Crowdfunding and traditional fundraising are two methods to collect funds for a particular project/cause. Crowdfunding is collecting fund from groups of investors for the benefit of a project which is done by an individual. Traditional fundraising is the process of collecting funds for charity work or a community cause.
Crowdfunding vs Traditional Fundraising
The main difference between Crowdfunding and Traditional fundraising is that crowdfunding is a method to raise funds for the benefit of a project whose initiator requires money to initiate it. Traditional fundraising is the process of raising funds for the benefit of a community. It is a charity-driven work.
Crowdfunding is the process of collecting money for a project work which is done by an individual. This is mainly done through the websites available on the internet. This method of fundraising is an alternative source of finance for the projects whose initiator has a lack of resources to initiate the project.
Traditional fundraising is the age-old process of collecting funds for a cause. Mostly this type of fundraisings is for charity works. Many volunteers stand up for this work, impressed by the cause of raising funds. This is a form of offline donations. Fundraisers engage with the people by explaining the reason for fundraising.
Comparison Table Between Crowdfunding and Traditional Fundraising (in Tabular Form)
| Parameter of Comparison | Crowdfunding | Traditional Fundraising |
|---|---|---|
| Source | Crowdfunding is from a group of investors who trust your work. It is mainly done online. | Traditional fundraising is a process where anyone can raise funds. It is commonly done offline. |
| Time | Crowdfunding requires less time according to its reach on the internet. | Traditional fundraising is a time-consuming process as it requires human effort. |
| Goal | Crowdfunding is an alternative fundraising process for short-term goals. | Traditional fundraising is organized for long-term goals. |
| Amount | A large amount of money is raised by one or two sets of investors. | Individuals raise the amount that they can hence it requires the support of many individuals. |
| Networking | It provides an opportunity for the initiators to be in contact with the fundraisers. | Since many people participate in this process, it is difficult to maintain contact with everyone. |
What is Crowdfunding?
Crowdfunding is the process of collecting funds from a group of people for a particular venture. It is mostly done through the internet. Mostly the required amount is collected from some organizations who like the idea of the project. Hence, the amount collected is comparatively large concerning the required amount.
The crowdfunding process has three actors in the play. A project initiator is the person who has put up the idea of the project. The volunteers who support the project initiator to complete the project and the moderating organization which is a platform to share the idea. The fundraisers get information about the project from this platform.
Mostly crowdfunding is seen for entrepreneurial projects. This is proposed by the individuals whose budget cannot support the resources needed to launch the idea. The project can be from any field and most people interested in that field raise funds for initiating the project. CrowdCube and Seedrs are internet platforms that host the idea of a project.
There are two types of crowdfunding – Rewards crowdfunding and Equity crowdfunding. In rewards crowdfunding, the entrepreneurs presell the product so that the business gains stability and the fundraisers won’t be in a debt. Equity crowdfunding is a process in which the fundraiser receives a share of the company in exchange for the money raised.
What is Traditional Fundraising?
Traditional fundraising or simply fundraising is the process of seeking financial help from different individuals. This is mainly done for the betterment of charity work or start-up businesses. Volunteers who are impressed by the idea, help the organizations in seeking help from people. In this process, a small amount is gathered from many people.
Traditionally, fundraising is a process common in the surroundings. Volunteers travel to different parts, mostly nearby the organization. They ask for donations, by explaining the cause of their arrival and about the organization. The common people who are impressed by this idea, donate the amount that they can contribute.
The organizations, which seek funds can also be eligible for government funds. This is due to the cause they work for. The work of the organization is exhibited in front of the government officials and if they are satisfied by the idea of their institution, then government fund is allotted for them. This is commonly called as grant funding.
Fundraising for a company can be improved by conducting events, whose idea is to increase the funds needed. They can be the events explaining the charity or religious talks for which the organization stands up for. Also, events like the walkathon and marathon are organized to improve the popularity of the cause.
Main Differences Between Crowdfunding and Traditional Fundraising
- Crowdfunding seeks help from online investors who are impressed by the project whereas traditional fundraising is from individuals who are approached by the volunteers.
- Crowdfunding requires less time as it is done online but traditional fundraising is done by volunteers offline. Hence it requires more time.
- The crowdfunding method is adopted for short-term goals. Traditional fundraising is opted by the organizations whose goals are long-term.
- Large amounts of money are collected from organizations through crowdfunding whereas, in traditional fundraising, only the amount bearable by the individual is donated.
- Through crowdfunding, the project initiators can get in contact with the fundraisers. Since many people donate through traditional fundraising, networking is difficult.
Conclusion
Crowdfunding is the procedure through which the funding of a project happens via the internet. Many online websites support the project initiator by posting the idea on the platform so that fundraisers get the attention of it. If the idea of the project impresses the fundraisers, then they donate the amount needed by the initiator.
Traditional fundraising is the practice of seeking donations from common people. This funding is done for a community cause or by a non-profit organization, The volunteers explain the reason behind the funding and people donate the amount which they can. This is a time-consuming process if compared to crowdfunding.
References
- https://dl.acm.org/doi/abs/10.1145/2530540
- https://platform.almanhal.com/Files/2/87935