Crowdfunding is the Wild West for civic initiatives

This article was first published on Cities in Transition on the 27th of May 2015

In a short time, crowdfunding has become extremely popular. Research agency Massolution estimates that global crowdfunding will double in 2015, raising over $34 billion. Lending-based and equity-based crowdfunding are the largest and fastest growing segments in the crowdfunding market. Nonetheless, perhaps the most exciting segment is ‘civic crowdfunding’. Civic crowdfunding is the generic term for crowdfunding campaigns aiming to raise funding for public or shared goods. Civic crowdfunding rubs against existing relationships between citizens and (local) governments as community groups take matters into their own hands.

So far, civic crowdfunding initiatives are usually small. Comparing civic crowdfunding platforms from different countries, Rodrigo Davies found that crowdfunding goals for civic initiatives generally do not exceed $7,500. They range from neighborhood gardens to festivals and from temporary use of public space to more permanent use of property for communal activities. The famous Luchtsingel bridge in Rotterdam, which raised €50,000, ranks among the largest civic initiatives in The Netherlands. But civic crowdfunding is on the rise. Douw & Koren Crowdfunding Consultancy calculated that civic crowdfunding raised €6 million in The Netherlands in 2014 and they expect the market to double every year.

An expression of participatory democracy…

The growth of civic crowdfunding mirrors the broader trend of government withdrawal, municipal cutbacks and the renewed focus on citizen participation in many Western countries. Therefore, few governments will not encourage citizens to raise support and funds for their initiatives. As long as these initiatives are limited in number and are relatively small, local governments tend to treat civic crowdfunding as something trendy, as a tangible characteristic of active local communities, and as something they want to associate with. For instance, New York City Council has its own portal on Kickstarter, London Councils on British Spacehive and the City of Amsterdam on Voor je Buurt.

However, at civic crowdfunding platform Voor je Buurt (For your Neighborhood) we regularly experience that uncertainty lurks underneath this supportive attitude. Local governments have a lot of questions about the role that they can or should play in civic crowdfunding. Civic crowdfunding is the Wild West of funding for civic initiatives. It is a largely unexplored area with many pioneers and many different platforms and models. For instance, support is often given as a gift or in exchange for a small reward. But loan-based crowdfunding (especially obligations) is also being introduced in the field of civic crowdfunding. In some models supporters will lose their money if an initiative does not reach its full goal, while on other platforms, the contribution will be refunded if the goal is not met. There is still a lot of experimenting.

Voor je Buurt was established in 2012 to increase knowledge about the do’s and don’ts of crowdfunding for civic initiatives and to support governments with policy-making regarding civic crowdfunding. We have learned that civic crowdfunding is as much about raising funds, as it is about influencing local decision-making. A lot of local governments that get involved with civic crowdfunding do so because they hope crowdfunding will make clear whether or not people actually like a particular civic initiative so much that they will want to support it financially or in a different way. Crowdfunding is thus seen as a way to shape a more participatory democracy.

…with limits to it

But those who see crowdfunding as a form of participatory democracy, must also pay attention to the (current) boundaries of the instrument. The ideal of participatory democracy is to empower more people to play a meaningful role in democratic decision-making processes. Crowdfunding indeed provides a nice entry for participation, but there are some issues that should not be overlooked. I want to mention three that will be become more important as civic crowdfunding grows.

1. Crowdfunding mobilizes supporters. There is no dislike button

Absolutely crucial for an attractive crowdfunding campaign is the enthusiasm of the campaign initiator. Successful campaigns are aimed at winning people for concrete initiatives. Crowdfunding platforms are designed to communicate support for an initiative. Pronounced opponents of an initiative have less options to express their objections. There is no dislike button and logically no option to contribute ‘negative amounts’ of money. Now and then, counter-campaigns are launched, but anti stories usually do not do so well. There are ways to increase the space for dialogue with civic crowdfunding, but they are still in their infancy. For example, the British platform Spacehive publishes projects in the idea stage, well before the actual campaign starts, so that feedback can be gathered in advance.

2. Crowdfunding is for everyone. But not everyone comes along

Crowdfunding is available to everyone as an instrument, but that does not mean it is accessible to all. Knowledge, skills and money set the stage for those who can and those who cannot participate. Knowledge on how to start crowdfunding and the skills and time to campaign are absolutely necessary. What is more, crowdfunding is like voting with money and getting your voice heard depends largely on your ability to pull out your wallet. In the end, the crowd are all too often themselves the elite.

The accessibility of crowdfunding is a task that is taken up little by little. Using its curated page on Kickstarter, New York City Council tries to encourage crowdfunding for civic projects in low-income neighborhoods. At Voor je Buurt we develop workshops specifically focused on the more vulnerable groups and neighborhoods.

3. Crowdfunding can mobilize people. But it doesn’t always produce feasible initiatives

Raising enough money and gathering public support through crowdfunding does not guarantee the feasibility of an initiative. This is particularly true if initiatives conflict with existing policy or regulations. This might not really be a problem to many small-scale initiatives, but as civic crowdfunding grows we are likely to see more large-scale, more complex and more controversial initiatives turning to crowdfunding. For instance, in Antwerp, Belgium, a community collective successfully crowdfunded over €100,000 last year, to conduct two studies on roofing the Antwerp highway. The City of Antwerp felt no need to carry out those studies, nor does it favor the plans of the collective.

For more large-scale initiatives, feasibility expectations of everyone – including government, initiators and supporters – need to be realistic. For those projects crowdfunding is no longer about fast implementation, but becomes strongly intertwined with existing policy-making. The Antwerp crowd has no expectation that the highway will be roofed soon, but they used their contribution to put pressure on the local representative democracy. Expectations are not always that clear, though. After four years, a disgruntled crowd is still awaiting the unveiling of a $70,000 statue of Robocop. No location has been arranged yet.

Pushing the boundaries

Governments that consider crowdfunding as a tool to strengthen participatory democracy, should not just be aware of the limits of civic crowdfunding, but should also be willing to push its boundaries. The same applies to the crowdfunding platforms. It is a prerequisite for civic crowdfunding to grow as a meaningful segment of the crowdfunding market, and also as a tool that actually contributes to our local democracies. The potential is absolutely there. That is for sure.