Crowdfunding vs. Traditional Fundraising: A Quick Guide
How do you know if you’re choosing the right fundraising project for your nonprofit’s size, cause, and audience? It can be easy to stick with the same fundraising plans out of habit. However, if you don’t explore other options, you could be losing out on potential revenue.
That’s why it’s important to know the fundraising basics before you solidify your plans, so you can be sure your fundraising strategy is the right one for your organization. To help you get started, we’ll cover two of the most popular options — crowdfunding and traditional fundraising.
Though commonly used interchangeably, crowdfunding and traditional fundraising are two distinct methods with their own advantages and limitations. Let’s dive into both!
Crowdfunding is an innovative type of fundraising that leverages online donations from a wide range of supporters to fund a need. This type of fundraising is typically conducted online through a crowdfunding platform.
Personal causes, nonprofit initiatives, creative endeavors, and religious causes can all benefit from using crowdfunding to generate support quickly. With a highly flexible online format, crowdfunding can back any mission. In fact, 35 billion crowdfunding dollars have been raised globally.
Given crowdfunding’s easy set-up and adaptable use, it has several advantages worth noting, including:
- An expansive reach. Crowdfunding campaigns have the potential to reach global audiences more quickly than traditional fundraising methods.
- Potential virality. Online campaigns have the potential to go viral as they are incredibly shareable and easy to access. This makes it simple for groups to find momentum and experience a fundraising snowball effect.
- Small donation amounts. On average, the amount of funds raised per individual with crowdfunded donations is smaller, coming in around $99 per donation. These smaller donation amounts lower the barrier to entry that many young or lower-income people face when they want to give to a cause but don’t have the means to.
- Young audience engagement. According to Nonprofits Source, individuals between the ages of 24-35 are much more likely to support a crowdfunding campaign in comparison to older generations. Factors such as social media sharing and video creation make crowdfunding a great option to tap into a younger audience base.
- Minimal planning necessary. Besides deciding on a platform and crafting your cause, crowdfunding campaigns can be easier to plan than traditional fundraising activities, which can be more involved.
- Immediate feedback. Individuals and organizations can quickly pivot campaign messaging or funding methods if they find that their crowdfunding efforts are not producing results.
Crowdfunding is a modern approach that harnesses the power of technology, social sharing, and shifting donor environments. Its broad reach and instant feedback can help kickstart any campaign without extensive planning.
Though crowdfunding does have substantial benefits, there are a few limitations you should be aware of as well, including:
- Fee structure. Crowdfunding platforms typically charge a fee for setup and some can take an “All or Nothing” approach where crowdfunders only receive support if they hit their specified goal.
- Limited major donor engagement. Because the average donation amount for crowdfunding is smaller, the opportunity to engage major donors is also limited.
- Set time frame. Crowdfunding campaigns must be completed in a set time frame. However, this urgency can spur more donations.
- Credibility and trust. Because crowdfunding is conducted online, supporters may be hesitant to give. That’s why it’s important to choose a reputable platform, clearly explain your cause, and provide additional resources for supporters to learn more.
A productive crowdfunding campaign starts with choosing the right platform that suits your mission. For example, an organization wanting to run a rewards-based campaign might select a platform that crowdfunds by selling high-quality t-shirts.
Be mindful that big-name platforms may not always be best for your specific goals. Look into resources like Fundly’s list of GoFundMe alternatives to find the perfect platform match for your campaign.
Traditional Fundraising Basics
Typically used for general organizational support, capital campaigns, and other specified projects, fundraising ideas and campaigns can come in many different shapes and sizes.
Traditional Fundraising Advantages
Traditional fundraising remains a tried and tested method for many reasons:
- Larger donations. Traditional fundraising donations tend to be larger than crowdfunded donations. According to 360MatchPro’s fundraising statistics, the average one-time donation in 2022 was $121.
- Flexible formats. Traditional fundraising can take several different forms, from walk-a-thon events to virtual galas or even direct mail campaigns. Using multiple formats allows nonprofits to plan distinct fundraising activities throughout the year.
- Personal engagement. Because traditional fundraising can be in person, it offers the opportunity to cultivate donor relationships year after year.
- Grants and sponsorship opportunities. Traditional fundraising also encompasses grant opportunities and allows space for organizations to pursue sponsorships.
Even as new online methods arise, the value of traditional fundraising for organizations and nonprofits, in particular, remains the same. Not to mention, many fundraising campaigns can be held online. Just be sure your team uses a comprehensive plan to maximize results.
Traditional Fundraising Limitations
There are a few disadvantages of traditional fundraising to note, including:
- Limited reach. In comparison to crowdfunding, traditional fundraising does not consistently have the same reach. Instead, it’s usually used to engage and expand on an existing network.
- More training time needed. Nonprofits running traditional fundraising campaigns can require time to recruit and train volunteers and event staff to make sure the event day goes smoothly.
- Can require additional resources. Venues and other fundraising event-related resources such as auction items, tables, field-day equipment, and food are sometimes needed to host a fundraising event.
Using the right digital tools can make all the difference when it comes to traditional fundraising. These include your CRM, volunteer management software, marketing materials, and any event-related software. That way, you can engage your donor base and prepare your volunteers ahead of time.
Pulling it All Together
Now that we’ve explored the pros and cons of both crowdfunding and traditional fundraising methods, you surely understand why choosing the right fundraising campaign can be a difficult task. So how do you make your decision?
Select an idea that will engage your donors by catering to your unique audience’s wants and needs alongside your organization’s goals. For example, if you’d like to engage a younger demographic you might pursue crowdfunding, but if you know your donor base responds well to in-person events, you can plan an action-packed fundraising campaign.
However, you’re not tied to just one strategy! Likely, the best solution will involve a multichannel approach that engages your audience through several different avenues. Here are a few examples:
- Launching a direct mail campaign that sends readers to your online crowdfunding page through a printed URL or QR code.
- Promoting your online efforts during an in-person fundraising event through signage and other marketing materials.
- Hosting a crowdfunding campaign, then following up with donors to thank them for their contributions and encourage them to get further involved in your mission.
Using hybrid tactics like these, you can expand your impact and engage more supporters. There’s always room for improvement when it comes to your fundraising strategy. Stay open to many potential methods and make adjustments as new strategies arise.
Each nonprofit has different objectives, which can make choosing just one fundraising option tricky. The solution? We suggest leveraging crowdfunding campaigns alongside your more traditional fundraising routes to maximize donation revenue and better fund your vision. Happy fundraising!