Are you wondering about what distinguishes crowdfunding from crowdsourcing?
And further, how can you use each of these modern tools for your business? Which one is right for you?
Here at CrowdCrux, we see a lot of confusion between these two terms. In this article, we’re going to clear it up for you by highlighting some of the differences and overlapping similarities.
At the end of the day, both crowdfunding and crowdsourcing can enhance your online business and add more value for your consumers. In our view, crowdfunding is a form of crowdfunding. You can think of it as Catholicism is to Christianity — it’s a branch of a larger concept.
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For now, let’s dive deeper into crowdsourcing vs. crowdfunding. Here we go!
What is Crowdsourcing?
At its core, crowdsourcing is basically the gathering of people’s opinions, input, or expertise on a product or service that you offer or intend to offer.
For example, let’s say you were headed out as an entrepreneur to create a new software application. You could then put that onto a platform like Github and source people to enhance that software application through their experiences and skills.
Another simple example of crowdsourcing would be making a post on Reddit. You could post your product and ask for feedback in the form of upvotes/downvotes, comments, and more.
Individuals involved in crowdsourcing can be paid freelancers, while others perform the task voluntarily through platforms like social media and smartphone apps.
Ultimately, this can be an extremely powerful tool for your business — especially in the start-up phases as you work out kinks and gauge interest.
What is Crowdfunding?
Most of the time with crowdsourcing, there is an end product or goal in mind.
That’s where crowdfunding comes in.
On crowdfunding platforms such as Kickstarter and Indiegogo, you are quite literally sourcing input from the crowd in exchange for monetary support. If people like your product and they’re excited about it — they’ll back your campaign.
If they don’t, you’re unlikely to reach your funding goal.
This is a powerful tool for creators to test out and perfect their project idea before making a huge investment in something like an ecommerce store. Learn more about this mindset from this awesome article:
Kickstarter First, Shopify Later? The Benefits of Crowdfunding Before Ecommerce
Let’s say you’re raising money for a board game on Kickstarter. With every backer that supports your campaign, they’re basically raising their hand as if to say:
Hey, this is a great idea. And I’m willing to give my hard-earned money to bring this into the world.
They’re not doing this through a donation. You’ll have to fulfill promised rewards — which usually come in the form of a tangible product offering.
If enough people are excited about your offering, you’ll ship it out to the masses and have an enthusiastic core of supporters as you transition into the next phase of your business, whether that be a strategy like ecommerce or Amazon Launchpad.
And keep in mind: not only will you have the crowd behind you — you’ll also have the seed money to scale your business.
That’s why so many entrepreneurs are turning to rewards-based crowdfunding. It’s a powerful tool to get your business off the ground!
Crowdfunding and Crowdsourcing Together
While crowdfunding itself is a form of crowdsourcing, there are built-in steps that you can take to get even more feedback from the people.
For example, during your pre-launch phase, you could:
- Source suggestions from your email list or social media
- Send out surveys to get feedback on style, colors, specs, etc.
- Source suggestions for rewards or add-ons
During your campaign, you can also send out surveys through Kickstarter to those who have already backed, read comments on your campaign page to see what people are saying about your project, and ask your backers to push towards stretch goals.
All this functionality and key data, built right into the operations and processes of launching a campaign!
Key Takeaways
Crowdfunding is a powerful type of crowdsourcing. You can use it to see what your customers are looking for, build a crowd that is excited about the future of your business, and receive seed funding to make your dream venture a reality.
Wanna learn more about crowdfunding? We’ve got all the educational resources you need:
- The Crowd Crux blog, podcast, and Youtube channel where we’re always working to deliver the best insider tips, tricks, and secrets from experts who have a wide range of experience in the industry.
- The Crowd Crux weekly newsletter that delivers awesome, valuable insights to your inbox every Thursday.
- Books and courses designed our founder Salvador Briggman, such as The Kickstarter Launch Formula and it’s sister UDEMY course
Think you’re ready to get moving towards launch?
Book a coaching call with the founder of CrowdCrux and crowdfunding expert Salvador Briggman. Our team is ready to assist you in smashing your funding goal!
Good luck on your entrepreneurial journey. We’re here to help if you need us!
