The Difference Between Crowdsourcing and Crowdfunding

Along with the times, including the development of science and technology, many new terms have been developed, for example crowdsourcing and crowdfunding. Both terms may sound familiar to them as common people, but for those who are familiar with online startup businesses, these terms are familiar. Crowdsourcing and crowdfunding are sometimes interpreted as the same thing. This is caused by the mechanism or the way it works which have in common. But in fact, the two terms have quite a difference.

The fefinition of Crowdsourcing and Crowdfunding

What exactly is meant by crowdsourcing? Crowdsourcing can be defined as the process of outsourcing a project that involves creative ideas. This process usually takes advantage of a crowd or large group of people. Another meaning is as a technique of outsourcing specific tasks or projects that require the support of many people in which these people act as external participants.

Crowdsourcing is generally used in creative projects. Things like writing, graphics, architecture, illustrations can use the crowd sourcing method. Many companies today are taking advantage of crowdsourcing methods to gather and get project ideas that suit their needs. A concrete example of a project like this is Wikipedia. As a platform for writing information about everything, Wikipedia allows its users to contribute in providing informative things. The user must be registered. In the opinion of successful people, the use of crowdsourcing methods tends to be faster, more varied, has a large selection of ideas and of course is cheaper than using the services of professionals in the related field.

The Difference Between Crowdsourcing and Crowdfunding

Apart from the term crowdsourcing, which I mentioned above, there is also the term crowdfunding. What is that? Judging from the implementation process, crowdfunding is a method of raising capital or funds. Usually, when there is a large project that makes it easier for many people, people do an Internet-based joint fundraising. The crowdfunding method also uses a platform that serves as a bridge between project owners who need capital and investors or lenders.

When viewed from the process, crowdfunding is actually a type of crowdsourcing. What distinguishes it is a specific or more specific objective to raise capital or funds. In its implementation, crowdfunding is not limited to the business sector, but also social activities such as collecting compensation for victims of natural disasters or joint donations to help ease the burden of someone who is sick. In essence, crowdfunding is a collective fundraising that involves a large number of people. Almost the same. Both involve many people.

The difference between crowdsourcing and crowdfunding

Crowdsourcing and crowdfunding methods have the same way, namely involving many people to achieve a goal. Even though crowdfunding is actually part of crowdsourcing itself. This means that crowdsourcing has a wider reach than crowdfunding. This also shows the difference between the two. For more details, here are some of the aspects that differentiate between crowdfunding and crowdfunding:

First: Project Objectives Aspect

In general, the main purpose of crowdsourcing is to collect creative ideas quickly and cheaply. This is because crowdsourcing methods take advantage of crowds on the Internet. Not only as an idea, crowdsourcing can also aim to raise contributions and collaborations, including raising funds for business projects or social interests.

Meanwhile crowdfunding specifically aims to raise capital to fund a project, both corporate and social. In this regard, crowdfunding has four basic types, namely:

Equity Based.

The equity base has the objective of raising funds or capital from several investors. The funds are used to fund a business project. Of course, the project is expected to provide benefits such as sharing company shares or monetary benefits in the future.

Debt Based.

The purpose of the debt-based crowdfunding method is to raise funds or capital to finance a business project. However, the funds collected have requirements, namely the return of the principal capital along with the promised interest at the time of fundraising.

Prize Based.

In this type, rewards in the form of prizes from projects that are funded either in monetary or non-monetary terms are promised when raising funds from large crowds through online-based platforms. For example, you are asked to co-fund a software development project. In return, the party inviting you will give you a special or limited edition product from the funded project.

Donation Based.

This crowdfunding method means collecting funds online from many people for social purposes such as disaster relief, scholarships, medical bills, rehabilitation, non-governmental organizations (NGOs), and other charities. Because it is donation based, this type of crowdfunding does not promise any reward to the funders.

Second: Activity Scope Aspect

As I have mentioned above that crowdfunding is a form of crowdsourcing, this gives us an understanding that the scope of crowdsourcing activities is broader than crowdfunding. Crowdfunding has the scope only to raise or raise funds as business capital or social activities, so the scope of crowdsourcing activities is wider. Starting from general knowledge in the form of informative writing, graphic design projects, architecture, to business ideas both large and small scale.

Third: Mechanism Aspect

From this aspect of the mechanism, crowdsourcing and crowdfunding both utilize online-based platforms to reach internet citizens. However, there are significant differences in the mechanism of these two terms.

Crowdsourcing is more about gathering ideas from people. These ideas are filtered to get the best idea according to the wishes of the project owner.

The mechanism of the crowdsourcing method generally starts with:

  • Doing things like online press conferences is like launching a project on an online platform both on social media and on company websites. This launch should be accompanied by a brief description of the project, budget, and deadline.
  • The name is also the internet, of course there will be people from around the world who respond to the project that was launched. If the people's responses match the project description, the project owner has the opportunity to get a lot of varied creative ideas.
  • The project owner can choose the best idea from the ideas offered by netizens.
  • Upon this choice, the predetermined budget is ready to be sent to the owner of the idea as compensation for his creative idea.

Fourth: Reward Aspects

In general, the nature of crowdsourcing tends to be voluntary, while the nature of crowdfunding is in the form of loans. This means, the project owner has an obligation to provide rewards to investors or their funders.

Rewards given can be in the form of shares of the company, refunds and interest, or prizes. Of these types of rewards, crowdfunding tends to be on refunds plus the promised or mutually agreed interest, because the funds collected are loans.

Another case with crowdsourcing, which is generally voluntary. Although it does not rule out a gift that is extrinsic or intrinsic in nature. Extrinsic prizes can be in the form of compensation and financial recognition for creative ideas. Meanwhile, intrinsic gifts are more on the expansion of knowledge, pleasure or personal satisfaction, and opportunities to express oneself.

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