What’s the Difference Between Crowdfunding and Peer-to-Peer Fundraising?

You may have heard the terms “crowdfunding” and “peer-to-peer fundraising” thrown around a lot lately (in fact, we’ve written about both of them on this blog!).

While many people use the terms interchangeably, they are actually two separate (albeit, similar) fundraising techniques.

We’re going to break down the differences between crowdfunding and peer-to-peer fundraising, and we’ll end the article with a quick overview of our favorite peer-to-peer fundraising and crowdfunding platforms.

For quick reference, here’s an infographic that demonstrates the difference between crowdfunding and peer-to-peer fundraising.

What's the difference between crowdfunding and peer-to-peer fundraising? Infographic

Let’s get started!

Definition of crowdfunding

Definition of Crowdfunding

Crowdfunding is a fundraising technique that can be used by individuals and nonprofits. It makes use of social networks and social sharing and brings communities of people together around a single cause.

Let’s run through two crowdfunding scenarios:

How Individuals Use Crowdfunding

In our example, Fred Fundraiser needs to raise money to pay for his wife’s medical expenses. To ask for donations, Fred sets up a crowdfunding campaign. The campaign must have an end date and a financial goal as well as a description of what Fred is raising money for. He also adds photos and videos for supporters to view.

Then, he shares his fundraiser via social media sites like Facebook and Twitter and sends out emails to his friends and family members.

These messages all contain the link to Fred’s crowdfunding campaign. His friends and family members can then donate to his crowdfunding campaign, leave messages of support, and share the campaign with their own networks.

Throughout the campaign’s duration, Fred can post updates along with photos and videos to keep supporters in the loop.

Once the campaign is over, Fred sends out thank-you emails and letters to let everyone know how much he and his wife appreciate their donations.

 

How Nonprofits Use Crowdfunding

A nonprofit’s crowdfunding campaign is typically tied to a tangible event or project. In our example, The ABC123 Organization needs to raise money for the public phase of their capital campaign to build a new gymnasium in their community.

The organization sets up their own crowdfunding page and includes information about the project as well as photos and videos of the individuals who will benefit from the project.

The nonprofit then shares the campaign across their social media profiles and emails their current donors and prospects about the fundraiser.

As people donate, a fundraising thermometer fills up, demonstrating how close the nonprofit is to their goal.

The organization should provide updates and thank donors as the donations come in.

Once the campaign is over, the nonprofit should acknowledge all of its supporters with personalized thank-you letters.

Here’s an example of a nonprofit’s crowdfunding campaign.

Example of a nonprofit crowdfunding campaign

Key Takeaways

  1. Crowdfunding can be used by individuals and nonprofits.
  2. Crowdfunding involves the fundraiser (the nonprofit or the individual) making a direct ask for donations.

Definition of peer-to-peer fundraising

Definition of Peer-to-Peer Fundraising

Peer-to-peer fundraising, also known as social fundraising, is a technique only used by nonprofits. Organizations enlist the help of loyal supporters who fundraise on the nonprofit’s behalf. A peer-to-peer fundraiser is also usually tied to an event, like a walkathon or marathon.

A typical peer-to-peer campaign goes like this:

  1. The nonprofit chooses a peer-to-peer platform and identifies key supporters.
  2. The organization reaches out to those supporters to see if they’d be interested in fundraising.
  3. If the supporter is interested, they set up their own individual fundraising page with the nonprofit’s help.
  4. The supporter then solicits donations from their friends and family members, who donate via the supporter’s individual fundraising page.
  5. The funds from each individual supporter are transferred to the nonprofit’s main fundraising page, where the collective total is displayed with a fundraising thermometer.
  6. Once the deadline or goal has been reached, the nonprofit hosts the event (usually an active one) and thanks supporters and donors.

You can think about peer-to-peer fundraising as a type of crowdfunding. Peer-to-peer fundraising is like crowdfunding with an extra level of fundraisers/supporters in the middle.

Here’s an example of what a peer-to-peer donation form might look like.

Example of a peer-to-peer fundraising campaign

Check out this video to learn more about starting a social fundraiser with Neon!

Key Takeaways

  1. Peer-to-peer fundraising is only utilized by nonprofits, but individual supporters are involved.
  2. Donations are made to a supporter’s individual fundraising page and then sent to the nonprofit’s main campaign page.

Top crowdfunding and peer-to-peer fundraising tools

Top Peer-to-Peer Fundraising Tool – Neon

Top peer-to-peer fundraising tool - Neon

NeonCRM has their own social fundraising software. Their platform integrates with their event and fundraising management software and enables supporters to create personal and team pages.

Each campaign comes with branded pages, a donor message board, campaign and individual thermometers, and social network integrations.

Click here to learn more about Neon’s social fundraising software and to sign up for a demo.

And check out this list of the top peer-to-peer fundraising platforms.


So what’s the bottom line?

Well, if you’re part of an organization, your nonprofit can launch a crowdfunding campaign or a peer-to-peer fundraising campaign.

If you’re an individual who needs to raise money for a personal cause, project, or event, crowdfunding is the best way to go. If you want to fundraise on behalf of a nonprofit, do some research on peer-to-peer campaigns and try to get involved!

Either way, these two methods are some of the best when it comes to social fundraising. With the right tools, you (or your nonprofit) can effectively raise more money and connect with more donors!

Click here to see Neon’s social fundraising software in action!

About
Andrew is a Marketing Associate at NeonCRM. He writes about innovation and technology in the nonprofit sector. Follow him on Twitter: @AndrewatNeon.

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