Crowdfunding and fundraising – what is the difference?

You have probably heard the two terms “fundraising” and “crowdfunding” more than once when it comes to NGO funding. Often these terms are confused, there is still a lack of understanding of what each one of them means and how to apply these methods when fundraising. So I will tell you specifically and clearly about both types of funding.

What is fundraising?

Fundraising is a very old phenomenon in our society. It is a way to raise money for various social projects, support, and charity. Fundraising is often done traditionally – you are asked to donate funds in a face-to-face meeting. This can be when people come to one’s house, in the office, during special charity events. The latter method receives a lot of public attention during telemarathons – a huge concert is held, during which the audience calls or writes an SMS (they are taxed) and the money raised is used for a specific purpose of support.

Politicians are also quite successful in using fundraising to raise funds for their election campaigns.

With the development of e-commerce solutions, fundraising is also successful in the digital space, and more and more ways of donating online are being implemented. An example of digital fundraising is the donation platform

What is crowdfunding?

Crowdfunding is a new term and process based on Internet technologies. Money is raised from Internet visitors when they buy certain information products, access to special data, real items, and souvenirs.

Crowdfunding campaigns organizers often do not know people who trust their money, therefore, this method of funding is called a crowd. The beginning of crowdfunding is linked to special start-up funding projects IndieGoGo and KickStarter, which help strangers to support the development of certain innovative products. Many of these support fundraising campaigns have been extremely successful and have given a serious boost to global companies.

There is a crowdfunding platform in Lithuania – Contribee.

Key differences between Crowdfunding and Fundraising

The key similarity between the two funding methods is the common goal to raise money. However, while similar money-raising methods may be applied, there are some key differences:

1. Fundraising is used when money is raised to support social projects, politicians, people, organizations so that the latter can carry out their activity. While crowdfunding can have much broader goals and can be applied not only when implementing social projects but also – commercial ones. Money can be raised for the commercial activity of natural persons or companies.

2. During a fundraising campaign, funds are donated – they are given without expecting any tangible benefit to the donor, but the social impact in a specific area and transparent communication (often in the form of reports) about the purposes for which the support is used and what change it creates is expected. During a crowdfunding campaign, money is given to a specific person or organization to buy a specific product (a tangible item or a digital product). As the product is bought, its buyer expects to benefit from it, he/she wants to know how his/her funds have been used.

One of the newest crowdfunding platforms in Lithuania is Contribee. What makes it unique?

Contribee is a Lithuanian platform that started its activity only recently – in September 2020. Content creators, artists, businesses, or organizations can create their own accounts for free, publish various posts, sell virtual reviews, interact with their followers, and collect periodic or one-time support and get regular income, depending on the individual model they choose.

One of the main features of Contribee is that this platform is completely free for creators, all fees that are minimal are covered by the fan (follower) when providing support to a selected creator of the platform. Analogous platforms usually charge creators a fee of 15-30% of the support they receive and charge fans as well. In addition to the recurring subscription or one-time support options, Contribee also offers pay-per-post, which allows creators to sell virtual tickets to events, training, concerts, performances, or even movie screenings.