Commentary
In late March 2012, the small Welsh ex-mining community of Glyncoch made the national headlines in the United Kingdom when it announced that it had, after seven long years of failed funding bids, finally raised all of the £792,000 it needed to build a new community centre. Remarkable was the fact that with just months to go before the planning approval for the proposed centre was due to lapse, the project team still had been some £39,000 short of its target. In a novel move, members turned to a recently-launched crowdfunding website called Spacehive.com, hoping to attract funding from people and businesses outside the community. This proved to be an astute move. Within a matter of weeks they were able to obtain the necessary funds to realize their community project.
Of course, the Glyncoch community centre’s experience is not the first time that the internet has proven itself a highly efficient fundraising tool. Advertisers and public-relations companies long have appreciated the lucrative potential of online marketing and have devoted considerable time to devising innovative web-based promotional campaigns. Now, however, thanks to new online crowdfunding platforms (CFPs) such as Spacehive.com, the marketing and networking possibilities provided by the internet are also becoming increasingly accessible to smaller organisations with limited budgets. For those involved in local initiatives and charitable projects around Europe, this has been a welcome development, especially given the ongoing financial difficulties sweeping the continent.
Globally, Europe shares the bulk of the industry with North America. According to a 2012 report by Massolution, over 55% of all successful crowdfunding campaigns originated in Europe (North America accounted for approximately 48% of the rest), with the latest estimates suggesting that over 650,000 different crowdfunding campaigns were launched in 2011 alone.
Essentially, online CFPs provide funding platforms that facilitate the exchange of money, goods or services between funders and fundraisers. Their power lies in the fact that, by operating through the internet, they make it possible for large numbers of disparate, individual investors to pool together their resources to fund specific projects. The sorts of returns that these funders receive on their investment vary greatly according to the business model adopted by the specific CFP. Some platforms offer investors the chance to earn a conventional fixed interest rate; others provide funders with compensation in the form of some type of equity or profit-share arrangement. As a further alternative, some platforms also allow fundraisers to provide non-monetary payoffs, such as a first-edition release of the product being funded.
Although still in its infancy, the crowdfunding industry has managed to attract a significant number of investors from across the globe. Current estimates put the amount of money raised in 2012 alone at $2.2 billion (€1.6 billion), with forecasts for continued growth over the coming years. Globally, Europe shares the bulk of the industry with North America. According to a 2012 report by Massolution, over 55% of all successful crowdfunding campaigns originated in Europe (North America accounted for approximately 48% of the rest), with the latest estimates suggesting that over 650,000 different crowdfunding campaigns were launched in 2011 alone. However, the European CFP market still remains very much skewed to the west, with the majority of European-based CFPs currently located in the UK, France, the Netherlands, Germany and Spain.
For civil-society activists and others concerned with local-welfare issues, the emergence of these new CFPs has been hugely significant: It has opened up a new source of funding when governments and businesses around the world are cutting back on their spending as a result of the ongoing financial crisis. Many artists, musicians and filmmakers already have benefitted hugely from the emerging European crowdfunding market. Indeed, at the 2011 Cannes Film Festival, two of the nominations for the Palm d’Or – “Habemus Papem” and “Polisse” – were funded by the French CFP PeopleForCinema.com. Moreover, there are now a number of CFPs, like the Barcelona-based website Verkami.com, that are devoted solely to the financing of artistic projects and performance pieces. Crowdfunded film projects even address the financial crisis itself: The Greek documentaries “Debtocracy” and “Catastroika” were co-financed by online donations. (See interview with co-director Aris Chatzistefanou on page XX.)
A number of local civic initiatives also have received substantial backing from funders on online CFPs. For instance, when the popular American CFP Kickstarter launched in the UK in October 2012, the first project to successfully reach its funding goal was a student-led architecture project to design a new pavilion for a park owned by The National Trust conservation charity. Similarly, in the autumn of 2012, the Mansfield Business Improvement District successfully raised £38,000 (€43,921) through Spacehive.com to create a free wi-fi access area in the town centre of Mansfield. Progress also is being made in establishing a new Helsinki-based CFP called Brickstarter.com, which its designers claim will allow “everyday people, using everyday technology and culture, to articulate and progress sustainable ideas about their community”.
Yet the significance of the emerging European crowdfunding market rests not just on the opportunity it presents to raise much-needed funds for local initiatives and artistic enterprises, but also on the extent to which it provides project founders with the means to develop more direct relationships with their funders. Different CFPs provide fundraisers with different promotional tools, but typically there are options to upload videos, pictures and background information both about the specific project and the individual behind it. This not only makes it easier for investors to fully appreciate a project’s potential; it also helps them visualise exactly what their money will be spent on.
Many online CFPs also provide some form of interactive messaging service that allows interested funders to communicate directly with project initiators. For charities and NGOs, in particular, these online messaging systems present huge opportunities both in terms of improving funder-fundraiser interaction and enhancing public awareness about specific causes. Indeed, there is now even an online CFP – openIDEO.com – specifically designed to provide a forum for charities and other NGOs to receive input and suggestions from interested users.
As well as providing enhanced information-sharing capabilities, the unique and decentralised architecture of the internet also makes it possible to fundamentally restructure the spatial dynamics of project fundraising. Indeed, one of the potentially most-radical aspects of online crowdfunding is the extent to which it breaks down traditional barriers between the local and the global. For instance, whereas in the past charity campaign managers might have been wary about backing projects that lacked mass-market appeal, now they can use CFPs to cheaply and effectively promote local and small-scale projects to niche markets and special-interest groups across Europe.
For individual funders, online crowdfunding provides a more-individualised investment experience, in the sense that it offers more opportunities to engage with and contribute to projects that reflect one’s own values and concerns. The fact that most funders who give to online crowdfunding campaigns in Europe still do not receive (or expect) a significant monetary return on their investment suggests the value of the emotional and ethical returns from CFPs. Similarly, by participating in online crowdfunding campaigns, funders not only get to enjoy a wider range of investment opportunities. They also gain solace from the knowledge that they are helping to provide the financial support needed to sustain that diversity in the future.
As well as providing enhanced information-sharing capabilities, the unique and decentralised architecture of the internet also makes it possible to fundamentally restructure the spatial dynamics of project fundraising.
On a more-abstract level, it also is apparent that – aside from the obvious material benefits they can bring to the charitable and social sectors – online CFPs have the potential to help encourage and stimulate the sort of democratic openness and participatory ethos that is necessary to sustain a thriving civic society. One of the clearest examples of this is the extent to which project founders now see online crowdfunding campaign as both a means for generating funding and an opportunity to get funder feedback and input. Sometimes this is achieved through open discussion forums (as is the case on openIDEO.com); other times, funders actually are given formal voting rights in the project. Websites such as Spachehive.com and Ioby.org also allow individual funders to volunteer on select projects.
Another potentially liberating aspect of online crowdfunding is the fact that (internet availability permitting) it makes it possible for anyone to promote any project or idea, regardless of size or ambition. In this way, it offers ample opportunity for expressions of individuality and diversity. In addition, the fact that the software used to promote projects on online CFPs is relatively cheap and widely available also helps to promote meritocratic ideals by ensuring that smaller projects are able to compete for funding on an equal footing with larger ones. From a democratic perspective, and in terms of the EU’s stated goal to produce a multicultural “Europe of Nations” in which solitary actors are encouraged to meet and interact on equal terms as individual citizens, this accessibility and openness has the potential to assist greatly in the promotion of civic-society ideals by both militating against political apathy and promoting the virtues of social self-organisation.
The structure of the CFP market also has a number of inherently-democratic features. By increasing the choice of investment options on the market, CFPs help democratise the financial sector by enabling investors to have a greater say over how their money is spent. This is increasingly important given the growing concern over the degree of concentration in the mainstream finance sector. Moreover, the fact that most online CFPs ask project founders to lay out exactly how they plan to use the money collected also helps to improve transparency and enables funders to make more-informed choices about how to spend their money. Such openness is important not only because it creates greater accountability, but also because it helps reduce information asymmetry between project founders and investors, levelling the investment playing field and encouraging greater levels of cooperation and consultation.
As the number of successfully funded online crowdfunding campaigns has continued to rise, so has the level of political interest in the crowdfunding market. In 2012, a number of academics and crowdfunding specialists produced “A Framework for European Crowdfunding”, which outlines how EU leaders can help create and support a pan-European crowdfunding market. It proposes, for example, greater transnational platform functionality, increased consumer protection, the establishment of educational forums about crowdfunding procedures and increased research on the crowdfunding market. Hopefully EU leaders will accept these important proposals.
It should be said that the online CFP industry is still relatively new. There are numerous issues that will need to be resolved if it is to become a serious player in the European financial market. Chief among these is the threat of fraud, although the problems associated with transcending language barriers also are clearly of huge relevance in Europe. Again, though, governments and legislators can help in this respect by harmonising collective investment activities and facilitating cross-border transactions. It is still too early to say whether or not there is sufficient political will to support such policies, but if Europe’s leaders are serious about promoting cross-border civic society structures and practices, they would be wise to support the fledgling European crowdfunding market.
Tags:
Commentary
Crowdfunding and civic society in Europe: a profitable partnership?
Commentary
In late March 2012, the small Welsh ex-mining community of Glyncoch made the national headlines in the United Kingdom when it announced that it had, after seven long years of failed funding bids, finally raised all of the £792,000 it needed to build a new community centre. Remarkable was the fact that with just months to go before the planning approval for the proposed centre was due to lapse, the project team still had been some £39,000 short of its target. In a novel move, members turned to a recently-launched crowdfunding website called Spacehive.com, hoping to attract funding from people and businesses outside the community. This proved to be an astute move. Within a matter of weeks they were able to obtain the necessary funds to realize their community project.
Of course, the Glyncoch community centre’s experience is not the first time that the internet has proven itself a highly efficient fundraising tool. Advertisers and public-relations companies long have appreciated the lucrative potential of online marketing and have devoted considerable time to devising innovative web-based promotional campaigns. Now, however, thanks to new online crowdfunding platforms (CFPs) such as Spacehive.com, the marketing and networking possibilities provided by the internet are also becoming increasingly accessible to smaller organisations with limited budgets. For those involved in local initiatives and charitable projects around Europe, this has been a welcome development, especially given the ongoing financial difficulties sweeping the continent.
Globally, Europe shares the bulk of the industry with North America. According to a 2012 report by Massolution, over 55% of all successful crowdfunding campaigns originated in Europe (North America accounted for approximately 48% of the rest), with the latest estimates suggesting that over 650,000 different crowdfunding campaigns were launched in 2011 alone.
Essentially, online CFPs provide funding platforms that facilitate the exchange of money, goods or services between funders and fundraisers. Their power lies in the fact that, by operating through the internet, they make it possible for large numbers of disparate, individual investors to pool together their resources to fund specific projects. The sorts of returns that these funders receive on their investment vary greatly according to the business model adopted by the specific CFP. Some platforms offer investors the chance to earn a conventional fixed interest rate; others provide funders with compensation in the form of some type of equity or profit-share arrangement. As a further alternative, some platforms also allow fundraisers to provide non-monetary payoffs, such as a first-edition release of the product being funded.
Although still in its infancy, the crowdfunding industry has managed to attract a significant number of investors from across the globe. Current estimates put the amount of money raised in 2012 alone at $2.2 billion (€1.6 billion), with forecasts for continued growth over the coming years. Globally, Europe shares the bulk of the industry with North America. According to a 2012 report by Massolution, over 55% of all successful crowdfunding campaigns originated in Europe (North America accounted for approximately 48% of the rest), with the latest estimates suggesting that over 650,000 different crowdfunding campaigns were launched in 2011 alone. However, the European CFP market still remains very much skewed to the west, with the majority of European-based CFPs currently located in the UK, France, the Netherlands, Germany and Spain.
For civil-society activists and others concerned with local-welfare issues, the emergence of these new CFPs has been hugely significant: It has opened up a new source of funding when governments and businesses around the world are cutting back on their spending as a result of the ongoing financial crisis. Many artists, musicians and filmmakers already have benefitted hugely from the emerging European crowdfunding market. Indeed, at the 2011 Cannes Film Festival, two of the nominations for the Palm d’Or – “Habemus Papem” and “Polisse” – were funded by the French CFP PeopleForCinema.com. Moreover, there are now a number of CFPs, like the Barcelona-based website Verkami.com, that are devoted solely to the financing of artistic projects and performance pieces. Crowdfunded film projects even address the financial crisis itself: The Greek documentaries “Debtocracy” and “Catastroika” were co-financed by online donations. (See interview with co-director Aris Chatzistefanou on page XX.)
A number of local civic initiatives also have received substantial backing from funders on online CFPs. For instance, when the popular American CFP Kickstarter launched in the UK in October 2012, the first project to successfully reach its funding goal was a student-led architecture project to design a new pavilion for a park owned by The National Trust conservation charity. Similarly, in the autumn of 2012, the Mansfield Business Improvement District successfully raised £38,000 (€43,921) through Spacehive.com to create a free wi-fi access area in the town centre of Mansfield. Progress also is being made in establishing a new Helsinki-based CFP called Brickstarter.com, which its designers claim will allow “everyday people, using everyday technology and culture, to articulate and progress sustainable ideas about their community”.
Yet the significance of the emerging European crowdfunding market rests not just on the opportunity it presents to raise much-needed funds for local initiatives and artistic enterprises, but also on the extent to which it provides project founders with the means to develop more direct relationships with their funders. Different CFPs provide fundraisers with different promotional tools, but typically there are options to upload videos, pictures and background information both about the specific project and the individual behind it. This not only makes it easier for investors to fully appreciate a project’s potential; it also helps them visualise exactly what their money will be spent on.
Many online CFPs also provide some form of interactive messaging service that allows interested funders to communicate directly with project initiators. For charities and NGOs, in particular, these online messaging systems present huge opportunities both in terms of improving funder-fundraiser interaction and enhancing public awareness about specific causes. Indeed, there is now even an online CFP – openIDEO.com – specifically designed to provide a forum for charities and other NGOs to receive input and suggestions from interested users.
As well as providing enhanced information-sharing capabilities, the unique and decentralised architecture of the internet also makes it possible to fundamentally restructure the spatial dynamics of project fundraising. Indeed, one of the potentially most-radical aspects of online crowdfunding is the extent to which it breaks down traditional barriers between the local and the global. For instance, whereas in the past charity campaign managers might have been wary about backing projects that lacked mass-market appeal, now they can use CFPs to cheaply and effectively promote local and small-scale projects to niche markets and special-interest groups across Europe.
For individual funders, online crowdfunding provides a more-individualised investment experience, in the sense that it offers more opportunities to engage with and contribute to projects that reflect one’s own values and concerns. The fact that most funders who give to online crowdfunding campaigns in Europe still do not receive (or expect) a significant monetary return on their investment suggests the value of the emotional and ethical returns from CFPs. Similarly, by participating in online crowdfunding campaigns, funders not only get to enjoy a wider range of investment opportunities. They also gain solace from the knowledge that they are helping to provide the financial support needed to sustain that diversity in the future.
As well as providing enhanced information-sharing capabilities, the unique and decentralised architecture of the internet also makes it possible to fundamentally restructure the spatial dynamics of project fundraising.
On a more-abstract level, it also is apparent that – aside from the obvious material benefits they can bring to the charitable and social sectors – online CFPs have the potential to help encourage and stimulate the sort of democratic openness and participatory ethos that is necessary to sustain a thriving civic society. One of the clearest examples of this is the extent to which project founders now see online crowdfunding campaign as both a means for generating funding and an opportunity to get funder feedback and input. Sometimes this is achieved through open discussion forums (as is the case on openIDEO.com); other times, funders actually are given formal voting rights in the project. Websites such as Spachehive.com and Ioby.org also allow individual funders to volunteer on select projects.
Another potentially liberating aspect of online crowdfunding is the fact that (internet availability permitting) it makes it possible for anyone to promote any project or idea, regardless of size or ambition. In this way, it offers ample opportunity for expressions of individuality and diversity. In addition, the fact that the software used to promote projects on online CFPs is relatively cheap and widely available also helps to promote meritocratic ideals by ensuring that smaller projects are able to compete for funding on an equal footing with larger ones. From a democratic perspective, and in terms of the EU’s stated goal to produce a multicultural “Europe of Nations” in which solitary actors are encouraged to meet and interact on equal terms as individual citizens, this accessibility and openness has the potential to assist greatly in the promotion of civic-society ideals by both militating against political apathy and promoting the virtues of social self-organisation.
The structure of the CFP market also has a number of inherently-democratic features. By increasing the choice of investment options on the market, CFPs help democratise the financial sector by enabling investors to have a greater say over how their money is spent. This is increasingly important given the growing concern over the degree of concentration in the mainstream finance sector. Moreover, the fact that most online CFPs ask project founders to lay out exactly how they plan to use the money collected also helps to improve transparency and enables funders to make more-informed choices about how to spend their money. Such openness is important not only because it creates greater accountability, but also because it helps reduce information asymmetry between project founders and investors, levelling the investment playing field and encouraging greater levels of cooperation and consultation.
As the number of successfully funded online crowdfunding campaigns has continued to rise, so has the level of political interest in the crowdfunding market. In 2012, a number of academics and crowdfunding specialists produced “A Framework for European Crowdfunding”, which outlines how EU leaders can help create and support a pan-European crowdfunding market. It proposes, for example, greater transnational platform functionality, increased consumer protection, the establishment of educational forums about crowdfunding procedures and increased research on the crowdfunding market. Hopefully EU leaders will accept these important proposals.
It should be said that the online CFP industry is still relatively new. There are numerous issues that will need to be resolved if it is to become a serious player in the European financial market. Chief among these is the threat of fraud, although the problems associated with transcending language barriers also are clearly of huge relevance in Europe. Again, though, governments and legislators can help in this respect by harmonising collective investment activities and facilitating cross-border transactions. It is still too early to say whether or not there is sufficient political will to support such policies, but if Europe’s leaders are serious about promoting cross-border civic society structures and practices, they would be wise to support the fledgling European crowdfunding market.
Tags: Commentary