Balancing the Positivity Around Crowdfunding

Crowdfunding is a well-known concept for most people, thanks to sites such as Kickstarter. Headlines of consumer products, such as the Pebble, to films, apps and games getting funded – with no apparent downsides – are everywhere.

So when I was asked to write a piece on the "negative" side of crowdfunding, which would be positioned against a positive view, I thought it would make a nice challenge.

In the end, it wasn’t really a negative view, more a look at some of the questions that need to be asked around crowdfunding and a few of the stranger uses for crowdfunding platforms.

You can view the edited piece, including the positive arguments, over on the Guardian Local Government Network.

I was prepared for a bashing in the comments of the Guardian piece from crowdfunding fans, but it did actually turn out to be a balanced discussion. Kudos to Maddie and Andrew from Spacehive for getting involved in the comments and explaining how their platform works well. You can view the discussion here.

The full original piece is below, would love to know what you think in the comments.

The Negative Sides of Crowdfunding for Local Government

There has been an explosion in crowdfunding platforms throughout the last few years and Local Government is starting to get interested in what is happening in this rapidly growing area.

The most high-profile crowdfunding platform is Kickstarter, but lots more have been appearing in the UK: SpaceHive, Indiegogo, PeopleFundIt, PleaseFundUs, Crowdfunder – the list goes on. There are so many in the UK that Nesta recently launched a directory of crowdfunding sites, CrowdingIn, to help navigate the field.

The appearance of these platforms follows the wave of positivity around crowdfunding and crowdsourcing in general. But questions remain and negative aspects often overlooked: Does crowdsourcing produce any more coherence for local government decision-making in modern, austere times? Can crowdfunding fill the gaps left behind by cuts to local government?

I’m a big fan of crowdfunding and its potential to power real social change, but there are several points to bear in mind for local government organisations, communities and individuals when thinking of running your next crowdfunding campaign.

1. The funding is too small for larger projects

Most projects are highly local, limiting the size of the community that might get behind that idea. The most successful campaigns on Kickstarter have generated funding around the tens of millions mark. This is a lot for a consumer product, but really not enough for larger projects that local government is behind, such as transport, infrastructure or educational projects. Can locally-backed projects raise enough funds for larger projects?

2. The people running crowdfunding projects are often amateurs

There is a basic question of who decides what is best locally. The highest value of a local development project is enabled only when subjected to considered critique, continuous exploration, asking the right questions, and engaging with the outcomes in ongoing, iterative fashion. This takes the concentrated work of numerous professionals over several years to take place, not a group of amateurs over just a few weeks.

3. Crowdfunding distracts from bigger issues

Crowdfunding campaigns are becoming a stream of micro-distractions to occupy individuals while the local government organisation get on with the larger projects, such as transit systems, energy infrastructure and civic buildings. As Dan Hill of City of Sound says, “Are we too distracted to notice developments that will affect us in a much larger way as we’re all too busy trying to crowdfund a park bench?”

4. Lack of accountability

For those crowdfunding projects that do successfully get funded, there is an extreme and supreme lack of accountability for actually making the project happen or delivering on the promised product. Platforms like Kickstarter specify in their terms that successful projects have to deliver within a “reasonable” time, but this is too loose to be held accountable to. Who decides once a project is finished and to an agreed standard?

5. Maintaining interest and long-term investment

In 2007, MyFootballClub sought to recruit at least 50,000 football fans to buy a football club. With its purchase of a majority share of Ebbsfleet United, MyFootballClub became the first online community to fully run a professional sports club in history – all through the power of crowdfunding. From this highly positive beginning, long-term interest in the club dwindled. In 2009, an estimated 23,000 members no longer visited MyFootballClub, leaving around just 9,000 active members. At the time of the next membership renewal date, the renewal rate had fallen to 20%, with only 800 out of a previous 4000 members still involved.

6. Crowdfunding is already being used towards a perverse end

A major digital media outlet recently created a crowdfunding campaign that aims to raise money to purchase a video of a Canadian mayor smoking crack. The site will then pay that money to members of Toronto’s drug trade for that video. Who will be paying the money to these drug dealers? Ordinary Toronto citizens. The campaign has raised over $64,000 so far, so is popular on the scale of crowdfunding platforms. What other will questionable projects will crowdfunding be used for?