The disruptive donation-based crowdfunding
4 things you didn't know about civic crowdfunding
Crowdfunding is everywhere. People are using it to fund watches, comic books, even famous film directors are doing it. In what is now a $6 billion industry globally, I think the most interesting, disruptive, and exciting work that's happening is in donation-based crowdfunding. That's worth, very roughly, $1.2 billion a year worldwide per year. Within that subset, I've been looking at civic projects, people who are producing shared goods for a community or broader public. These projects build on histories of community fundraising and resource pooling that long predate the Internet; what's changed is that we've created a scalable, portable platform model to carry out these existing practices.
So how is civic crowdfunding doing? When I started this project very few people were using that term. No one had done any aggregated data collection and published it. So I decided to take on that task. I collected data on 1224 projects between 2010 and March 2014, which raised $10.74 million in just over three years. I focused on seven platforms: Catarse (Brazil), Citizinvestor (US), Goteo (Spain), IOBY (US), Kickstarter (US), Neighbor.ly (US), and Spacehive (UK). I didn't collect everything. There's a new crowdfunding site every week that may or may not have a few civic projects on it. If you're interested in my methodology, check out Chapter 2. I don't pretend to have captured every civic project that has ever existed, but I'm working with a representative sample.
Here are four things I found out about civic crowdfunding.
Civic crowdfunding is small-scale but relatively successful, and it has big ambitions. Currently the average civic crowdfunding project is small in scale: $6,357 is the median amount raised. But these civic projects seem to be doing pretty well. Projects tagged 'civic' on Kickstarter, for instance, succeed 81% of the time. If Civic were a separate category, it would be Kickstarter's most successful category. Meanwhile, most platform owners and some incumbent institutions see civic crowdfunding as a new mechanism for public-private partnerships capable of realizing large-scale projects. In a small minority of cases, such as the three edge-case projects I explored in Chapter 3 of my thesis, civic crowdfunding has begun to fulfill some of those ambitions. For the center of gravity to shift further in the direction of these potential outcomes, though, existing institutions, including government, large non-profits and the for-profit sector, will need to engage more comprehensively with the process.
Civic crowdfunding started as a hobby for green space projects by local non-profits, but larger organizations are getting involved. Almost a third of campaigners are using civic crowdfunding platforms for park and garden-related projects (29%). Event-based projects, and education and training are also popular. Sports and mobility projects are pretty uncommon. The frequency of garden and park projects is partly because these projects are not capital intensive, and they're uncontroversial. That's also changing. Organizations from governments to corporations and large foundations, are exploring ways to support crowdfunding for a much wider range of community-facing activities. Their modes of engagement include publicizing campaigns, match-funding campaigns on an ad-hoc basis, running their own campaigns and even building new platforms from the ground up.
Civic crowdfunding is concentrated in cities (especially those where platforms are based). The genre is too new to have spread very effectively, it seems. Five states account for 80% of the projects, and this is partly a function of where the platforms are located. New York, California are our top two, followed by Illinois and Oregon. We know there's a strong trend towards big cities. It's hard work for communities to use crowdfunding to get projects off the ground, especially when it's an unfamiliar process. The platforms have played a critical role in building participants' understanding of crowdfunding and supporting them through the process.
Civic crowdfunding has the same highly unequal distributional tendencies as other crowd markets. When we look at the size distribution of projects, the first thing we notice is something close to a Pareto distribution, or Long Tail. Most projects are small-scale, but a small number of high-value projects have taken a large share of the total revenue raised by civic crowdfunding. We shouldn't be surprised by this. On Kickstarter most successful projects are between 5 and 10k, and 47% of civic projects I studied are in the same bracket. The problem is that we tend to remember the outliers, such as Veronica Mars and Spike Lee—because they show what's possible. But they are still the outliers.
Now, here are two things we don't know.
Will civic crowdfunding deter public investment or encourage it?
Will civic crowdfunding widen wealth gaps?
We don't have enough high-quality data, and not enough time has passed, to answer these questions satisfactorily yet. There are some clues in the rhetoric people use, which I explore in Chapter 4 of my thesis, but they point in many different, contradictory directions. Nevertheless, there are concrete goals we can work towards to try and make the answers to those two questions positive ones for community development and society more broadly.
Communities and the groups that serve them, in the government and social sector, are in an important position to influence how crowdfunding evolves. It can just as easily become a part of the toolkit for community organizing and be a mechanism for getting resources to places where they're needed as it can be to do the opposite. I've been involved as a workshop leader and advisor in trying to help support some of this activity, but we're really just getting started.
To really understand what's going on, especially over the longer term, we need better data. We need to know more precisely when projects are happening, if they're succeeding, and by what measure. And we need to be able to know how what's happening in crowdfunding relates to the other things we measure. We can't build civic engagement and awareness on the back of bad data. This is something I'm actively working on with the platforms I've worked with.
Finally, we need more socially-grounded research in this space. It's one of the things I'm going to be spending my time on at Stanford over the next five years. I'm excited about advancing qualitative inquiry to support the quantitative analysis we're doing, research that helps us understand how crowdfunding is changing the ways that organizations and the people within them work. We know crowdfunding is not just a numbers game, it's a very human and complex game, and I look forward to continuing to help us understand it better.
You can read Civic Crowdfunding: Participatory Communities, Entrepreneurs and the Political Economy of Place in its entirety (173 pages) now, and if you do so, I'd love to hear your feedback.