What Is Crowdfunding? The Clear and Simple Answer

Crowdfunding harnesses the power of social networks and the internet to give people the means to raise funds, help others overcome hardship, and meet aspirational goals. The core principle behind the crowdfunding definition is; you can help a friend or help an entire community. You can do everything from pay for your own surgery to fulfill a student’s dream of attending college—and so much more.

If you’ve ever found yourself wondering, “What is crowdfunding,” “What does crowdfunding mean,” or, “What are the benefits of crowdfunding?” then keep reading. We’ll answer your questions about crowdfunding and give you top tips on how to bring in donations.

Start crowdfunding

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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 2017, charitable giving by individuals grew by 4% for a total of $390.05 billion, outpacing giving by both corporations and foundations.

People often turn to crowdfunding when they can’t afford the rapidly increasing cost of medical care, or when they lack insurance to cover major medical procedures. Some sobering facts about medical costs:

  • 40% of Americans can’t afford to spend $400 when faced with an emergency.1
  • The retail cost for 267 brand name prescription drugs widely used by older adults has risen by an average of 8.4%.2
  • Annual out-of-pocket medical expenses in the US have risen to $486 billion, or an average of $1,400 per person.3
  • 66% of people surveyed said that planning for out-of-pocket costs is both the biggest challenge and most stressful part of healthcare management.4

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

  • 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 for crowdfunding. Because of this, it can be hard to define crowdfunding. Some people might worry that their fundraiser isn’t as worthy as others—but 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 a new creative idea.

  • 2. What are the different types of crowdfunding?

    Donation-based crowdfunding: This type of crowdfunding is one of the most common when looking up “what is a crowdfunding campaign.” 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.

    Rewards-based: Through rewards-based crowdfunding on platforms like Indiegogo and Kickstarter, the organizer of the fundraiser provides a reward or products 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?

    Absolutely. Thousands of people start online fundraisers every day to raise money for themselves. It’s understandable that you might be nervous about asking for money. But 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 definitely 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 will inspire your network of friends and family to take action. For specific tips on how you can create an engaging fundraiser and share it far and wide, read on.

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How is crowdfunding on GoFundMe different?

We empower people to rally support for personal and charitable causes. We built our reputation by serving and supporting our community of organizers and donors, and we continue to build on that trust every day. GoFundMe’s giving community is more than 50 million strong and has raised more than $9 billion.

How it works

Our industry-leading fundraising tools help individuals, groups, and organizations share their stories far and wide. Even small donations can eventually grow into something extraordinary.

1

Create your fundraiser

GoFundMe helps you quickly create a fundraiser and tell your story. You can raise money as an individual or invite others to join your fundraising team. Learn more about team fundraising.

2

Share your fundraiser

Our sharing tools help you spread the word about your story via social media, emails, and even text messages. We make it easy to keep your network informed so you can raise more money quickly.

3

Easily accept donations

GoFundMe allows you to send donations directly to your or your beneficiary’s bank account, so you can get help right away.

 

Find out how it works

Choosing the right crowdfunding platform

Here’s what sets GoFundMe apart from the rest:

Trust & safety

Backed by the GoFundMe Guarantee, our platform is the safest, most secure place to give and receive donations. We have a dedicated Trust & Safety team that works day and night to prevent misuse and make sure funds reach the right hands. 

Advanced tools

The key to fundraising success is sharing your fundraiser with as many people as you can. With built-in social fundraising technology, GoFundMe crowdfunding makes it easy to spread awareness for your fundraiser so you can increase donations.

Fundraising resources

Our resource center offers proven fundraising ideas and tips to set you up for success. Our blog is packed with fresh content to help you drive more donations to your fundraiser.

Crowdfunding best practices

four kids holding up signs for charity car wash

Tell a compelling story

family of five standing in front of their home

Share and update

  • Every time you share your fundraiser, you’ll bring in an average of $43 in donations—so share your fundraiser often on Twitter, Facebook, and even LinkedIn to encourage others to do the same. If you get enough momentum going, your fundraiser could go viral. Well-written updates with any news you can share will also keep supporters and potential donors engaged and in the loop. For more tips, see these blog posts:
group of people in a parade

Thank your donors

Everyone loves being thanked after doing a good deed, and it’s no different with your donors. In lieu of gifts or rewards, sending thank-you messages is a way to make each donor feel appreciated. And as an added bonus, expressing gratitude can encourage additional donations and increase donor retention. 

Our blog post How to Write a Donation Thank-You Letter That Gets You to Your Goal will walk you through the process of crafting the best thank-you possible. Be sure to also check out our list of 20 Affordable Ways to Say Thank You to Donors if you’d like to show your thanks beyond an email. 

View more tips

Fundraiser success stories

Young kids sitting together outside of a cafe smiling and making funny faces

Walt & Naima’s Winter Shelter Wish

Charity

Walt is only 7 years old, but he has a huge heart. That’s why after devastating fires swept through Northern California, he wanted to do something to help the most vulnerable people in the Bay Area. He started a GoFundMe to benefit a local homeless shelter and raised over $11,000.

group of people posing with dogs

Support Rancho Relaxo’s Expansion

Animals

Caitlin has a simple mission: to save as many animals as possible from abuse or neglect. She does this on Rancho Relaxo, an animal rescue farm that she founded. So far, she’s saved more than 300 animals, and she can continue her mission thanks to a GoFundMe that has raised over $147,000.

Split image of a recent college grad who's excited about his college diploma

From Compton 2 Harvard

Education

Growing up in Compton, E-Jayy had no shortage of obstacles. Despite the odds, this dedicated young man got accepted to Harvard—but he still needed help with all the expenses that come with an Ivy League education. Donors gave nearly $25,000 to help him with his freshman year.

View more success stories

Become our next success story

Our crowdfunding lessons help make fundraising simple. 

Crowdfunding lessons
Lesson one: Sharing
Lesson two: Photos

Sources

  1. Federal Reserve, 2018
  2.  AARP Public Policy Institute, 2017
  3. Consumer Affairs Report, April 2017
  4. Alegeus Healthcare “Moments of Truth” research report, July 2016