Crowdfunding, Crowdsourcing, Fundraising: What Is The Difference?

In order to understand the difference between crowdfunding and fundraising, we first need to introduce crowdsourcing. A little more than 10 years ago, Wired magazine published a text called “The rise of crowdsourcing“. The article discussed the advantages of collective endeavor and how working alone really does not pay any more. Long story short, the term “crowdsourcing” lives today and stands for collecting goods and services through an open network of internet users.

Crowdfunding, on the other hand, is a type of crowdsourcing that enables internet users to put together their financial assets in order to complete a project. This idea came directly from fundraising which is a way to collect money for non-profit or charity events.

The Power Of Masses In Any Sphere Of Life Is Unchallengeable!

There are two main types of crowdsourcing recognized by the Crowdfunding Center. The first is Rewards Crowdfunding, which relies on entrepreneurs preselling their product or services in order to start their business without the need to sacrifice shares or start with a debt. This concept works well because it allows startups to create different levels of rewards based on the amount of the money donors pledge to the campaign. The second type of crowdsourcing is Equity-based Crowdfunding and it includes sharing company shares depending on how much a backer is ready to invest.

Other notable types of crowdfunding include:

• Software value token, which includes raising money for a campaign where software-based value token is a reward.
• Debt-based crowdfunding is also known as “peer-to-peer landing” and it’s one of the fastest growing crowdfunding methods. After the introduction of the JOBS Act by Barack Obama in 2012, US-companies were able to issue securities through crowdfunding, which gave a boost to the funding of small businesses in the United States.
• Litigation allows plaintiffs or defendants to reach out, seek funding, and offer rewards in return to their investors. Additionally, the investors could be able to purchase a stake in a claim they funded, potentially getting back more than they invested if the case turns successful.
• Donation-based crowdfunding allows gathering resources for a charity campaign.

Crowdsourcing is available in many different aspects of life; it is implemented in science, medicine, engineering, etc.

• In the early 19th century, astronomer Denison Olmsted went to the press in order to address the nation and seek information regarding a meteor shower that he tried to understand. The responses quickly started to pour in and the amount of information gathered allowed the science to have a better grasp on meteor showers.
• In genealogy, research crowdsourcing plays a significant role since the middle of the 20th century. Members of The Church of Jesus Christ of Latter-day Saints asked their members to submit information about their ancestors. The project grew through four generations of members, allowing the collection of an impressive amount of data.
• Journalism is another sphere where crowdsourcing plays its part. It is also called “citizen journalism” because the information journalists use come from the collective data gathered by individuals. The information is verified before publishing, of course.

Fundraising campaigns take part in charity events as well as other non-profit social issues. Fundraisings are organized by religious, philanthropic, political groups as well as individuals. Scholarships, athletic or academic awards, as well as presidential campaigns are heavily depending on public fundraising. In 2007, Ron Paul managed to gather $2.7 million for his presidential campaign in a single day, thanks to 21.000 online donors.

While the majority of fundraising campaigns revolves around non-profit issues, there are examples where funds are gathered through the selling of products or services. Girls scouts sell cookies in order to gather money. Many sport events or music concerts are organized so that the portion of the funds would go to charity or some other important social issue. This type of fundraising, where products or services are offered to raise funds for a certain cause are called product fundraising.

The Connection Between The Three

There are many similarities between the crowdsourcing, crowdfunding and fundraising events. The first and the foremost is the importance of public inclusion. The more people are included in the event, the better are the chances that the project will become a success. This often depends on marketing or the public influence of organizations and individuals that support the campaign. The objective of the event is also an important role, keeping in mind that different backers claim different interests.

The digital era allowed people to connect more easily and collaborate in real-time, which is the backbone of every crowd-based event. Nowadays it would be difficult to imagine a crowdsourcing event without the convenience of the internet connectivity.

Each of these events are taking part in a wide array of different spheres of life. There are almost no limitation to the activities that could be tasked through crowdsourcing or crowdfunding. Anything from starting a rocket company to collecting materials for a PHD is possible through a campaign.

Perhaps the most important feature that connects the three is the ability to add to common good though a collective cooperation of individuals worldwide. There are seldom cases where participation is limited geographically.

Most Popular Platforms For Crowdfunding, Crowdsourcing, Fundraising

The number of platforms where campaigns could be started is growing by the day. However, not all of them get the same amount of appreciation by the online society. The type of projects they support heavily influences the publicity of each campaign platform.

Kickstarter is arguably the best known crowdfunding platform on the internet. Since the launch of the website in 2009, Kickstarter managed to raise over $2billion for different campaigns. The platform supports creative projects only, which makes it open for film, music, games, and tech projects. On the other side, charity and other related projects are not welcome. Ultimately, the website takes 5% of each successful campaign, and if the project fails to reach its goal, no money is collected, which is a risk to take.

When it comes to crowdsourcing, there are many commercial websites that allow individuals or businesses to finish their projects by outsourcing them. It is something that students do when they look for help at AustralianEssays or similar sites. Nevertheless, when it comes to best known crowdsourcing website, the most commonly known and used platform is Wikipedia. Completely free, the platform allows individuals to collaborate and generate a massive amount of information and references in various different languages.

Causes.com is a fundraising platform that gives individuals and non-profit organizations the opportunity to work together and collaborate on solving individual and social issues. The platform uses a Supporter Network as a social network that connects people with a high level of social conscious and similar views. Donors are allowed to create profiles that identify their fundraising campaign, while organizations have the chance to create organization profiles and place all their campaigns in one place.

Success Stories

We already mentioned the case of Ron Paul and his presidential election campaign fundraiser, but there are thousands of other success stories deriving from crowdfunding and crowdsourcing campaigns, as well as fundraising events that helped make the world a better place.

Pebble E-Paper Watch hosted a Kickstarter campaign that placed the platform on the map. It gathered over $10 million in just 37 days. The production of the watch was stalled at the beginning but after 10 months, the backers got their hands on the reward-the first affordable smart watch (Ed., Pebble was since bought by Fitbit, slowly phasing out Pebble’s watch.)

Businesses were quick to back Bitvore, a software that allows monitoring and analytics of large, continuous streams of data, and the equity crowdfunding campaign managed to gather $4,5 million for further software development.

IdeaStorm is a crowdsourcing project that allows DELL users to brainstorm ideas that could be implemented in order to improve products and services of the company. One of the most notable ideas was offering Linux as an operating system on Dell products.

Conclusion

The impact that crowd-based campaigns have on social and business image across the globe is immense. Through crowdsourcing, businesses are able to finish their projects faster and cheaper, while focusing their attention to more urgent or complex issues. Startups are allowed to share their ideas and grow with the help of the community that can also enjoy the benefits of a successful campaign. There are some that question the quality of crowdsourcing, however, the fact that so many businesses and individuals rely on community backed projects shines with confidence in the results of such actions.

 

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