Civic Crowdfunding

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= civic crowdfunding is the use of crowdfunding to produce shared goods and services for communities. [1]

Research

* Master's Thesis: Civic Crowdfunding: Participatory Communities, Entrepreneurs and the Political Economy of Place. Rodrigo Davies. MIT Center for Civic Media, May 8, 2014

URL = http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2434615

"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." (http://www.shareable.net/blog/civic-crowdfunding-and-the-public-good)


Abstract:

"Crowdfunding, the raising of capital from a large and diverse pool of donors via on- line platforms, has grown exponentially in the past five years, spurred by the rise of Kickstarter and IndieGoGo. While legislative attention in the US has turned to the potential to use crowdfunding as a means of raising capital for companies, less attention has been paid to the use of crowdfunding for civic projects - projects involving either directly or indirectly, the use of government funds, assets or sponsorship, which may include the development of public assets. This project analyzes the subgenre of civic crowdfunding from three perspectives.

First, it provides a comprehensive quantitative overview of the subgenre of civic crowdfunding, its most common project types and its geographic distribution. Second, it describes three edge cases, projects that, while uncommon, demonstrate the current limits, aspirations and potential future path of the subgenre. Third, it analyzes the historical and intellectual paradigms within which civic crowdfunding projects and platforms are operating: whether they are best located within the historical context of community fundraising, participatory planning, entrepreneurial culture or a combination of the three. In addressing these questions, the thesis will explore the potential benefits and challenges of using crowdfunding as a means of executing community-oriented projects in the built environment, and offer proposals for how public and non-profit institutions can engage with crowdfunding to realize civic outcomes." (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2434615)


Research Findings

Rodrigo Davies:

"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." (http://rodrigodavies.com/blog/2014/05/09/civic-crowdfunding-four-things-we-know-two-things-we-dont.html)


Interview

Conducted by 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.


* 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." (http://www.shareable.net/blog/civic-crowdfunding-and-the-public-good)

The Concept

Definition

Rodrigo Davies:

"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." (http://www.shareable.net/blog/civic-crowdfunding-and-the-public-good)

Examples

Ethan Zuckermann:

"Kansas City was denied funds from the US Department of Transportation to build a new streetcar line. Jase Wilson is now trying to raise $10 million towards the streetcar on his site, neighbor.ly, designed to enable investment in “civic projects.” (So far, only $3600 has been pledged towards the goal. Ethan Mollick’s research on Kickstarter suggests that Wilson’s project is following a pretty common pattern of failing big… the majority of projects success by small margins, and those that fail often fall far short.)

Writing on TechPresident, Miranda Neubauer points to two other civic crowdfunding sites: Citizinvestor and Patronhood, which hasn’t yet launched. In the UK, Spacehive allows similar crowdfunding projects and can boast an enormous success, with nearly 800,000£ raised for a community center in Glyncoch, Wales. (It’s worth noting that most of the funds for the center came from government, with roughly 2000£ coming from community donations.) Brickstarter is pursuing a similar model in Helsinki.

Alexandra Lange calls these type of projects “Kickstarter Urbanism”, and she warns that they are far from guaranteed to succeed. She points to funding for The LowLine – a proposed underground park in an abandoned trolley terminal – as a widely discussed project in this space. The $155,000 raised by the LowLine isn’t building the park, but allowing the park designers to build a demonstration installation, proving their fiberoptic lighting technique works. Actually building the park, Lange warns, is much more complicated – it’s going to require massive bureaucratic wrangling to get the space permitted and supported as a public park.

Lange suggests that Kickstarter works best as a way to sell goods. The projects that have raised massively more funds than they sought, like the Pebble watch, are most frequently ones where your pledge purchases a product. Kickstarter allows a designer to aggregate sufficient demand to make creating a product feasible. I recently backed a (failed) project that sought to build a toy action figure of Rama – the project sought $125,000 to cut custom molds for the toy. Had it succeeded, a $35 pledge would have bought me a very cool action figure for my son. Other successful projects function as pre-sales systems for audio recordings or documentaries." (http://www.ethanzuckerman.com/blog/2012/08/10/how-do-we-make-civic-crowdfunding-awesome/)

Discussion

Civic Crowdfunding shouldn't undermine public services

Ethan Zuckermann:

"Parks aren’t products – they are public goods. And that’s where my concerns about civic crowdsourcing begin.

The right in the US, led by anti-tax crusader Grover Norquist, has been fighting a war against government spending that is, in effect, war on public goods and services. Norquist’s conviction that private sector enterprise is inevitably more efficient and less corrupt than the government has led to the privatization of services once provided by the government, like prisons and defense, and elimination of other key services once tax revenues no longer support their provision. A recent episode of This American Life – featuring an interview with Norquist – makes clear that the elimination of public goods is no accident. Demanding that Republican politicians sign a pledge not to increase taxes is about forcing a crisis that will lead to elimination of programs and shrinking of government.

Sometimes, this shrinkage means that public services we rely on no longer work very well. This American Life interviews government officials in Trenton, New Jersey, where massive cuts to the police department have led to dramatic increases in crime. At other times, it means services are only available if we pay for them. Colorado Springs turned off streetlights, stopped maintaining public parks and cut public transit when voters didn’t pass a tax increase. Affected citizens could pay to “adopt” a streetlight turned off by the government, paying $75 for a service that had previously been provided by the city. (The city council has abandoned this program, in part due to adverse publicity, and “all residential streetlights are in the process of being reactivated”.)

When an underfunded police department can’t prevent crime, it sends a message: the government isn’t doing a competent job, so perhaps we should look for alternatives, like private security forces for neighborhoods who can afford to hire them. When community efforts to maintain a park, despite cuts in government funding, succeed, they send the message that we don’t need the government to provide a public service, as volunteers will take care of it. (This was the genius of George H.W. Bush’s “thousand points of light” – Americans love the ideas of volunteerism and community organizations, and if those organizations can serve the public, why should government provide the services they can provide?) Whatever the outcome, positive or negative, Norquist’s experiments “prove” that we need less government and fewer goods and services provided by the government.

The impact of cuts to public services is not evenly distributed. Cuts to public transport don’t dramatically affect people who own cars and use them to commute to work. Closure of public parks matters less to people who can afford country club memberships or the dues at a gym or YMCA. This uneven impact on the poor turns these cuts into a social wedge – the tax savings disproportionately benefit the rich and service reductions harm the poor, sparking debate on whether wealthy people should be required to subsidize services to the less privileged.

When Colorado Springs turned off the streetlights in 2010, they launched a secure website that allowed residents to log on and pay to turn their lights back on. It’s not hard to imagine a cash-strapped municipality taking a list of parks they can’t build or maintain posting projects to Kickstarter or Neighbor.ly, seeking crowdfunding for their support.

I think that would probably be a bad thing. Unless done very carefully, crowdfunding a city’s projects is likely to favor wealthy neighborhoods over poor ones. People in poorer neighborhoods have less to spend on crowdfunding projects, and are less likely to have internet access. If Lange’s observation that people tend to Kickstart projects they benefit from holds true, we’d expect to see a wealth of parks funded in Brooklyn and few in the Bronx.

But unfairness isn’t the only problem. If crowdfunding parks succeeds, it supports the case that governments don’t need to build parks because they’ll get built anyway through the magic of civic crowdfunding. That, in turn, supports the Norquistian argument for a government small enough to drown in a bathtub, with services provided by the free market and by crowdfunding a thousand points of light.

Is Jase Wilson, the guy who’s trying to fund the Kansas City streetcar line on Neighbor.ly a secret agent of the radical right? Of course not – he’s a well-intentioned guy who’s turning to a successful online model to support a project he cares about. The nature of unintended consequences is that they’re the downside of an otherwise worthwhile activity. Bringing neighbors together to make their neighborhood better is a good thing. Figuring out how to do it while minimizing unwanted political impacts is even better.

Civic crowdfunding is inevitable because it’s so consonant with other forms of internet-based organization. There’s widespread acceptance of the idea that software developers can build high-quality software, motivated not purely by financial gain (though there’s certainly a role for commercial enterprises within the open source ecosystem.) Wikipedia demonstrates that volunteers can produce a high quality reference work. The campaigns against SOPA/PIPA and the Susan G. Komen Foundation show that activists, loosely linked through the internet, can achieve social change. Civic crowdfunding leverages many of the same mechanisms: rapid and lightweight group formation, coordination of efforts, enlightened self interest.


Here are some thoughts on how we could embrace civic crowdfunding and avoid the downsides:

Avoid rhetoric that posits crowdfunding as a remedy for government inaction and failure. There’s a proud tradition on the left of building social services for communities ignored or shortchanged by the government. I think of the Black Panthers’ “Survival Programs“, providing child nutrition, education and medical testing to the African American community in Oakland, and more recently, efforts by the Occupy movement to provide food to local homeless communities. It’s possible to provide these services and argue – as the Panthers did – that these services are an alternative to unfair government services. It’s also possible to argue, as Occupy has sometimes done, that these services are an example of what we want governments to provide and a way of pressuring government to do the right thing. This second argument is a healthier one, in light of a sustained rightwing push against public goods and services.

Crowdfund projects that leverage existing government opportunities. ioby is a civic crowdfunding site that seeks environmental change close to home – “in our back yards”. One of their featured projects is helping Latino communities in San Francisco engage with a city planning process to convert unused lots into public parks. The crowdfunding ask – $5,185 – isn’t sufficient to build a park, but it’s enough to ensure that the Latino community in southern San Francisco can participate in hearings and lobby city officials for their rights.

Use crowdfunding to brainstorm and innovate, and let governments implement. Crowdfunding has been a powerful tool to bring innovative new design solutions to market. In the case of civic innovation, the folks behind the LowLine may have the right idea – crowdfunding can help bring attention to a civic project and enable an innovative prototype design, but actual implementation will surely involve the city of New York. Finding ways to cooperate with governments to sustain new public spaces, works of art, etc. is surely going to be a key part of civic crowdfunding projects going forward, and ensuring that projects have built appropriate government ties should be a criterion for evaluating viable projects.

Look for projects that create community capital through volunteering. One of the promises of civic crowdfunding is that it builds stronger neighborhoods and communities. We know that participating in volunteer activities, like Kaboom!’s efforts to build playgrounds, helps build local civic capital. Let’s encourage projects that want our time and input, as well as our dollars – civic crowdsourcing as well as crowdfunding.

Don’t let governments dump unfunded projects into civic crowdsourcing. Instead, let’s look for ways that people excited about civic crowdfunding can lobby and ensure that city, state and federal funding for transportation, public spaces and the arts isn’t cut any further. Civic crowdfunding should be about making public goods and services more awesome, not shifting responsibility onto the backs of internet-connected donors." (http://www.ethanzuckerman.com/blog/2012/08/10/how-do-we-make-civic-crowdfunding-awesome/)