A Neighborhood Improvement Journal - Summer 2017

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How Can Crowdfunding Work for My Neighborhood?

 

by Andrew Sloane

 After their initial success crowd funding the preliminary design work, Build Gateway Green continues to raise funds for the completion of a bike park through events such as this cyclocross race.       

 

In the age where “disruptive innovation” has become a buzzword, web platforms and mobile applications are influencing not only the way people do business and communicate but also the ways we interact with the urban environment. These innovations can been seen in numerous ways - from movements such as the #SEPTA247 petition on Twitter, which was used to alter subway schedules in Philadelphia, to obvious integrations such as cell phone applications for reporting potholes or checking transit schedules. One burgeoning tech sector that has begun effecting change in communities around the world is the crowdfunding of community projects.

 

In this article I will explore some trends in crowdfunding community projects and offer some insight into determining if crowd funding could be an asset in addressing a need or issue you have identified in your community.

 What needs do you see in your community?

Residents in East Portland Oregon saw a lack of adequate green space and off-road cycle paths in their community, while at the same time a 38 acre lot of land, where a prison had once stood, was laying fallow. They decided to take action and started a campaign called Build Gateway Green with the goal of constructing a bike skills park and community green space on that land. First, they engaged in a lengthy, but ultimately successful, process by which Portland Parks & Recreation acquired the land , so it could be used by the community. Then, before even beginning grant applications or seeking permits of approval for construction from Portland Bureau of Development, $100,000 was needed for the initial design work. They turned to the community for financial support, through the crowdfunding website Indiegogo, and exceeded their goal, raising $123,000 to be used for the initial steps toward making their ambitious project a reality. While this money will only cover a fraction of the cost needed for completion of the park, the role that the community played in getting this project off the ground cannot be understated (Indiegogo 2014).

Members of Anshe Emet Synagogue, saw play ground deficit on the South side of Chicago and a need for a playground at Bright Star Church. They started a campaign called Build a Playground on Chicago’s South Side! and exceeded their goal of raising $30,000. The play ground erected stands as a commitment “to building bridges between (their) communities” (Indiegogo 2014).

 A “100% volunteer powered” community bookshop and art space, in the Washington Heights neighborhood of Manhattan, was closed due to lack of funding. They were desperate to return to the neighborhood after the overwhelming public outcry when the venue had closed its doors.  They created a campaign called Bring Back Word Up Book Shop and exceeded their goal of raising $60,000. With these funds they were able to reopen their doors in 2013 at a new location in the same neighborhood and “continue fostering a positive environment for literacy, arts, and education in Northern Manhattan”.  (Indiegogo 2014). In 2014 Word Up, remains committed to responding to the needs expressed by residents of Washington Heights. They have turned to the community for support with another Indiegogo campaign to expand their Spanish book selection and offering of Spanish youth programs called "Word Up ¡para siempre!",  that will be active from January 18th, 2015 (Indiegogo 2014).

Before the crowdfunding campaign

 After the crowdfunding campaign funds were invested

Although the three stories are very different, after needs were identified, the paths that led to the meeting of each need contains common elements; First an achievable plan, with community input, and a realistic budget was developed. Next, a funding goal was set and then met by the generous contributions of donors to their campaigns on the crowd funding website Indiegogo.    

Merriam-Webster defines Crowdfunding as “the practice of soliciting financial contributions from a large number of people especially from the online community”. Although they state that the first use of the word was in 2006, it is an idea that predates the internet. Notably in American history, crowdfunding was used to fund the construction of the base that the Statue of Liberty still stands on today. The campaign, run by Joseph Pulitzer in 1885, was advertised in the New York World News Paper with a goal of raising 100,000 dollars, roughly $2.3 million when adjusted for inflation today. Funds were sent directly to the newspaper and a running total of the amount raised, along with names of donors, was reported daily. The goal was met with a steady flow of the small but important contributions of over 120,000 donors (Davies 2014, 32). Rodrigo Davies in his Masters thesis for MIT on Civic expands the definition put forth by Merriam-Webster explaining crowdfunding as “the raising of capital from a large number of individuals donating or investing relatively small amounts of money in an environment of high mutual visibility among participants. Participants are constantly aware of the campaigns progress and others’ behavior, and this mutual visibility reinforces their sense of membership of a crowd and produces social benefits associated with belonging” (Davies 2014, 25). The importance of this mutual visibility is essential to creating the sense of community and participation that make crowdfunding not only appealing but successful.  

Crowdfunding web sites are used to fund a gamut of project topics from art, to invention, travel, even in one case trying to remedy an excessively high cab fare. While much of the market serves for-profit clients, donation-based crowd funding for financing public-good projects is a rapidly growing sector of the crowdfunding industry. In a study published in 2014, Rodrigo Davies defines donation-based crowd funding as subset of crowd funding where participants have a non-monetary motivation for participation. His research focused on an even narrower branch of donation crowd funding which he terms “civic crowd funding”. These involve projects that are “expected to produce good that is non-rival and non-excludable - that once produced can be enjoyed by members of a community equally, perpetually, and without regard to their contributor” (Davies 2014, 28). His research suggest that since 2010, 771, out of 1224, civic crowdfunding projects have succeeded and raised a total of $10.75 million.

What is the typical scale of successful crowdfunding projects?

Although .8% of recorded civic crowd funding projects accounted for 29% of the $10.75 million that was recorded to have been raised, the majority of the successful campaigns were small scale. The median ask of civic crowd funding projects was $8,000 with a median donation of $68. He goes on to note that the successful projects were primarily gardens or parks in underserved communities (Davies 2014, 58).

What is the cost associated with crowd funding?

The cost of crowd funding varies from site to site, but in general sites take between 3-5% of the total funds raised and another 3-5% goes to payment processing fees which are taken by a third party meaning 8-10% of funding raised will be for the crowd funding platform and should be accounted for in your fund raising goal (Davies 2014, 37).

It is also important to note that generally funds are not provided unless projects meet their predetermined goal. This is an assurance contract to donors that funds will go toward their intended use. However, some sites such as Indiegogo offer flex-funding options where funds are available even if the project goal in unmet.

How do I decide if crowd funding is the right funding source for my project?

Is your project something that will resonate well with others? Alexandra Lange, Architecture and Design Critic, has likened crowdfunding community projects to a popularity contest (Lange 2014). While this is a harsh critique, it is important to think about how the intended community will respond to your proposal. Engaging those you intend in the planning process is an essential step.

Are you prepared to deliver what you have promised? In an article about the dynamics of crowd funding Mollick states that having a clear and accurate budget and a plan for executing your project are crucial both for communicating your intentions to others and making good on your promise once funds have been received (Mollick 2014).

Do you have the time? The unseen cost of running these campaigns is the time needed to ensure their success. Crowdfunding websites are tools for communicating your story and collecting funding. Without efforts executed beyond and outside of the website, projects will most likely fall flat. Davies and Mollick both express the importance of social networks, both in your community and online, in achieving success.

Another important question: is my project something that the city would cover or should cover? Davies states that many successful projects are additive innovations rather than projects that are replacements for existing institutions (Davies 2014, 103).

How do I get people to donate?

You need to create a way to tell your story whether that is through video, in print, at community meetings. Let people know this is for them and that you need them.

Many successful cases are a combination of on and offline efforts often culminated in a tipping point where the event became publicized through multiple channels spreading the word of your campaign to a greater audience. One case studied by Davies was the Glyncoch Community Recreation Center showed the power of combining on and offline media. Glyncoch is town of 3,000 in South Wales with limited economic resources which had relied on the previous recreation center as a source of education and entertainment before it fell into disrepair and been demolished. Well into the planning of the new proposed rec center, a crucial investor backed out and the community scrambled to find other backers to contribute. They succeeded in covering all but 5% of the budget so turned to the web platform Spacehive to raise the remaining $43,441. During the first months donations only tricked. The pivotal moment in the campaign came when British comedian Stephen Fry shared the event on Twitter to his 400,000 followers - the tweet was not only read by individuals but also by news organizations who then picked up the story and spread the word even farther (Davies 2014, 82).

While there should be an intrinsic good in your project, many successful campaigns have given away perks to donors as a thank you for their contribution. These are often dependent of the scale of the donation and can be simple things such as Build Gateway Greens list of 25 Greats for individuals who donated $25 to the campaign. The list consisted of 25 great things about the community including 5 greats of each of the following - off road running paths, ways to build a back yard habitat, bird watching spots, places in gateway, and biking trails. The church and synagogue in Chicago gave away a link to “the incredible playlist for build day” as an incentive to individuals who donated 50 dollars. Prizes could also be asked for as an in-kind donation from local businesses (Indiegogo).

Be prepared for individuals who are interested in contributing ways other than financial assistance. Determine a strategy in advance for utilizing those who wish to donate their time or other goods in advance by simply listing an email contact or using a volunteer scheduling website such as “volunteer spot” or “volunteer match”. The web platform IOBY calls what they offer “crowd-resourcing” because they encourage and facilitate not only monetary donation but donations of social capital, in-kind donations, volunteer time, and advocacy as well (Ioby, 20014).

What fundraising platform should I choose?

There are many platforms available for crowdfunding. Some such as Neighbor.ly, IOBY, and Citizenvestor cater specifically to community projects by offering discounts to them or offering organizations the ability to register as non-profit so donors can write off their contribution as tax deductions. Although community specific platforms are tailored to the needs of communities, larger general platform crowd funding sites such as Kickstarter and Indiegogo have sub categories that denote projects as community-serving. The larger websites are likely to increase projects viability and have higher proven success rates (Davies 2014, 53).

Why would I choose crowd funding over seeking a grant or government funding?

This obviously depends on the nature of the project you have in mind. If you have applied and received grant funding in the past it might be safer sticking to traditional channels of funding. Crowdfunding could be used in tandem with other funding sources as a solution to providing marketing, branding or other avenues sometimes restricted under grant funding.

Other considerations

Crowdfunding of civic projects can be a contentious issue for several reasons. The underlying concerns are primarily a loss of equity by giving only those with money to spare a hand in deciding which projects are funded. Additionally, subverting the city or governments roles in the planning process could undermine long-term comprehensive planning strategies as well as potentially forgo measures to ensure equity such as detailed stakeholder analysis and impact reports. While addressing these and other concerns about the equity of civic crowdfunding are outside of the scope this paper, they are important to note.

Conclusion

Crowdfunding platforms offer empowerment by giving communities the ability to effect change in their surroundings, share their thoughts and strengths, and connect on a local level. The potential that crowdfunding offers is a bottom-up participatory planning model where citizens partner with cities and are thus able to participate in realizing goals in their community. For example, The New York City Counsel has begun endorsing projects on Kickstarter. Crowdfunding could be a source of finance for active transportation, or potentially other programs that are less competitive from a policy standpoint, by allowing citizens to pay for the programs themselves. As the young industry emerges, only time will tell if it blossoms into something bigger or fades away - It’s up to you!  

           

Works Cited

"About Ioby." Ioby. N.p., n.d. Web. 01 Dec. 2014.

"Bring Back Word Up Community Bookshop." Indiegogo. N.p., n.d. Web. 01 Dec. 2014.

"Build a Playground on Chicago's South Side!" Indiegogo. N.p., n.d. Web. 01 Dec. 2014.

"Build Gateway Green." Indiegogo. N.p., n.d. Web. 1 Dec. 2014.

"Crowdfunding." Merriam-Webster. Merriam-Webster, n.d. Web. 01 Dec. 2014.

Davies, Rodrigo. Civic Crowdfunding: Participatory Communities, Entrepreneurs and the Political Economy of Place. Thesis. MASSACHUSETTS INSTITUTE OF TECHNOLOGY, 2014. N.p.: MIT, n.d. Print.

Lange, Alexandra. "Opinion: Making Something Big Happen at an Urban Scale Is More than a Popularity Contest." De Zeen. N.p., 19 June 2014. Web. 01 Dec. 2014.

Mollick, Ethan. "The Dynamics of Crowdfunding: An Exploratory Study." Journal of Business Venturing 29.1 (2014): 1-16. Web.

Moss, Caroline. "26-Year-Old Successfully Crowd Funds To Pay For Her $362 Halloween Uber Ride." Business Insider. Business Insider, Inc, 02 Nov. 2014. Web. 30 Nov. 2014.

 

           

 

 

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