Over the last couple of years, crowdfunding has become a popular way to raise money for projects whether it’s a creative project or a feel-good project or any project in between. But is crowdfunding a donation or sponsorship?
A donation is made when the campaign appeals to the largesse of individuals, companies, organizations, et al.
A sponsorship comes about as a result of a campaign that not only appeals to the largesse of individuals, companies, organizations, et al, but also brings with it a solid business plan.
To that end, crowdfunding is, for the most part, a donation platform.
But aside from the business plan aspect, what are the other differences between a project that relies on donations and one that partners with sponsors?
Identifying A Donation
Some donate because they feel it’s the right thing to do. Some donate because the idea seems like a good idea, or because it looks like it’s going to be a lot of fun, or the cause is one that’s close to the donor’s heart.
Many people donate knowing that they can deduct their donations at the end of the year when they file their Income Tax returns. But not every donation is tax deductible.
When a corporation or company makes a donation, they usually want to be able to deduct it on their corporate Income Tax returns. But even if the corporation or company can’t deduct it on their corporate Income Tax returns, there are still reasons why a corporation or company donates to a cause or campaign. Sometimes it’s to enhance the corporation or company’s image with employees and shareholders; sometimes it’s just because the corporation or company enjoys being a good corporate citizen.
The money comes from philanthropy and donation budgets. The money is usually cause-related (education, health, disasters, etc.) although donations are also given to support cultural, artistic and sports events as well. And in the end, donations, usually come with little to no fanfare.
Identifying A Sponsorship
For the individual as well as corporations and companies, sponsorship is generally done to raise the profile of the individual, corporation or company. They want to sell more products or services while at the same time increasing positive awareness of their brand in markets and among customers and potential customers.
Sometimes the sponsorship takes the shape of bartered services such as reduced printing costs, free media placement (i.e. print and/or broadcast advertising), cross-promotions, etc. Sometimes the sponsorship takes the shape of a cash investment that underwrites a part of the campaign.
The money comes from marketing, promotion, advertising or communications budgets. The money is usually event or team related, with a strong leaning towards campaigns that will yield an established presence (i.e. libraries, parks, annual events,etc.). And in the end, sponsorships most often come with a considerable amount of high-profile publicity.
What’s The Difference?
Some will say there’s really no difference between a donation and a sponsorship as long as money comes in to support the campaign or cause. Not so. It matters because the type of funding you ask for can either make or break whether you meet your financial objectives, and determine if you can move forward with your project.
Take the time to clearly identify whether you need donations or sponsorship to make your project a reality.
Then go out there and make it happen!