Fundraising to Crowdfunding: An Evolution

Fundraising to Crowdfunding: An Evolution

by July 6, 2015


Every generation voices fears about change marking the ruin of tradition. Rock and roll would spell the death of “real” music. Texting would lead to the degradation of language. Now some have come up with a new fear: crowdfunding will do away with traditional peer-to-peer fundraising. Yet, as the saying goes, “the more things change, the more they stay the same.” While crowdfunding may be a new form of fundraising, it shares quite a lot with its predecessor.

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Peer-to-Peer Fundraising

Conventional peer-to-peer fundraising evokes notions of charity campaigns, sponsorship walks and runs, gala dinners, silent auctions, and door-to-door appeals for money. The common thread throughout these activities, of course, being the in-person human communication.
Donors have no inherent desire to simply give away their money with reckless abandon. Instead, they look to retain a modicum of control by only giving to organizations and causes they feel offer complete transparency, responsibility, and a sense of community. Peer-to-peer appeals engender these feelings of trust.

What may surprise many is that crowdfunding relies heavily on these very same concepts. Donors to a crowdfunding campaign must feel trust, connection, and a sense of belonging to a community. A crowdfunding campaign page, social media page, and website about the project all help to create a sense of community and open communication, allowing the donor to feel the in-person connection sought.

Although a lot of more traditional fundraising may have used the concept of team solicitations to raise funds by sponsoring races, charity sales, and other competitions, this feature has not yet made its way into crowdfunding. However, a number of crowdfunding platforms have already begun to experiment with ideas about how to accomplish just that. Thus, in the near future, team fundraising may also find its way into the world of crowdfunding.

Unique Characteristics of Crowdfunding

Though crowdfunding clearly borrows from fundraising, as a result of the medium change, there are some clear differences. In lieu of classic overhead that non-profits often have to fund (renting office buildings, paying utilities, employee salaries, etc.), crowdfunding platforms charge campaigns a usage fee. Hatchfund operates on a free for artist model where the operational cost are passed onto the donor.

Moreover, many crowdfunding platforms only allow an all-or-nothing crowdfunding campaign: if the campaign fails to reach its goal, then the donors are not charged and the project does not receive any money. Of course, classic fundraising has no such limits, which is both good and bad. Donors may not ever know if a traditional fundraising campaign achieves its goals, making crowdfunding much more transparent.
Crowdfunding also allows set up and deployment of a fundraising drive with much less time and effort than a traditional fundraising campaign. Indeed, a single person can create media, theme the appearance, and create materials with digital tools in a crowdfunding setting, thus eliminating time spent to train volunteers and costs associated with printing informational materials.

On the other hand, with the reward for contributing model of most crowdfunding campaigns, tax deductions for donations to a crowdfunded campaign may be less than those for a traditional fundraising drive. Often, the reward aspect of crowdfunding diminishes the amount that can be claimed. For instance, a donation of $100 may be offset by the receipt of tangible goods worth $15. In this instance, benefactors may only be capable of deducting 85 percent of the donation.
Also, crowdfunding focuses on a single project, while traditional charities and other fundraisers could potentially focus on many projects at the same time. Moreover, the goals in crowdfunding campaigns tend to be much lower than in more traditional campaigns, given the smaller audience and potential to receive nothing should a campaign fail to reach its funding goals.

The Future

Crowdfunding is relatively young in comparison to many other forms of fundraising. Because of this, some elements of traditional fundraising have yet to find their way into crowdfunding. Nevertheless, crowdfunding is more similar to traditional fundraising than many realize, and even has its advantages. Crowdfunding is clearly the future of fundraising, and it will continue to evolve, incorporating more of the aspects of traditional fundraising that have thus far eluded it.

Related: Hatchfund Vs Other Crowdfunding Sites