Confused by the crowd-phrasing? You're not alone. These two words obviously do have a few things in common, like harnessing the power of a 'crowd', but are in fact very different in nature. While often confused for each other, or as one thing, here is a look into what crowdfunding is, what crowdsourcing is, and the differences between the two.
What is crowdfunding?
If a person has an idea, cause, side hobby, or passion project they wish to turn into a full-time business but they don't have the funds, they can turn to crowdfunding.
Crowdfunding is the method of raising capital for a project or a venture online through the collection of small donations from family, friends, the general public, and investors. There are a lot of crowdfunding platforms available for those who would like to launch a crowdfunding campaign.
In an uncertain economy, struggling creatives, solo entrepreneurs, startups, and small businesses are fighting to stay afloat and keep up with the times. Crowdfunding platforms such as Kickstarter and Indiegogo give these people an opportunity by providing a place where they can showcase their products and services directly to the world; no middleman required.
There are three types of crowdfunding projects. They could be in the form of equity, donation, or debt.
Equity-based crowdfunding is donating financial support in exchange for equity. Donation-based crowdfunding is giving money in exchange for non-monetary rewards such as a t-shirt, a CD, or a copy of the finished product. Debt-based crowdfundin is asking for money in exchange for financial investment or interest that will be paid at a future date.
What is crowdsourcing?
Crowdsourcing is the process of outsourcing tasks to a broad number of people through an open call. The term "crowdsourcing" has been coined by Jeff Howe in his article on Wired magazine titled, "The Rise of Crowdsourcing". It is a portmanteau of the words "crowd" and "sourcing".
One of the more famous results from crowdsourcing is Wikipedia, which is an online encyclopedia that can be written and edited by anyone who is registered to the site.
In the field of graphic design work, DesignCrowd is a platform where a client will hold an open call and many designers get to present their designs. This way, the client can choose from a lot of designs, which is something highly unlikely if the project has been outsourced to just one dedicated designer.
Crowdsourcing also allows for a free trade system where inexperienced, young designers who don't have a lot on their portfolio can be given the chance to show their work, gain experience, and enlarge their network. On the other hand, clients also benefit from crowdsourcing because it gives them variety in a cost-efficient manner.
How Are They Different?
There is a growing confusion between crowdfunding and crowdsourcing because of the similarity between these two words. But although they sound similar, these words have different meanings. Both are similar in the sense that they engage a crowd in order to meet goals.
They also make use of the internet and social media when looking for people who will help them. However, crowdsourcing involves the crowd by soliciting their ideas, contributions, and collaboration to achieve better results for a project.
On the other hand, crowdfunding is asking for a donation in the form of financial support for a project. Technically, crowdfunding is a kind of crowdsourcing activity.
Key takeaways
- Crowdfunding is a type of crowdsourcing that aims to collect small amount of money from a large amount of people in order to fund a specific goal.
- Crowdsourcing is a broader term which includes any activity which involves sourcing some form of value from a crowd.
- Using crowdsourcing platforms to outsource ideas and graphic design work from a large online community can be beneficial to both the client and the designer. It is a win-win situation for both sides, as it gives the client a chance to capitalize on the power of the crowd to come up with answers while at the same time, it gives a level playing field to the designer.
Want More?
Want to know more about using crowdsourcing for all your design needs? Check out these articles:
Design Crowdsourcing, Can It and Has It Worked? These Big Brands Think So
Why Small Business Should Start Crowdsourcing Branding and Graphic Design
10 Cool, Quirky Facts You Didn't Know About Crowdsourcing
Written by Jessica Walrack on Tuesday, July 12, 2016
Jessica Walrack is a professional freelance writer with a background in sales and marketing. After 7 years in the corporate world, she stepped into the online sphere and has now been freelancing for 4 years. She specializes in helping businesses to create a stellar online experience for their audience in order to build industry authority and increase profitability. In her spare time, Jessica enjoys traveling all over the world with her family.
