Civic Crowdfunding and the Public Good

A successful crowdfunding campaign led to government support for the Luchtsingel pedestrian bridge in Rotterdam, The Netherlands. (Cameron R. Nielson via Wired UK)

At first glance, civic crowdfunding appears to be the ideal antidote to diminishing municipal budgets. Like conventional crowdfunding, civic crowdfunding provides a web-based venue for project designers who solicit donations from individuals and organizations. Unlike Kickstarter and other commercially-oriented sites, however, civic crowdfunding platforms like Spacehive (based in the UK) and Neighbor.ly focus on community-development rather than product-based proposals. But even as interest in, and activity around, civic crowdfunding continues to grow, critics including Alexandra Lange worry that the model perpetuates environmental injustices and abrogates local governments’ responsibilities to their citizens.

Rodrigo Davies has thought a lot about civic crowdfunding, first as an adviser to Spacehive, then as an MS student at MIT and, now, as a PhD student in the Work, Technology and Organizations group at Stanford University. Davies is currently on leave from his doctoral research and working as Head of Product at Neighbor.ly, where he is helping build a platform that will allow community members to invest in their cities by purchasing municipal bonds. Davies’s master’s thesis, "Civic Crowdfunding: Participatory Communities, Entrepreneurs and the Political Economy of Place" is the first academic study on the subject. Davies and I recently spoke by phone about the history of civic crowdfunding, its relationship to democracy and equity, and the promise of new models including debt-based crowdfunding.

[See below for a list of resources on civic crowdfunding.]

Anna Bergren Miller: What is civic crowdfunding?

Rodrigo Davies: Other people might have their own [definitions, but] I think civic crowdfunding is the use of crowdfunding platforms—online websites for arranging large amounts of small donations from lots of people—to produce shared goods that have value to communities.

If I can simplify that again: civic crowdfunding is the use of crowdfunding to produce shared goods and services for communities.

You have argued that civic crowdfunding, rather than being purely a product of the internet age, actually extends earlier models of community fundraising. Can you say more about that?

I think that most behaviors we see online are a reflection, or an extension, of things that happened previously. I think that's especially true with collective behaviors like crowdsourcing and crowdfunding. People participate collectively when they feel connected to people in that group. They are motivated by things like social ties. Although the internet, in some ways, makes the transaction cost of doing that much lower—it's much faster and costs less to reach thousands of people—the dynamics are the same.

You might have the potential, thanks to a software platform, to reach thousands of people. But if the feeling of collective identity, and the desire and motivation to cooperate are not there, the tool alone will not get you to your goal. You still need the social forces that we see present in offline situations—those are still very much in the DNA. What the technology does is allow you to do it on a bigger scale, and faster.

Davies identifies civic crowdfunding with pre-internet community fundraising efforts, including the 1884 campaign to build the Statue of Liberty's pedestal. (Rodrigo Davies)

In your MS thesis, which is based on a field study of 1,224 projects over three years, you describe the "typical" civic crowdfunding project. What does that look like?

The thing that defines [the typical project] most persistently across platforms is the scale. Most civic crowdfunding projects are relatively small, i.e., between US$5,000-$10,000. That was consistent across the US, Spain, and the UK. That's also consistent with Kickstarter. People remember the multimillion-dollar campaigns on Kickstarter because they attract the most attention, but the highest volume of projects in terms of numbers of projects is happening at this $5,000-$10,000 level.

Switching back to civic crowdfunding, the typical project is in that range, and that conditions the sorts of projects that happen. The one that came through strongly in the data was parks and community gardens. I think they're typical because they're small-scale, which is what donation-based crowdfunding has proven it can deliver. They are shared goods; it's easy to make access to a garden open, and lots of people can enjoy it in different ways. They also have many audiences. The typical community garden projects will [attract] people [of all ages] who want to learn how to garden. There's also an educational component—this is a learning garden for local schoolchildren. Having those different audiences enjoying the same resource maximizes the appeal.

You could also say that parks and gardens are uncontroversial. Who doesn't like a garden? It's very hard to make an argument against a garden. I think that's another reason why, in these first few years of civic crowdfunding, these are the low-hanging fruit. Great projects that are small-scale have lots of different audiences and are really easy for people to get behind.

Speaking of scale: will civic crowdfunding ever be a total solution to funding civic projects? Or is it always going to be just one piece of the puzzle? Some have expressed concern that the success of civic crowdfunding will encourage local governments to stop funding projects altogether.

I think that's a really valid concern, and it's one that I've had at different points in time. My feeling is that these donation-based models will, in the vast majority of cases, remain small-scale. Therefore, for larger projects, it can only be one piece of the puzzle, as you put it. I do think that there are other models that can succeed.

I'm about to start working on a new project, which is working with a platform called Neighbor.ly. They began as a donation-based civic crowdfunding platform. I'm joining the team that will be building a platform based on municipal bonds. [We'll be] helping open up access to that market.

You could see that as a form of debt-based crowdfunding, where you, as a member of the community, invest $500. You know that while the bond is out there you get 6 or 7 percent, tax-free, every year. Then, at the end of the term of the bonds, you get your money back. I think that that is compelling because it has the potential to realize much bigger-scale projects. Most municipal bond issuances in the US are somewhere between one [million] and 10 million dollars. Things like transport infrastructure, water infrastructure, large kinds of green space improvements, happen at that scale. That's why I've decided to join neighbor.ly—because they realized that they wanted to go in this direction, and I think it's the right direction. I think it's a really exciting one.

I see municipal bond or debt-based crowdfunding as another piece of the puzzle, if you like. [But] I don't think it's a setup for doing a community garden, for example. I think all of these alternative models will continue to coexist and serve different purposes.

To what extent do you think civic crowdfunding either enables or constrains democratic participation in civic projects?

I think that, in theory, [democratic participation] could be enabled quite successfully. Imagine a platform that allows people to post ideas and then have some kind of deliberative process [before] there's a fundraising campaign. Or perhaps you have several ideas fundraising in parallel, and you have a competitive process. That could be another way to do deliberation. But right now, the donation model, in most places, doesn't really allow for deliberation.

A project comes up, and your vote is yes or no. Your vote can't be, "Here's this alternative suggestion"—which I think is a shortcoming of the system. That's why you can't just crowdfund everything. If you're planning something like a big, multi-year improvement to a neighborhood, there are going to be millions of different options that you could consider. And it's really important that people can deliberate. That's something that urban planners are paid to do—to figure out where are the tradeoffs. They spend a huge amount of time trying to engage the public in that process. That's really difficult to do well.

Might rethinking some of the technology behind civic crowdfunding enable more participation?

Exactly. We're just at a really early stage. Giving people the opportunity to put fully-formed ideas up and raise resources for them in this way is a big change. But the model needs to mature a bit. I think that's happening. All the platforms out there are thinking about this. They're wondering how to get more engagement during the process.

Spacehive, which is a UK-based platform that I worked for a few years ago, has a model. It isn't quite deliberation, but you can put a project up as an idea, before you have the necessary approvals from local government to get the thing built. They don't allow you to open fundraising until you can show that you have those approvals.

There's potential there to have projects in these different stages. I haven't seen a ton of engagement on that front yet, but the potential definitely exists. Even some of the really good crowdsourcing platforms realize that just asking people for ideas, where there's not necessarily an output that the people who submit those ideas have any agency over, can end up being unsatisfying.

The classic criticism is of big brands that try and crowdsource ideas for artwork, or a product, or a logo. People say, "Well, this is just an extractive process. [They're] taking this expertise for free, from customers, from fans, [who are] not really getting anything back." Whereas in crowdfunding, if you have the sourcing of ideas, the deliberation, and then the potential to actually, within that same group, bring the thing into being, that's really powerful. That's really participation with a clear point to it.

Davies's research suggests that most civic crowdfunding projects are relatively small in terms of total cost. (Rodrigo Davies via Next City)

A related question has to do with the equity issue: whether civic crowdfunding, as an existing practice, excludes particular groups, and whether that is something that can be rectified.

That's something I've thought about quite a bit. I've done some research that I haven't published anywhere yet, where I looked at Kickstarter projects across the US, and looked at cities that had the most dense activity on Kickstarter. I noticed, for example, that the most dense place—in terms of number of projects per 10,000 people—is Austin, Texas. And the least dense place is McAllen, Texas, five hours down the road.

Clearly they're very different types of cities. What I decided to do was look at indicators that might predict if a city would have more dense crowdfunding activity. This is still fairly early—I would probably want to do more robust testing on it—but what I found was that cities that have a higher percentage of people in the the "independent life stage"—after the end of education, but before starting a family—tend to have more dense Kickstarter activity.

If you have a higher percentage of people aged 25-34, a higher percentage of people who live in non-family households, and a higher percentage of people who have college education, then you get more dense Kickstarter activity.

You could say this is obvious, because these are the typical early adopters of anything remotely technological. But I still think it's interesting. If cities have these specific kinds of populations, they're more likely to benefit.

To your question, it's not that crowdfunding systematically excludes certain groups, but rather that people who are early adopters are going to benefit much faster. So underserved groups are probably going to find it harder to get started. That's not something that's limited to crowdfunding.

What that means is that the platforms and mission-driven organizations who work in those communities need to work hard to build capacity there, to show people in underserved communities, "Crowdfunding could be a great tool for getting resources to your community, especially when government or other groups are not really interested. If you are underserved, this is a chance to tell that story, and say, 'We've been overlooked, and we have great ideas, and those have great potential for impact here.'"

Easy to say, but harder to do, I know. The missing piece, I think, is that there are some nonprofit organizations that do crowdfunding. [But] what I see is very small nonprofit organizations doing crowdfunding, and some very large ones doing things like match funding. Everybody else in the middle doesn't seem to know what to do with crowdfunding. I think that's a problem, because there are a lot of great organizations who already know a lot about how to fundraise, and who are already doing great work on social equity, and they're not taking advantage of this particular tool.

Davies identifies community gardens and parks as "typical" civic crowdfunding projects. (WPSU.org)

Where is civic crowdfunding headed? What can we expect in the coming months and years?

I think we're definitely going to start to see larger organizations, like nonprofits, and some municipal governments, begin to pay more attention to crowdfunding and start to get involved. I know of at least one city that recently sent out an RFP to have a civic crowdfunding platform built for [them]. So I think we're going to see cities trying to build their own platforms, in some cases. In other cases, we're going to see cities match funding or supporting crowdfunding campaigns in other ways.

The third thing I think we're going to see is the emergence of a menu of different models. As I said, there's a donation-based piece to this, there's the kind of work with municipal bonds that I'm going to be doing at neighbor.ly—I think that's going to become quite a big part of this conversation. And then there's also participatory budgeting, which is not crowdfunding per se because you're working with tax dollars, but I think that increasingly we're going to start to see these different options as part of a menu. So if you want to invest in your community, and achieve better outcomes, your options are: donate to, or start a civic crowdfunding campaign; buy municipal bonds and invest that way; or participate in a participatory budgeting process or something that is owned by the government.

I feel really optimistic about the fact that these different roads are merging, because they all speak to people's desire to improve the quality of life at the neighborhood level, and also to engage really constructively with government and with other organizations that are already working in that space, and say, "How can we make that relationship more responsive, more flexible?"

Initially, when donation-based crowdfunding was around, and there were some people who had a sense that it was just going to replace everything, I felt less optimistic because I've never felt that that was realistic or desirable. Now, just seeing it as a way to achieve one type of project, but we have these other options for larger-scale projects, I think things are looking really interesting for the future of community development.

Civic Crowdfunding Resources

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