Crowdfunding vs Fundraising: What's the Difference?

What Is the Difference Between Crowdfunding and Fundraising?

You’ve probably heard people throw around the terms crowdfunding and fundraising like they mean the same thing. But are they really the same? If you’re planning a campaign for your nonprofit, or just trying to figure out where to start, understanding the difference can save you time and help you pick the method that fits your goals.

Maybe you’ve done traditional fundraising before. Reaching out to donors, organizing events, sending out appeals — it’s familiar.

But what about crowdfunding? Is it just another word for raising money online, or is there more to it?

Both help you raise money, but the way they work is quite different. Crowdfunding often relies on a large group of people each giving a small amount. Traditional fundraising tends to involve fewer people giving more.

In this blog, we’ll deconstruct how each method works, what sets them apart, and when it makes sense to go with one over the other.

Eager to know which one might work best for you? Let’s dig in.

What Is Crowdfunding?

Crowdfunding is a way to raise money by asking a lot of people — your friends, coworkers, even strangers — to chip in small amounts toward a specific goal. You usually do this online through a crowdfunding platform. Once your campaign is live, people can read your story, see what you’re trying to raise money for, and decide if they want to help.

This method works because it’s built on sharing. You post your campaign, others pass it along, and before you know it, it spreads across social networks. Even if someone can only give a little, it adds up fast when enough people care.

There are different kinds of crowdfunding, and the right type for you depends on what you're trying to raise money for.

• Reward-based crowdfunding: You offer a product or service in return for support. A common choice for startups launching a new gadget, game, or product.
  

• Donation-based crowdfunding: People give because they want to help. They don’t expect anything in return. You’ll often see this used for medical bills, school fees, or community causes.
  

• Equity crowdfunding: Here, you’re not just asking for money; you’re offering ownership as well. People invest in your company in exchange for a small stake.
  

• Debt crowdfunding: It’s sometimes called peer-to-peer lending. People lend you money, and you agree to pay it back with interest over time.
  

No matter the type, crowdfunding helps you rally support around something specific: a project, an expense, or a mission. You set a goal and a deadline, then spread the word. The platform handles the logistics, and you focus on telling your story in a way that connects with people.

Who Uses Crowdfunding & Why?

Crowdfunding isn’t just for entrepreneurs or nonprofits. Anyone can use it, and lots of people do.

If you’re an individual, you might start a crowdfunding campaign to help cover surgery costs, pay for college, or even raise money for a trip with a purpose, like a volunteer project. It’s a way to reach out to people who care about you or your story and give them a way to pitch in.

If you run a small business or startup, you might use crowdfunding to launch a product without taking on a loan. People get excited about new ideas, and if they believe in what you're building, they'll support it, even before it's officially out.

Nonprofits also use crowdfunding, usually for seasonal projects or urgent needs. Perhaps, they’re trying to fund emergency relief or build an evening classroom in an underserved area. Based on their cause, they might also run a campaign around themes like Support Sunday for faith-based or community-focused groups, Clean Future Friday for environmental initiatives, Fall into Giving for autumn-based drives, or Holiday of Hope for motivating action at year-end.

So, why do people choose crowdfunding? It’s simple, flexible, and doesn’t require a big upfront investment. You don’t have to curate a massive donor list or organize a fancy event. All you need is a reason people can connect with and the willingness to share it.

How Do You Set Up a Crowdfunding Campaign?

Starting a crowdfunding campaign doesn’t take a ton of prep, but there are a few things you’ll want to think through first.

1. Choose the right platform.

There are dozens of sites out there, and they’re not all the same. Some charge fees. Some specialize in products or nonprofits. Look around and find one that fits your situation and makes it easy for people to give.

2. Set your goal and timeline.

How much do you need to raise? And by when? Pick a number that makes sense for your project, and don’t be afraid to start small. You can often keep raising money even after you pass your goal.

3. Write your story.

Tell people why you're raising money. Keep it clear and honest. Use photos, maybe even a short video. The more real it feels, the more likely people are to help.

4. Share it everywhere.

Once your campaign is live, start spreading the word. Post it on social media. Text your friends. Ask people to share it with others. The more it travels, the better your chances.

5. Consider offering rewards.

If you’re going the reward-based route, think about what you can give back. It doesn’t have to be fancy. Sometimes, a thank-you note, a sticker, or a t-shirt are enough to inspire action. People love getting something in return.

6. Stay active.

Check in often. Post updates. Say thank you. Let people know how things are going. Campaigns that stay active usually see more support than ones that go quiet.

7. Wrap it up well.

When it’s over, thank everyone who gave, regardless of how much. A simple message of appreciation goes a long way, and if you ever run another campaign, people will remember how you handled this one.

Crowdfunding can feel a little intimidating at first, but once you get going, it’s just a matter of telling your story, staying visible, and keeping people engaged. And whether you’re trying to raise $500 or $50,000, you might be surprised by how much support you can gather.

What Is Fundraising?

Fundraising is a broader way to raise money. It includes everything from silent auctions to phone drives, fancy galas to bake sales. Crowdfunding is actually a type of fundraising, but when people say “fundraising,” they usually mean something bigger and more structured.

You can run a fundraising campaign as an individual, but more often it’s used by schools, nonprofits, religious groups, or community organizations. These efforts usually go beyond just a single online page and involve a mix of events, appeals, and personal outreach.

Essentially, fundraising is about building relationships because you’re asking them to stay connected, care about your cause, and support it over time. That’s why traditional fundraising almost always means weekly donor meetings, fortnightly newsletters, monthly thank-you calls, and yearly giving programs.

Who Uses Fundraising & Why?

Nonprofits use fundraising to pay for daily operations, new programs, or emergency needs. Schools run campaigns to cover supplies, field trips, or sports equipment. Religious groups might ask their members to donate toward mission trips or building repairs. Some small businesses and startups fundraise by seeking donations, investors, or community support.

The main reason people use fundraising is to build lasting support for a goal or mission. While crowdfunding often happens once for a single project, fundraising campaigns can continue over time. Supporters may give once, or they may stay involved by donating monthly, attending events, or helping spread the word.

How Do You Plan a Fundraising Campaign?

Planning a full fundraising campaign takes more time than setting up a crowdfunding page, but you can break it into manageable steps.

1. Define your goal.

What are you raising money for? Be specific. Are you trying to fund a scholarship, start a new program, or keep the lights on for another year? People are more likely to give when they know exactly what they’re supporting.

2. Understand your audience.

List the groups of people you’re hoping will support you. They could be parents, neighbors, past donors, or coworkers. You might need different messages for different groups.

3. Pick your channels.

You don’t have to do everything. Maybe you’ll host a dinner. Maybe you’ll send emails. Maybe you’ll set up peer-to-peer fundraising pages. The key is to use the channels where your supporters already are.

4. Tell your story.

Just like crowdfunding, your story matters. Explain the need, show the impact, and be clear about how donations will help. Real stories and simple language work better than complicated reports or vague mission statements.

5. Ask directly.

When you reach out, don’t beat around the bush. Be clear about what you need and how people can help. It doesn’t matter the medium you choose to ask for support: in person, over email, or on social media. Use plain language to make people understand how they can help, what their gift will do, and how to donate.

6. Follow up.

Once someone gives, thank them right away. After the campaign also, don’t just disappear. Say Give them a shoutout on social media. Share updates via emails. Tell them the results of their support. If you treat them well, they’re more likely to give again next time.

How Are Crowdfunding and Fundraising Really Different?

So far we’ve established that crowdfunding and fundraising both help people raise money.

Now, we’ll take you through a few examples to show how they differ in real-world situations.

Linda: The Individual

Linda needs to raise money for a medical procedure. She creates a crowdfunding campaign on a popular platform. On her page, she shares her story, adds a few photos, and sets a goal of $8,000. Her friends, coworkers, and extended family start sharing the link, and small donations come in from across her network. She reaches her goal in just over two weeks. In this case, crowdfunding gives Linda a fast and focused way to raise money through social sharing.

Now take fundraising. A few months later, Linda wants to help someone else in her community with a similar need. This time, she decides to host a small event, sends letters to local businesses, and creates a monthly giving option for ongoing help. She builds a list of supporters and sets up regular updates. This is a full-fledged fundraising campaign which requires ongoing effort to support a bigger cause.

Andrew: The Business Owner

Andrew runs a small tech startup. He wants to test a new product, but first, he needs to see if there's enough interest and funding. He turns to reward-based crowdfunding. On a platform like Kickstarter, he offers early-bird versions of his product and branded merchandise in exchange for contributions. His campaign has a fixed deadline and clear rewards. Backers get something in return, and Andrew gets a way to raise money and test demand at the same time.

Later that year, Andrew wants to grow his company further. He looks into equity crowdfunding, where contributors receive shares of the business in return for their money. This attracts investors who believe in his idea. Both are forms of crowdfunding, but each serves a different purpose—one to launch a product, the other to raise capital.

Now compare this to fundraising. Andrew could also apply for a grant from a business foundation, or he might host a pitch night with potential investors. These efforts would take more time and involve deeper connections. Instead of quick one-time contributions, he’s building long-term support with a bigger focus on relationships and sustainability.

Asha: The Nonprofit Director

Asha leads a small nonprofit that helps children access school supplies. She wants to raise money for one summer program. She launches a donation-based crowdfunding campaign online with a $5,000 target. She shares the link with volunteers and past donors. The page is easy to understand: $25 gives one child a backpack with supplies. Many people give small amounts, and the campaign meets its goal in a month.

For the rest of the year, Asha runs several other initiatives: an annual gala, monthly donor drives, and a campaign targeted at animal rescue and pet families in need of help with vet bills. All these fall under the fundraising category. They require planning, time, and different types of outreach.

Do you see the difference? The summer crowdfunding campaign was quick and specific, whereas her other fundraising efforts support the organization year-round.

Bonus: Debt Crowdfunding Example

Debt crowdfunding, or peer-to-peer lending, works a little differently. Let’s go back to Andrew. Suppose he wants to avoid giving up equity in his company. He might turn to a platform where people lend him money with the expectation of being paid back with interest. This gives him access to funding without needing a bank loan. It’s still crowdfunding, but it’s built on a lending model instead of donations or rewards.

So, Which One Should You Choose?

If you need funds quickly for one project or product and you have a clear story to tell, crowdfunding is often the better choice. You can reach people fast, track your progress in real-time, and raise money in a short window.

If your goal is long-term support, deeper engagement, or multiple funding streams, then fundraising might suit you better. It gives you room to plan ahead, connect with donors on a deeper level, and use different strategies over time.

Both methods have value. You can even combine them. For example, a nonprofit might launch a crowdfunding campaign for one urgent need, while running their usual fundraising plans in the background. Or a startup might crowdfund a product now, and host fundraising dinners with angel investors later.

It all depends on your goals, your timeline, and the kind of support you need.

Final Thoughts

Crowdfunding and fundraising aren't competing methods; they just serve different purposes. Crowdfunding helps you rally people around one specific goal, often in a short time frame. Fundraising builds longer-term support through various efforts and relationships.

Whether you’re an individual like Linda, a business owner like Andrew, or a nonprofit leader like Asha, the right approach depends on what you're raising money for and how quickly you need it. Sometimes, the best plan combines both.

Start small, stay clear about your goal, and choose the method that fits your needs best.