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Crowdfunding FAQ

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. 

5 Steps for Running a Crowdfunding Campaign

1. Determine your goal. 

What are you fundraising for and how much will you need? Assess your project to ensure that you have properly budgeted all of the expenses you will need so you can set an accurate goal for your crowdfunding campaign. Too high a goal may be impractical, and supporters can feel doubtful about your organization if you fail to meet your goal. However, if your estimate is too low, you may not be able to complete your project even if you achieve your fundraising goal. 


2. Pick a platform and set up your campaign.

There are a variety of crowdfunding platforms from well-known sites designed for individuals to set up a crowdfunding page like GoFundMe and Kickstarter to platforms created specifically for different types of organizations. Assess each platform’s features and price model to ensure you’re choosing the right solution for your campaign. 


3. Promote your campaign.

Spread the word about your campaign! Your most effective fundraising days will be the very beginning and end of your campaign. On average, most crowdfunding campaigns receive 42% of their total fundraising on these days, so be sure to begin and end strong.

Share your crowdfunding page on social media and encourage your supporters to promote it to their friends, family, and followers. 


4. Track your progress. 

Monitor your campaign from beginning to end to ensure you’re on track to reach your goal. Thank supporters who contribute and keep your page’s feed active to show potential supporters that your campaign is still going strong and accepting donations. 


5. Thank supporters and collect funds.

Once your campaign finishes up, be sure to thank all of your donors for contributing to your campaign, sharing your page, and helping to make your campaign a success. Then, collect your accumulated funds to start work on your project. 

If your campaign met your fundraising goal, you can go ahead and collect all of your funds without issue. If your campaign didn’t, you’ll only be able to collect donations if your crowdfunding platform isn’t an all-or-nothing model. As the name suggests, if you don’t meet your goal for an all-or-nothing campaign, all donations go back to their contributors. 

Additional Resources

You can learn more about crowdfunding campaigns by exploring these top resources: