly. 
• Collected funds support a specific project. Crowdfunding campaigns are usually launched to meet one specific need, rather than provide general funding. For example, if your nonprofit raises funds to help repair a local school’s roof, your donors will expect all of your collected funds to go to help with the roof repair. 

Both strategies do benefit from social media sharing and supporters driving attention to your donation pages, so be sure to optimize your online presence and make virtual giving as easy as possible. 

Who can host a crowdfunding campaign?

Both individuals and organizations can host a crowdfunding campaign to support one-time projects or needs.

• Individuals. Individuals often launch crowdfunding campaigns to cover major personal expenses, such as medical bills, college tuition, trips, or other even creative projects. These projects can vary in how much they’ll need to raise from a few hundred dollars to several thousand. 
• Organizations. Nonprofits, schools, churches, sports teams, and other organizations can also launch crowdfunding campaigns to support specific projects, missions, or expenses. Whether your nonprofit needs to startup funds to launch a new initiative or your church wants to collect funds to help with travel expenses for their next mission, they can launch a crowdfunding campaign. 

Crowdfunding campaigns also can be used to help supplement other fundraisers. For example, a public crowdfunding campaign is considered to be a normal part of a capital campaign. After gathering a few private major donations, organizations hosting a capital campaign will then launch a crowd fundraiser to gather the rest of their needed funds from their moderate supporters.