The rise of crowdfunding
In recent years, crowdfunding has transformed the traditional fundraising landscape, breaking down barriers between those in need and those available to help them. Crowdfunding has made it possible for people to offer direct support to those who need emergency financial assistance, contributing to the larger trend of individual giving. In 2022, almost $5 million Canadian tax filers (17.1% of all tax filers) declared making charitable donations.
People often turn to crowdfunding during times of economic instability and financial difficulty. For example, the current cost of living crisis in Canada has profoundly impacted what people can afford, with 43% of Canadians agreeing that they’ve been affected by rising food prices and 56% of Canadians concerned about whether they can afford housing or rent.
What are the advantages of crowdfunding?
When funding from the government and nonprofits falls short, many people turn to crowdfunding, meaning that they will rely on the kindness of their community. Online fundraising removes the traditional barriers that typically exist when asking for support, making it simple to overcome financial obstacles quickly or raise money for a worthy cause. For those looking for crowdfunding basics, here are some of the main advantages of crowdfunding:
- There is no application process.
- There are no long wait periods to receive your funds.
- Crowdfunding takes the fear out of asking for financial help. It’s simple to share your fundraiser with your network of friends and family members on social media.
- Crowdfunding makes it easy to reach people outside of your network.
Below, we answer the questions people most often have about crowdfunding when they’re trying to decide if they want to start an online fundraiser.
Four of the most common questions about crowdfunding
Despite now knowing what a crowdfund is, you’ll likely still have some additional questions about it before you create your own fundraiser.
Here, we look at some of the most common crowdfunding questions.
1. How do I know if crowdfunding is right for me?
The best way to have crowdfunding explained is to understand that it can work for anybody, and there is no cause too big or too small. The beauty of crowdfunding is that it exists to help an array of people and needs. Whether you want to help your pet, raise money to pay for a memorial, or get help with bills, crowdfunding can allow you to overcome the financial barriers that may stand in the way.
While most people think crowdfunding services are only for individuals who need emergency financial assistance, businesses looking to fund a new project or raise capital can also fundraise online. Entrepreneurs can even use crowdfunding to finance projects or new creative ideas.
2. What are the different types of crowdfunding?
- Donation-based crowdfunding: In donation-based crowdfunding, people search for and support a cause by donating to it without receiving anything in return. The person running the fundraiser isn’t obligated to pay back donors or give them anything else in return for their contributions. GoFundMe is one of the major crowdfunding sites that uses donation-based crowdfunding.
- Equity-based crowdfunding: In equity-based fundraising, the fundraiser organizer accepts money from people looking to invest, typically to help launch a business. In return, investors will receive a small piece of equity in the business or company. You can find out how to raise money for a business here.
- Rewards-based: Through rewards-based crowdfunding, the organizer of the fundraiser provides a reward or product to donors, usually a service or physical item, in exchange for a contribution.
Note: GoFundMe only allows donation-based crowdfunding.
3. Is it okay to raise money for myself?
Yes, absolutely. Thousands of people start online fundraisers every day to raise money for themselves. Understandably, you might be nervous about asking for money. However, it’s important to remember that nearly everyone has experienced financial hardship at one point or another. You might be surprised by the number of people who want to support you when you need it most.
4. What is the best way to get more donations?
While there’s no magic formula for receiving donations, there are steps you can take to set yourself up for success. The most important thing you can do is create a compelling fundraiser and build a community that empathizes with your cause. Investing the time into your fundraiser story will inspire your network of friends and family to take action.
