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Crowdfunding versus peer-to-peer fundraising: similarities and differences

Did you just start your non-profit organization or are you still at one of the early stages? Did you not get the funding you were hoping for? Or perhaps you’re still just looking for financial support to support the growth and development of your organization? In that case, crowdfunding or peer-to-peer fundraising is for you! Tens of years ago there weren’t many options yet. Most non-profit organizations would go door-to-door asking thousands of potential donors for their support or they went knocking on the door of big trusts or philanthropists. This exhausting way of fundraising has come to a dead end. Especially the coming of the internet and sharing economy has created a world of opportunities for organizations 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 interchangeable, and although they are similar for sure they are two separate fundraising techniques. This ambiguity around ‘crowdfunding’ and ‘peer-to-peer fundraising’ makes it a bit of a complex subject.

What is crowdfunding?

The term itself already suggests it, crowdfunding is getting funding of the crowd. With crowdfunding most people tend to give smaller amounts of money like €5, €10, €50, €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 organizations to raise money.


Private individuals and crowdfunding

People from all over the world use crowdfunding through online fundraising platforms for 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. Let’s imagine Amy would like to raise money to pay for her university master’s degree. Amy sets up a crowdfunding campaign to be able 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 a 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 organizations and companies will have a more intense process for this.

crowdfunding campagne


Companies and crowdfunding

You have probably heard of, or contributed to, a fundraising on Kickstarter. Here people with a project like launching a special planner, or who have found the perfect travel jacket, are looking for like-minded people who can help with the financing of the project (or who can cover printing or production costs). Usually, in exchange for this, they will get some kind of reward. This will vary depending on the amount of money. Additionally, companies with a profit motive will make use of equity crowdfunding. 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 organization and crowdfunding

Generally speaking, the crowdfunding campaign of a non-profit organization will be linked to a specific project or event. For example, when non-profit organization XYZ wants to support one of the communities they help with building a new water purification system. Just like Amy, non-profit organization XYZ will set up their own crowdfunding page which will contain information about the project or event. Like Amy, non-profit organization 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 organization is to reaching their target. This is usually an integral part of the crowdfunding and action platforms. Non-profit organization XYZ will also give update and thank each donor when donations come in. There are several big websites for hosting crowdfunding campaigns such as GoFundMe, IndieGoGo, or even the Facebook-donations app. When your non-profit organization is using 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 a variety of causes on there.

peer-to-peer fundraising


What is peer-to-peer fundraising?

Peer-to-peer fundraising encourages supporters of a charity or non-profit organization to individually raise money. It’s a bit 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 organization at the end. Contrary to crowdfunding, which is used by individuals, companies and non-profit organizations, peer-to-peer fundraising is usually only used by non-profit organizations. This strategy uses the network of existing donors as it encourages 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, it uses existing donors of non-profit organizations, and it builds social proof. People are more inclined to trust a publication when it’s shared by a friend or family member. In most cases a peer-to-peer fundraising is linked to an event such as a walk-a-thon or marathon.


This is how a typical peer-to-peer fundraiser works:

Non-profit organization XYZ will identify a project/event/cause and identifies its main supporters. After this non-profit organization XYZ will contact those supports to ask them if they would like to take part in the fundraiser. The next step is for non-profit organization 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 non-profit organization XYZ. Non-profit organizations usually have their own websites on which they will host peer-to-peer fundraising campaigns. When donors visit the website of a non-profit organization they usually won’t be distracted as quickly by other causes as they will with crowdfunding campaigns.


Crowdfunding versus peer-to-peer fundraising: which one should I use?

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 organization. Crowdfunding is easier than peer-to-peer fundraising because you only need one donations webpage. However, promotion of this page amongst your donors and followers requires investment of time and energy. Peer-to-peer fundraising is more complex and requires more time and planning. Since it will be your supports who will be raising the money you will need to find them first of all and then provide them with training. Additionally, there should be constant support available to them. However, since peer-to-peer fundraising is exponential, as all individual campaigns of your supports has 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 crowdfunding if:

  • You have a small team
  • 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 retention of donors

Don’t forget…

Whether you choose to go for peer-to-peer fundraising or crowdfunding, you should always keep the following key elements in mind:

  • Targets: targets will be different for each and every organization but they should always be realistic and achievable.
  • Supporters: look for supports who regularly donate to your organization, 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.
  • Branding: 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. For a peer-to-peer fundraising campaign you will need to prepare branded materials to send to your individual fundraisers.
  • Images and videos: interesting and engaging videos and images will attract people to your page and will keep them there.
  • Social media: 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.
  • Updates: make sure you constantly post updates about your campaign.
  • Thank yous: 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.

Summary
Similarities

  1. Both are forms of alternative financing.
  2. Both usually receive multiple (smaller) donations instead of only a few big donations.
  3. Both crowdfunding and peer-to-peer fundraising require specialised technology.

Differences

  1. Whilst crowdfunding is usually hosted on one website, peer-to-peer fundraising multiple websites to share and promote the campaign.
  2. Individuals, companies, and non-profit organizations can all choose crowdfunding to raise money for a specific goal. Non-profit organizations and organizations choose for peer-to-peer fundraising by including supporters in the process.
  3. Big crowdfunding platforms offer action platforms to hold crowdfunding campaigns. Non-profit organizations usually use their own websites for peer-to-peer fundraising.
  4. Crowdfunding can have more control about the messaging and brand consistency.

Conclusion

Both crowdfunding and peer-to-peer fundraising through action platforms are useful fundraising techniques for non-profit organizations. Both have their pro’s and con’s but used well 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 and that it helped you to decide the best option for your organization so that you can start a successful fundraising campaign! If you’re interested in more hints, tips, tricks, and resources about fundraising for non-profit organizations check out our latest non-profit blog here.


 

Niels Cover
Managing Director & Co-Founder at Whydonate

Donation Crowdfunding Platform in Europe. Whydonate is a global fundraising platform that connects causes with donors in an efficient, relevant and enjoyable way. We try to create the best cross-continent fundraising platform in the world for individuals, NGO’s and companies. We do this by providing the newest fundraising features.

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