Differences Crowdfunding and Fundraising – In the world of Financial Technology (Fintech), there has been a very rapid development both in terms of types and ways to run their business.
As is known, crowdfunding is one type of fintech that is being used by many people, not only in Indonesia but almost all over the world.
In fact, both crowdfunding and traditional fundraising have some differences and similarities in some of their concepts.
Definition: Crowdfunding VS Fundraising
Actually, the Indonesian language identifies the word 'urunan' or 'joint venture' which has been known for a long time as a form to collect funds from several individuals which are usually in small amounts.
Crowdfunding is actually not a new product, because the concept is still on the term 'joint' or 'derivative' earlier.
But what sets it apart from traditional fundraising is that crowdfunding has exploited technology.
The exploitation of this technology aims to form a network and marketing that snakes (affecting a few people then to many people and to a large network) with the concept of viral networking and marketing.
The goal is to mobilize the largest possible number of users (potential funders) to access the internet in a short time.
The principle is that any user who accesses the crowdfunding web who has the same interest is willing to voluntarily raise funds to the party who will distribute it.
So it is different from fundraising, where the main activity is collecting funds but in a limited environment and usually without the use of technology.
Fundraisers (fundraisers) are limited to those who are usually in the same office, a particular community or community who usually already know each other.
The method used is usually conventional, such as getok tular, with the ingredients using an envelope or bag and managed by an appointed person in charge.
Meanwhile, Norton only limits fundraising to social services, which is defined as an effort to raise funds to finance services as assistance that finances social services to people in need.
Types of Crowdfunding and Fundraising
In crowdfunding there are three main actors who make this activity run smoothly, the initiator is the party who first pitches the idea of a project that will be funded through this activity.
Investors are parties who can be individuals, groups, or corporations that support the project idea by donating a certain amount of funds.
An intermediary is a party that connects the initiator with investors, which is usually a trustworthy website platform.
Reporting from Sawakinome, there are three types of crowdfunding that have been running so far:
Donation-based crowdfunding: this activity has no obligation for the organizer to return the funds that have been collected because the concept is in the form of donations.
Reward-based crowdfunding: investors who contribute with funds hoping for a return in the form of a reward or it could be a service provided by the company.
Equity based crowdfunding: investors/contributors who put in a certain amount of money can have the opportunity to get a share of the shares when investing equity in the business.
Meanwhile, for fundraising, the source of funds can come from three things, namely:
Loans, when small companies and startups provide loans to financial institutions such as banks along with interest for a certain period of time
Business capital, individuals provide financing simultaneously or independently with banks and financial institutions to start-up companies that are considered to have good business prospects, sometimes also called venture capital.
Concept Difference
There are conceptual differences between crowdfunding and fundraising from the two platforms which lie in the idea, network, focus and control.
