Tens of years ago, there weren’t many options. Most non-profit organisations would go door-to-door, asking thousands of potential donors or trusts for their support. This exhausting way of fundraising has come to a dead end. Especially, the arrival of the internet and sharing economy has created a world of opportunities for organisations of all kinds.
One of those exciting developments is alternative financing, of which crowdfunding and peer-to-peer fundraising are the most common ones. Many people use these terms interchangeably, and although they are similar for sure, these are two separate fundraising techniques. This ambiguity around crowdfunding and peer-to-peer fundraising make it a bit of a complex subject.
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What Is Crowdfunding?
The term itself is pretty much self-explanatory – crowdfunding is getting funding from the crowd. With crowdfunding, most people tend to give smaller amounts of money like €5, €10, €50, or €100, or they give towards a specific project or cause.
Crowdfunding has become very popular through the increase of suitable online fundraising platforms. It’s now used by individuals, companies, and non-profit organisations to raise money.
Individuals And Crowdfunding
People worldwide use crowdfunding through online fundraising platforms for many reasons, such as healthcare expenses, money for college, mission trips, and tons of other projects, ideas, and initiatives. Let’s give you an example of how an individual could use crowdfunding to collect donations.
Let’s imagine Amy would like to raise money to pay for her university master’s degree. Amy sets up a crowdfunding campaign at any fundraising platform to ask for donations. The campaign has an end date and financial goal as well as a description of why and what for Amy is raising money.
Subsequently, she shares her crowdfunding campaign on her social media platforms such as Facebook and Twitter, and she emails her friends and family. Her friends and family then donate to her campaign, leave a message of support, and also share it with their own networks. Amy keeps everyone in the loop by sharing messages, photos, and videos.
This is crowdfunding in a nutshell. Although, non-profit organisations and companies will have a more intense process for this.
Companies And Crowdfunding
When it comes to corporates involved in crowdfunding, one of the most popular terms is equity crowdfunding. In equity crowdfunding, people are encouraged to invest in a company that is not yet listed on a stock exchange.
The goal of the process is to make money for the investors while giving the company a chance to succeed. However, if the company fails, the investors can lose money.
This form of crowdfunding resembles investing in stocks or equity, hence the name. People who donate to a company through equity crowdfunding will get a share in the company in return.
The risk is that the company can fail, in which case the donor will lose its investment. On the other hand, the company can also do well in which the donor might be able to receive a return on its investment.
Non-profit Organisations And Crowdfunding
Generally speaking, the crowdfunding campaign of a non-profit organisation will be linked to a specific project or event. Nonprofits can choose to create personalized campaign pages and promote them to raise money for their causes.
For example, when non-profit organisation XYZ wants to support one of the communities, they help with building a new water purification system. Just like Amy, non-profit organisation XYZ will set up their own crowdfunding page, which will contain information about the project or event.
Like Amy, non-profit organisation XYZ will also share their campaign on their social media platforms, and they will email current donors and potential clients about their fundraising campaign.
When individuals donate, the fundraising thermometer will go up and up to indicate how close the non-profit organisation is to reaching its target. This is usually an integral part of crowdfunding and action platforms. Non-profit organisation XYZ will also give updates and thank each donor when donations come in.
Several big websites host crowdfunding campaigns, such as GoFundMe, IndieGoGo, or even the Facebook donations app. When your non-profit organisation uses a crowdfunding website for your fundraising, you won’t be the only crowdfunding campaign on there, which means your donors can be distracted by the many other campaigns for various causes on there.
What Is Peer-to-peer Fundraising?
Peer-to-peer fundraising encourages supporters of a charity or non-profit organisation to individually raise money. It’s a bit of a subcategory of crowdfunding.
Instead of having one main crowdfunding page where everybody donates, you will have multiple individual fundraising pages with peer-to-peer fundraising, which the individual people will share with their own networks. All raised money will be received by the non-profit organisation at the end.
Contrary to crowdfunding, which is used by individuals, companies and non-profit organisations, peer-to-peer campaigns are usually only used by non-profit organisations.
This strategy uses the network of existing donors to encourage supporters to get in touch with family, friends, colleagues, and peers for donations. Peer-to-peer fundraising is effective because it builds on existing relationships, uses existing donors of non-profit organisations, and builds social proof.
People are more inclined to trust a publication when it’s shared by a friend or family member. In most cases, peer-to-peer fundraising is linked to an event such as a walk-a-thon or marathon.
How Peer-to-peer Fundraisers Work:
Non-profit organisation XYZ will identify a project/event/cause and identifies its main supporters. After this non-profit organisation, XYZ will contact those supports to ask them if they would like to take part in the peer-to-peer fundraiser.
The next step is for non-profit organisation XYZ to train the interested supporters, either themselves or by sending them an online manual, after which the individual supports will set up their own individual fundraising pages. The fundraisers will then ask their family, friends, and network to donate money on their own individual fundraising pages.
All the money raised by each of the individual fundraisers will go to the main fundraising page of the non-profit organisation XYZ. Non-profit organisations usually have their own websites on which they will host peer-to-peer campaigns.
What Is The Difference Between Crowdfunding And Peer-to-peer?
Both fundraising techniques are good and efficient ways to raise money. Which one you should choose largely depends on the resources available to your non-profit organisation. Crowdfunding is easier than peer-to-peer fundraising because you only need one donation webpage.
However, the promotion of this page amongst your donors and followers requires an investment of time and energy. Peer-to-peer fundraising is more complex and requires more time and planning. In order to raise funds, you will need to find your supporters and provide training.
Additionally, there should be constant support available to them. However, since peer-to-peer fundraising is exponential, as all individual campaigns of your support have a ripple effect and will bring you more donors, it can bring you more visibility and raise more money than a crowdfunding campaign.
Peer-to-peer events do require more planning, execution time, and direct involvement of the participants than crowdfunding campaigns. Nevertheless, the result can be unbelievable.
Choose To Crowdfund If:
- You have a small team fundraising campaign
- You have lots of followers on your social media platforms
- You want to keep it simple
- You don’t have a lot of time
- You have a fundraising goal for a specific cause or campaign
Peer-to-peer fundraising is a good choice for you if:
- You have enough employees to support the fundraising campaign
- You can count on a loyal group of supporters and fans
- You have time to plan and execute the campaign
- You have a team that is familiar with using online tools
- You have a good process in place for the retention of donors
Whether you choose to go for peer-to-peer fundraising or crowdfunding, you should always keep the following key elements in mind:
Targets will be different for each and every organisation, but they should always be realistic and achievable.
Look for supporters who regularly donate to your organisation, who take part in your volunteering days, and who attend your fundraising events. These are your best bets for peer-to-peer fundraising. If you decide to go for a crowdfunding campaign, you need to be transparent about your marketing strategy.
Make sure you create and launch a branded website for your crowdfunding. Donors are more inclined to trust a website with official branding on it to make their donations. You will need to prepare branded materials to send to your individual fundraisers for a peer-to-peer fundraising campaign.
Images and videos:
Interesting and engaging videos and images will attract people to your page and will keep them there.
Both fundraising techniques rely on distribution on your social media platforms, so you need to make sure it’s easy for donors to tell their friends about your campaign. Create written templates and materials that can be used.
Make sure you constantly post updates about your campaign.
As soon as you reach your fundraising targets, it’s time to thank your donors for their contributions and your supporters for their hard work.
- Both are forms of alternative financing.
- Both usually receive multiple (smaller) donations instead of only a few big donations.
- Both crowdfunding and peer-to-peer fundraising require specialised technology.
- Whilst crowdfunding is usually hosted on one website, peer-to-peer fundraising multiple websites to share and promote the campaign.
- Individuals, companies, and non-profit organisations can all choose crowdfunding to raise money for a specific goal. Non-profit organisations and organisations choose peer-to-peer fundraising by including supporters in the process.
- Big crowdfunding platforms offer action platforms to hold crowdfunding campaigns. Non-profit organisations usually use their own websites for peer-to-peer fundraising.
- Crowdfunding can have more control over the messaging and brand consistency.
Both crowdfunding and peer-to-peer fundraising through action platforms are useful fundraising techniques for non-profit organisations. Both have their pros and cons but they both can deliver excellent results.
By analysing your goals, resources, and audience, you can decide which platform suits your individual situation best!
We hope this article has helped you and informed you about the differences and similarities between crowdfunding and peer-to-peer fundraising. It should help you to decide the best option for your organisation so that you can start a successful fundraising strategy for your campaign!
If you’re interested in more hints, tips, tricks, and resources about fundraising for non-profit organisations, check out our latest non-profit blog here.