Donation-based crowdfunding is when a project creator accepts funds without offering anything in return. The most common examples of donation-based crowdfunding include raising for charities, nonprofits, or personal objectives.
Some popular crowdfunding platforms that support donation-based crowdfunding are GoFundMe, Fundly, and FundRazr. It is worth noting that both Fundly and FundRazr charge fees to the campaign owner based on the amount raised.
Did you know?
Some of the most popular reasons people begin personal crowdfunding campaigns are to cover medical expenses or raise funds to rebuild homes or businesses after a natural disaster.
Risks & Benefits of Donation-Based Crowdfunding Platforms
Because donation-based crowdfunding is typically associated with personal projects, there are some special considerations to be made regarding the risk and benefits of launching a campaign. Some of the benefits of donation-based crowdfunding platforms, while a boon to campaign creators, can also be considered a disadvantage to potential contributors, so it is important to communicate clearly with your community and represent your intentions as transparently as possible.
- Low barrier of entry means your campaign is more likely to be accepted on supported crowdfunding platforms.
- Funds can be accepted with no additional obligation to donors.
- Most platforms allow partial-funding, so campaigns can withdraw raised funds even if their goal is not met.
- Donation-based platforms tend to have less fees, so more of the money raised goes directly to the project creator.
- Contributions from platforms like GoFundMe are considered “personal gifts” and thus are not usually subject to taxes.
- Donors may have less trust in campaigns since donation-based crowdfunding platforms like GoFundMe have less vetting required before building a campaign.
- Creator fraud happens more often on platforms like GoFundMe due to the low barrier of entry.
- Donation-based crowdfunding platforms tend to be oversaturated, so it can be difficult to stand out.
- Contributors are less likely to donate if they cannot verify the campaign creator’s intentions and reputation.