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Sponsorship Vs. Fundraising: Which One is Right for Your Startup?

In today's competitive socio-economic landscape commencing startups and making it successful is a daunting task. Here with an innovative business idea, imperative to consider several significant aspects for business like legal services for business and fund. Fund is the most important for the growth of the business. It is an undeniable fact that maximum business and startup collapse due to lack of fund. Some prominent sources to raise fund are sponsorship and fundraising. Sponsorship and fundraising are two effective business strategies to raise fund but their ways are different, therefore maximum people don't know the fundamental difference between these two. This blog aims to shed light on fundamental difference between fundraising and sponsorship, their respective objectives, pros and cons.

What is Fundraising?

Fundraising is the process of collecting donations from individuals, organizations, and corporations for a specific cause.
Generally, non-profit organizations, charities, political parties use this process to raise funds. Apart from that, startups and for-profit companies also use this process to raise funds to fulfill business objectives.

Types of Fundraising:

Fundraising Through Direct Mail: In this process, funds raised through direct mail sent to individuals and organizations.

Fundraising Through Crowdfunding Website: In this process, funds raised through crowdfunding websites. Kickstarter, Indiegogo, Patreon, etc. are some popular crowdfunding websites.

Fundraising Through Events: In this process of fundraising, fund raised through different events like street theatre, galas, matches, charity, street play, etc.

Fundraising Through Corporate Partnership: In this process of fundraising, corporate sectors donate to non-profit organization jointly in exchange for promotion or recognition.

The Pros of Fundraising:

Person or organization gets direct support through fundraising.
Through fundraising campaign, you can connect with large number of people that raises awareness about the cause.
Fundraising is the effective method to establish relationship between a non-profit organization and its supporters; and between individuals and organizations within the community.

The Cons of Fundraising:

Fundraising is a time-consuming process wherein requirement of significant resources such as staff and volunteers.
Only a limited geographic location or audience can be targeted in fundraising campaign.
Fundraising campaign is not effective to generate large revenue thereby executing long term operation through this process is not possible. Collecting money through fundraising depends on donation.

What is Sponsorship?

Sponsorship is a marketing strategy wherein mutual benefit is the primary objective.
In sponsorship company provides financial or in-kind support to an event, organization, or individual in exchange for promotion or recognition.
From increasing brand awareness to build better customer relationship, companies use sponsorship to enhance business value.

Types of Sponsorship:

Event Sponsorship: In event sponsorship companies provide financial or in-kind support to an event, such as a concert, charity run, or sports tournament, in exchange for promotion or recognition. For example, Tata Group being the title sponsor for IPL 2023.

Cause Related Sponsorship: In this type of sponsorship companies support a specific cause such as charity match in case of social issues or diseases, in exchange for promotion or recognition.

Product Sponsorship: In this type of sponsorship companies provide financial or in-kind support to product, in exchange for promotion or recognition.

The Pros of Sponsorship:

Through sponsorship it becomes easy to promote brand and reach large number of audiences.
Sponsorship is an effective marketing strategy to establish relationship with consumers and other stakeholders and with organizations and events.
Through sponsorship companies can build their positive reputation by participating in noble cause that also demonstrates its commitment to corporate social responsibility.
Through sponsorship companies can leverage various marketing opportunities such as advertising, product placement, and access to exclusive events and activities.

The Cons of Sponsorship:

Sponsorship can hamper company's reputation if sponsored entity has controversial image.
In case of high-profile events sponsorship can be expensive.
There is a tough competition in sponsorship, especially when veteran companies come forward to sponsor any event.

Core Difference Between Sponsorship and Fundraising

Fundraising aims to raise funds or asking donation for specific purpose, while sponsorship is a marketing strategy where companies support any event, cause or product in exchange for promotion and recognition.

Conclusion:

Sponsorship Vs. Fundraising: Which One is Right for Your Startup?

Broadly, sponsorship and fundraising aim to secure funds and support for a cause. But in the context of objectives, benefits, and drawbacks; sponsorship and fundraising both are different. Startups who want to raise funds should carefully take the right step, according to their specific needs and goals. However, today there are so many online platforms, therefore easier for individuals and organizations to raise funds from anywhere in the world.

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