Center of Gravity: Crowdfunding vs. Peer-to-Peer Fundraising

We didn’t call it “peer-to-peer fundraising” at first. Back in the late ’90s and early ’00s, some of us were excited by the prospect of bringing traditional fundraising activities online. One of the big areas of focus was the pledge-based special event. Historically, these campaigns occurred offline using just pens, paper pledge-forms, cash and checks. Someone participating in a run for cancer, for example, would get people to sign their form, and pledge to donate to them for completing the walk or run.

While it was wonderful that people had the opportunity to interact face-to-face with their supporters, there were some serious downsides.

You can imagine what a data-entry and processing nightmare this caused. Piles of paper, envelopes of cash and scrawled penmanship on wet paper forms. On race-day (or walk-day) there would literally be cardboard boxes full of cash under the check-in tables at the starting line!

Bringing these processes online not only increased the security of payments, but also gave volunteers much greater scope for their fundraising efforts. At first, email was the primary way to solicit donations, and then came social media. We now refer to this as peer-to-peer (P2P) fundraising.

There are many contemporary examples of online P2P fundraising tools, and you probably use some yourself, or at least have heard of them. The list is long, which demonstrates how much enthusiasm there is for this sort of fundraising.

Crowdfunding, on the other hand, started a few years later than P2P fund-raising. Crowdfunding can be considered a subtype of crowdsourcing, which gets it’s name from “crowd” and “outsourcing.” Early days of crowdfunding include the short-lived Howard Dean presidential campaign of 2004, and the founding of the
microloan site Kiva.org in 2005.

One of the big differences between peer-to-peer fundraising and crowdfunding is the “center of gravity” of each campaign type. P2P campaigns can be thought of as our solar system, with the charity-led event as the sun in the middle, and the planets representing fundraisers, or fundraising teams, orbiting around. In contrast, crowdfunding campaigns look more like the Milky Way, comprising many different stars (causes), each with their own solar systems. In this model, there are a diversity of fundraising campaigns that are collected on a single fundraising platform. Crowdfunding campaigns tend to be bottom-up, while P2P campaigns tend to be top-down.

Examples of crowdfunding platforms include Kickstarter, DonorsChoose.org and GoFundMe. It’s interesting to note that DonorsChoose.org is a 501(c)(3) organization founded in 2000. Last year’s Form 990 reveals it has grown to $78 million in annual revenue. Not bad for a nonprofit that didn’t exist in the ’90s!

Kickstarter is a benefit corporation launched in 2009. Since then, $2.6 billion has been pledged, 12 million people have backed a project and 112,584 projects have been funded.

GoFundMe is a for-profit organization founded in 2010 to allow people to fundraise for just about anything: medical bills, college tuition, disaster victims, etc. In the past year alone, the platform has raised more than $2 billion, and almost $4 million is raised on the platform each day. In 2015, a majority investment valued the company at around $600 million.

Using these examples, there is clear evidence that crowdfunding is a powerful trend that rivals traditional P2P fundraising, depending on your cause. It’s worth your time to think about the role of each type of campaign at your next strategic brainstorming session.