Crowdfunding has become a loaded term, meaning so much more than just raising money from the public. In fact, it means different things to different people. New and old terms are sometimes being used to describe the same or similar activities. Here, I’ll break it down in hopes of bringing greater clarity to a question that still gets asked every day: what is crowdfunding?
Nonprofits use crowdfunding to gather donations. They often refer to crowdfunding as “online fundraising,” “social media fundraising” or “peer-to-peer fundraising.”
Generally speaking, when nonprofits refer to online fundraising they are talking about applying traditional direct mail and telephone solicitation techniques to email and social media. They do this with wide-ranging sophistication and outcomes. Typically, this approach remains centralized and is a one-to-many type campaign. The same is largely true of social media fundraising. Peer-to-peer fundraising is crowdfunding led by donors themselves. One of the early and most effective users of this approach has been Habitat for Humanity, which encourages those who wish to travel to the developing world to participate in a “build” but who can’t afford to simply plunk down a check for $3,000 or more, to raise the money via crowdfunding from their friends and family.