If you’re constantly looking for ways to drive growth and stay ahead of the competition, one strategy you might have heard of is leveraging the power of the crowd through crowdfunding and crowdsourcing.
While these two terms are often used interchangeably, they are distinct concepts with different applications.
Understanding the Difference Between Crowdfunding and Crowdsourcing
Crowdfunding refers to raising funds for a project or venture from a large group of people, usually through online platforms, while crowdsourcing refers to obtaining ideas, solutions, or services from a large and diverse group of people, also often through online communities.
Both involve leveraging the power of the crowd to achieve a goal.
Crowdfunding represents the democratization of access to capital. And it’s the most exciting thing to happen to finance in decades. - Kevin Lawton, Entrepreneur and Author.
Crowdfunding is primarily focused on financing, allowing entrepreneurs, artists, and creatives to fund their projects through contributions from a broad audience. Crowdfunding campaigns typically involve offering rewards or equity in exchange for contributions, and they have a set funding goal and a specific timeline.
On the other hand, crowdsourcing is focused on leveraging the knowledge and creativity of a group of people to solve problems or generate ideas. Crowdsourcing initiatives may be ongoing or periodic, and they may or may not involve direct incentives.
Another key difference is that crowdfunding is usually a one-time event, while crowdsourcing may be ongoing or periodic. Crowdfunding campaigns typically have a set funding goal and a specific timeline, while crowdsourcing initiatives may continue for as long as the company or organization is looking for input from the crowd.
Industry Examples of Crowdfunding and Crowdsourcing
To give you a better idea of how crowdfunding and crowdsourcing can be used to drive innovation and growth, let's look at some industry examples.
Crowdfunding is typically used by entrepreneurs, artists, and other creatives to fund their projects. It has been used successfully by companies like Pebble, Oculus, and Coolest Cooler to launch innovative products and raise funds. For instance, Pebble raised over $20 million on Kickstarter to launch its smartwatch, while Oculus raised over $2 million to develop its virtual reality headset.
Crowdsourcing has also been a valuable tool for companies seeking to gather input and ideas from their customers or stakeholders. For example,Make America Vote crowdsourced solutions to get more people to the polls, and thelululemon Healthier Communities challenge tapped into the crowd for innovative ways to use store locations and community hubs to improve mind, body, and the local community at large.
How to Leverage Crowdfunding and Crowdsourcing for Your Business
To leverage the power of crowdfunding and crowdsourcing for your business, it's essential to understand the differences between the two and identify which approach aligns best with your goals. If you're looking to finance a project or venture, crowdfunding might be the right choice. On the other hand, if you're seeking to gather ideas or solutions from a broad audience, crowdsourcing might be the way to go.
In either case, it's crucial to set clear goals and expectations, develop a compelling pitch, and engage with your audience through social media and other channels. With the right strategy and approach, crowdfunding and crowdsourcing can be valuable tools for driving innovation and growth in your business.
Want to get innovation insights from a large group of people outside of your organization? Learn how to run a successful crowdsourcing challenge with HeroX.
