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The Crowdfunding Manual <br />for Social Movements<br />(Please Do Not Distribute!)<br />-- Draft Manuscript --<br />Joe Brewer & Suresh Fernando<br />June 12, 2011<br />Please Read This First!<br />This manual is incomplete. We have written about several substantive issues and gotten to this point. We need your help to shape it into it’s final form.<br />What’s In Here Now<br />We have completed writing about:<br />The values shift and technology revolution that make new funding models essential;<br />The paradigm of open collaboration that lays foundations for the new economy;<br />A taxonomy of models and tools for collaborative finance;<br />The Pooled Ecosystem Fund as the solution to our financial challenges;<br />The nuts-and-bolts for running a successful crowdfunding campaign.<br />What We Know We Still Need<br />All of this material is a bit jumbled because it lacks an opening context. We know that we still need:<br />A strong introduction that explains the role of finance in large-scale social movements;<br />Discussion of the mismatch between the progressive agenda and existing funding tools;<br />A historic case study that explains how the U.S. conservative movement aligned financial objectives with a cultural agenda to build its infrastructure;<br />Exploration of social justice and democracy through the lens of crowdfunding;<br />A vision of what 21st Century social movements can look like when crowds self-organize and pool resources to advance a shared agenda.<br />We are sharing this with you now because we believe that collaborative discussions about this material can improve the manuscript and ensure that it is useful for social innovators and entrepreneurs striving to solve the funding challenges that inhibit adoption of sustainable solutions to social problems.<br />Please read through this manuscript, make notes using the comment function of Microsoft Word, and join us for discussions about how it can be improved in the Google Group set up for this project.<br />Looking forward to working with you to complete this important project,<br />Joe Brewer & Suresh FernandoINTRODUCTION<br />So you want to successfully engage the crowd to solve the world’s most pressing challenges? You’ve come to the right place.<br />We have watched as fragmented efforts across issue silos repeatedly divide social movements against themselves. And we bear witness to the fact that the world is changing faster than our institutions can adapt. The old roads lead to stagnation and ruin. <br />We’d like to offer a new way forward that enables people to organize themselves around the issues and concerns that are most pressing to humanity—one that takes the power of collaborative engagement and applies it to our modes of organization.<br />Our purpose in writing this manual is to shed light on the vital capacities that 21st Century social movements will need to acquire with a special emphasis on the burgeoning set of tools for engaging crowds of people in a focused manner that leads to meaningful and substantive progress.<br />While the focus is primarily on crowdfunding techniques, we will need to paint a larger context to show just how deeply the world is shifting right now. We are in the midst of a truly inspiring values transformation accelerated by a technological revolution that—unlike mechanistic models of the past—actually strengthens our social fabric and helps us better connect to one another.<br />To fully understand what crowdfunding is (and why it offers a glimpse of the new paradigm for social movements), we’ll have to survey the landscape of deep trends in cultural values, institutional forms, and collaboration tools that enable a new social order to emerge that spans the global economy. This broad perspective will help us see how we can leverage the power of crowds to solve previously intractable problems.<br />Major topics we’ll cover along the way include:<br />What is crowdfunding and how is it different from traditional fundraising?<br />An overview of how social movements work, with an emphasis on the role of finance in building vital infrastructure;<br />A Taxonomy of different models for collaborative finance and their application parameters;<br />How to run a successful crowdfunding campaign;<br />The nature of engagement and collaboration in crowd-based approaches to social change.<br />WHAT IS CROWDFUNDING?<br />We are in the midst of a revolution where self-organized crowds have begun to displace entrenched powers as the primary drivers of social change in the world. At the heart of this revolution is the capacity for people to easily find like-minded peers and collaborate using social media tools.<br />Crowdfunding has grown in popularity as a way for artists and entrepreneurs to directly engage their fans and invite them to help make their projects a success. The most visible element in this process is the money that changes hands. Yet, there are more interesting—and potentially transformative—things going on that warrant special attention.<br />Crowdfunding is a community-engagement process between an individual or organization seeking money to create something new and a crowd of supporters who want to participate in the effort in a meaningful way. It is primarily about open collaboration among the participants that takes the form of:<br />An Invitation to Make A Successful Project; followed by<br />A Campaign to Engage More People in the Effort; and culminating in <br />A Celebration of What Everyone Has Created Together<br />Note how none of these steps is really about money. Yes, there must be money pledged by fans. And the amount of money raised needs to be sufficient for achieving goals set out initially by the project’s host. But the central action centers around meaningful engagement that empowers the crowd to create something new. This is why crowdfunding has so much potential for “game changers” in the arena of social movements. It is a fundamentally empowering process that engages people in meaningful action.<br />Not bad for a process that also generates revenue for cool projects, eh?<br />In this manual you will learn how to leverage the power of crowds to drive social change. You will discover how to create successful crowdfunding projects and which tools are best suited for your particular needs. <br />So let’s get started.<br />THE ROLE OF FINANCE IN SOCIAL MOVEMENTS<br />[Add content about how social movements depend on infrastructure that gets built over time. Present the U.S. Conservative Movement as a case study that shows how it was funded, which institutions were put in place, and why finance was essential. <br />Then explain how the Progressive Movement needs different finance models because it’s objectives are not aligned with free market ideology – as the Conservative Movement is – and so it cannot exploit existing finance mechanisms to advance it’s agenda.]<br />AN INFLECTION POINT IN HUMAN HISTORY: WE ARE AT THE TIPPING POINT<br />We are at an inflection point in human history that requires us to answer the call. There is no more time to dawdle. This inflection point can be characterized by the convergence of a transformation in values with a technological revolution. This combination makes possible a techno-cultural re-ordering that enables us to interact with each other differently, making it possible to organize and coordinate activities in new and innovative ways as well as to re-define the very structure of our institutions, which are deeply connected to how we interact with each other.<br />In this manual, we will explore new ways of organizing and collaborating online with a view to shedding light on how our newfound capacity to massively collaborate and coordinate activity can serve as a basis for bringing about the Tipping Point. A global revolution is now within our grasp.<br />We will also examine some of the difficulties with current institutional models that aim to support social impact work and will offer suggestions for how these models might be updated.<br />The Values Transformation<br />The Tipping Point is finally in reach, made possible by an immense transformation in values that has many different axes. Here are a few:<br />Climate Change: A Rallying Cry: This generation is unique in all of human history in that we are faced with the greatest challenge ever presented to our species; the threat of climate change. This is a global threat that places our entire species at risk. In and of itself this is remarkable, but what makes our current situation unique is that we are faced with this threat in conjunction both with the knowledge of this threat as well as sufficient communication and technological capacity to do something about it. We are in the midst of crisis and have the tools to cultivate empowered collective action.<br />Mistrust of, and Disinterest in, the Political Process: Notwithstanding certain gains accrued with the recent election of President Obama and several populist uprisings around the world, the political process involves in a limited way, at best, half the populace and deeply engages far fewer. Our best and brightest spurn ‘opportunities’ in public service in search of the all-mighty dollar. The way that we are governed is seen as the lesser of many possible evils, and doesn’t really engage our capacity for creativity to make progress on addressing global challenges.<br />Financial Market Collapse and the Rebalancing of Power: The recent collapse of financial markets makes it evident to a growing majority that the capitalist paradigm is not sacrosanct. It is ripe with systemic flaws and (if it was not apparent already) rife with greed and avarice. It brings forth the worst of human nature and we feel a subtle but steady shift in the global balance of power. We know that this shift will bring about new institutions; even if we don’t know what those institutions will look like. The old ones are simply inadequate in the face of 21st Century challenges.<br />Species Extinction Risk: For the first time in the course of human history, the climate change problem has forced us to have a conversation about the possibility of the extinction of our species. We, the most intelligent and ‘rational’ of animals have brought this upon ourselves. Now is the time to pull out all stops and explore radical possibilities to reverse the process.<br />Alienation and Fragmentation in Western Culture: Economic and political problems sit side by side with deep feelings of dislocation, disempowerment, powerlessness, boredom and outright depression. We have created a culture where we are forced to spend the vast majority of the day doing menial tasks in service of a corporate agenda that is disconnected from our deepest personal concerns. We sit in cubicles with walls. Similarly our homes separate and divide us. We long for community and connection. There must be a better way!<br />Absence of Spiritual/Holistic Context: The deep sense of disconnection and unhappiness that we feel is further exacerbated by the erosion of a deeper cultural commitment to a larger social context. Spirituality, broadly understood, is also not a part of life in the same way that it used to be. The capitalist push towards individualism has taken its toll over the last several generations. We no longer think of the greater good or celebrate the beauty of our planet.<br />Economic Inequity/War: All of the above takes place within a world that is dramatically polarized; those that have stand in stark contrast to those that do not. This disparity is not new, but is more visible than ever.<br />This sampling of observations about the world we live in today makes evident the need for a new orientation of values that shape our we govern ourselves, generate business, and work together to make our communities more resilient in the face of change. Inklings of a values transformation have started to emerge. And a technological revolution has begun to offer new modes of social organization that can accelerate this cultural process. <br />Values TransformationThe Forces at PlayClimate ChangeFinancial Market CollapseAlienation and Fragmentation in Western CultureDiscontent!Species Extinction RiskAbsence of Holistic/Spiritual ContextMistrust of, and Disinterest in, Political ProcessEconomic Inequity/WarWhat is different today is that we all know it, we all see it and we all know that we all know it!... Collective consciousness!!<br />The Technological Revolution<br />The Internet era is just beginning to mature. It is easy to forget the days of the Netscape IPO in 1994 which, in some sense, marks the birth of the Internet era. Lost in the hype and promise of increased sales has been a sufficient examination of the changing nature of the dynamics of interaction that become possible as a result of the following simultaneous trends: <br />Technological TransformationThe Forces at PlayBroadband ProliferationIncrease in Processing PowerDecrease in Cost of MemoryReal Time Infrastructure Power at Edge of NetworkHigh VISIBILITY and ConnectednessWhat Does this lead to?<br />The convergence of (1)the ubiquity of broadband dispersion; (2) increases in processing power; and (3) the decreases in the cost of memory is leading to a real-time infrastructure where everyone can be connected with everyone else all the time. This has profound implications for the very notion of community and the ability to organize and coordinate activity across geographic boundaries over sustained periods of time.<br />It now becomes possible for us to come together like never before.<br />The Tipping Point<br />We can understand the Tipping Point as being the result of the convergence of the values transformation with this technological transformation. A proper understanding of these dynamics makes many things possible that were previously unthinkable.<br />The Tipping PointThe Forces at PlayValues TransformationTechnological Transformation The Tipping Point!!So What Now?<br />WHAT MAKES TODAY DIFFERENT?<br />It’s essential to understand that within the context described above things are different because we have much greater visibility into the disparate nature of our existence as a global family. We see, through the media and the internet, the problems that others have, the possible riches, the possible solutions etc. The difference lies in the nature and possibilities for collective consciousness.<br />Our current situation can be characterized simultaneously as creating a personal context that alienates as well as provides the possibility for connection that spans the globe.<br />The move we need to make is from a paradigm of fragmentation and opacity to a new paradigm that enables deeper collaboration and engagement across boundaries—be they cultural, institutional, political, or economic.<br />THE NEW PARADIGM<br />The transition from the old paradigm to the new one can be described as follows:<br />Old Paradigm New Paradigm Self interested Part of Ecosystem Industrialization, consumerism etcSustainabilityOrganizations solely focused on financial profit (corporations) Focused on triple bottom line Employees are ‘workers’ Employees are people Progress quantified by Return On Investment Progress quantified by Social Return On InvestmentIsolated Collaborative Use technology to increase productivity Use technology to build community Closed Open Insular view of world Holistic view <br />At its essence these changes represent a shift in consciousness towards a more holistic, systemic and interdependent perspective. This is a function of both changes in the communication landscape that provides visibility and connectivity across all boundaries (geographic being perhaps the most important), as well as a shift in values towards an increased interest and focus on sustainability and mutual caring. The impacts of these shifts converge at all levels and create a completely new context for us to think about how we can come together to make the world a better place.<br />The changes we are situated within require that we rethink everything; most importantly the role of existing institutions as well as the way that we govern and coordinate activity in service of social ends. This change in context provides huge opportunities for new and innovative solutions to old problems. Our objective in the following pages is to shed some light on new and innovative models for us to consider as we come together to address global challenges.<br />THE CHALLENGE OF INTENTIONALITY<br />Given what we have advanced so far, we are faced with the question of what we as dissatisfied global citizens can do. Must we leave fate to chance or are the possibilities to bring about change in an intentional fashion any different than they were in the past?<br />Our answer to this question is a hopeful one.<br />SOCIAL MOVEMENTS AND COLLECTIVE CONSCIOUSNESS<br />A detailed analysis of the genesis and structure of social movements is beyond the scope of this work. In the following we will suggest how a set of simple assumptions reveal that the possibility for us to come together and bring about radical societal shifts is far greater than it has ever been.<br />The Intersection of a Set of Common Ideas: In order to fully understand the potential that the internet has for bringing about massive social change, it is important to understand the impact on social movements of the ability to see into each others’ activities. In reflecting on this we can then get a better idea why the internet and an associated collaboration infrastructure and models can serve to play a huge role in bringing about and sustaining future social movements.<br />Without going into a detailed analysis, we will suggest that social movements can be associated with a set of ideas that converge in the minds of those that are party to the movement. These ideas in most cases will be vague and difficult to specify as is the case with those that participate in the Tea Party Movement in the United States, or are a part of the larger global sustainability movement. Nevertheless there is some binding set of ideas that provides enough commonality to call them movements.<br />The Visibility of People Coming Together: An essential element in the formation of social movements is everyone’s ability to see that others are also feeling the same way and are interested in coming together and working to bring about meaningful change. This is why activists organize rallies and large movements are symbolized by the congregation of many people in a single space. Examples of this include the Million Man March, Woodstock, and the recent 350.org demonstrations; events that captured and symbolized the spirit of a generation. In being able to observe such activity, we come to realize that we are not alone; that we are a part of a much larger process. <br />The ability to see the movement as it is unfolding contributes greatly to the movement itself.<br />An essential insight for change agents is that the internet can play a huge role in providing visibility into existing movements at various stages. This visibility will serve to communicate the movement and to support the collective consciousness and alignment of intent necessary to mobilize very large numbers of people towards better ends.<br />Visibility into the entire system, therefore, serves to change our consciousness of each other, but in and of itself it is not enough since we need to be able to come together and to work together. We need to be able to collaborate.<br />TOWARDS DECENTRALIZATION AND ENGAGEMENT<br />Much of the dissatisfaction and disillusion that we feel regarding the political process and the futility of fully partaking in the corporate agenda rests on the fact that we tend to feel powerless. We feel that our votes count for little and that our dead end jobs serve to enhance the wealth of a few at the expense of the rest of us. What we are feeling is discontent relative to the very structure of power. One way to look at this is in terms of the way that the traditional media and messaging flows outward and down through a centralized hierarchy.<br />Power, Information, Processing Power, Decisions…PeopleDevicesCentralizedModelHierarchical‘One Way’PeopleDevicesPeople,DevicesPeople,DevicesPeople,DevicesPeople,DevicesPeople,DevicesPeople,Devices<br />Fortunately, through the rapid advances in digital communications infrastructure, we are becoming directly connected to each other in ways that make possible a re-organizing of certain aspects of the power structure. We are, at the least, able to connect with each other, to have more control over what we consider ‘news’ and so on. This distinction can be represented as follows:<br />Power, Information, processing power, decisions…People DevicesPeople DevicesDecentralizedModel‘Flat’‘Two Way’PeopleDevicesPeople DevicesPeopleDevicesPeopleDevicesPeopleDevices<br />An important realization in this context is that the cultural shift towards new and emerging values is dependent of the structure of communication our social movements are situated in. The architecture of our interactions influences what it is possible for us to accomplish together.<br />THE POSSIBILITY OF MASS COLLABORATION<br />The technological revolution has created in a global communication system with high-speed computing and mobile devices woven together in a web of connectivity that makes mass collaboration possible like never before.<br />Projects like Wikipedia and the Linux operating system provide inspiration as shining demonstrations that large numbers of people spread across the globe can come together and build complex solutions that address real needs. It has become much easier to share information, distribute tasks, and see progress being made than ever before. This allows us to ask ourselves how do we come together to intentionally change the world?<br />How Do We Come Together to Change the World?Scaleable Team ThinkingA problem we all want to solve!No geographic or time constraints<br />An open architecture—that allows information to flow across its boundaries with ease—provides a glimpse of what is now possible... millions of people coordinating their activity to solve problems together! This is a particular application of the principles of open collaboration that lie at the heart of crowdsourcing efforts.<br />THE EVOLUTION OF CROWD ENGAGEMENT<br />To help get a sense of what we’re now capable of doing with social movements, it is worthwhile to take a brief tour of the key concepts that are foundational to crowd-based action. <br />Open Collaboration<br />To properly understand what open collaboration is, it is necessary to provide a definition both of what we mean by collaboration as well as openness.<br />What is collaboration? There are many ways to define the notion of collaboration. We consider the following as essential:<br />The sharing of risks, resources, responsibilities and rewards<br />The co-creation of content<br />What is Openness? By open we mean that the collaboration strategy will reach across existing boundaries. The boundaries can be geographic, within the organization (inter organizational), or across different organizations (intra organizational).<br />Open collaboration is a specific form of collaboration; one that aims to extend the range of participation by using various communications tools, thereby increasing the number of people, groups and organizations that are thinking about the problem that an organization is attempting to solve.<br />Crowdfunding.org provides a useful taxonomy of different open collaboration categories:<br />Cloud Labour: Leveraging of a distributed virtual labor pool, available on-demand to fulfill a range of tasks from simple to complex. Crowdsourcing is used to connect labor demand and supply. Virtual workers perform activities that range from simple to specialized tasks. <br />Collective Creativity: Tapping of creative talent pools to design and develop original art, media or content. Crowdsourcing is used to tap into online communities of thousands of creatives to develop original products and concepts, including photography, advertising, film, video production, graphic design, apparel, consumer goods, and branding concepts.<br />Open Innovation: Use of sources outside of the entity or group to generate, develop and implement ideas. In a world of widely distributed knowledge, where the boundaries between a firm and its environment have become more permeable, companies cannot afford to rely entirely on their own research and ideas to maintain a competitive advantage.<br />Collective Knowledge: Development of knowledge assets or information resources from a distributed pool of contributors. Crowdsourcing is used to develop, aggregate, and share knowledge and information through open Q&A, user-generated knowledge systems, news, citizen journalism, and forecasting. <br />Community Building: Development of communities through active engagement of individuals who share common passions, beliefs or interests. Crowdsourcing can be used to increase audience engagement and build loyalty through online dialogue with customers or a broader population. It can also be leveraged to provide a forum where views and opinions can be shared, ideas can be generated, and to receive feedback on products and services. <br />Knowledge Building: Open collaboration environments where different people work together as a part of a much larger project by either contributing certain aspects of the project individually or by working in close collaboration with a few people. This includes open source software projects, information repositories like Wikipedia etc.<br />Crowdfunding: A more recent crowd engagement phenomena where people or projects tap as wide an audience as possible to raise small amounts of financing from a number of different funders. This mechanism of finance is on the rise and something we’ll discuss at length later in this manual.<br />To analyze the distinctions in these models, we find it useful to define the following taxonomic variables:<br />Open: in principle, anyone can participate<br />Hierarchical: the crowdfunding strategy is introduced by a particular organization that, at least to a large extent, controls the requirements, rewards etc.<br />One-To-Many: Refers to a relationship between the originator of the crowdsourcing project and the recipients of the offer that is structured in a way such that there is no relationship or interaction between the recipients.<br />Many-To-Many: Represents a relationship between those making the offer and the recipients such that whatever output is generated is of value to everyone including the recipients.<br />Mutual Development: Represents a relationship between the output of the recipients and the input of other recipients such that peoples’ work builds off each others’ work.<br />Collaborative: Represents a relationship between those making the offer and the recipients such that the recipients are engaged with each other and work together towards the larger objective<br />Collective Intention: Refers to a larger over-riding goal or mission that binds all participants in the crowd engagement process.<br />Crowd Engagement StrategiesOpenHierarchicalOne To ManyMany To ManyMutual DevelopmentCollaborativeCollective IntentionCloud LabourNoYesYesNoNoNoNoCollective CreativityNoYesYesNoNoNoNoOpen InnovationYesYesYesNoNoNoNoCollective KnowledgeYesNoYesYesNoNoNoCommunity BuildingYesNoYesYesNoNoYesKnowledge BuildingYesNoYesYesYesSometimesYesCrowdfundingYesYesYesNoNoNoNo<br />It is interesting to note the following:<br />There are few truly collaborative models where we understand collaboration as co-creation and the sharing of risks. <br />There are few models where all participants have a clearly defined collective intention.<br />Crowdfunding models, to date, don’t embrace collaborative principles.<br />That said, mass collaboration projects do exist. Here are a few important examples.<br />Mass Collaboration Projects<br />What distinguishes mass collaboration projects from other forms of crowd engagement is:<br />The project outputs provide a collective social benefit that contributors can easily see.<br />The project is structured so that relations between contributors could be engaged in highly collaborative activities. <br />OrganizationFocusCollective IntentionMutual DevelopmentCollaborativeGoogle MapMakerCollaborative MapsYesYesNoLinux OSSoftware Operating SystemYesYesYesOokabooPicture SharingYesNoNoOpenStreetMapsCollaborative MapsYesYesNoRDTN Radiation MonitoringYesNoNoWikipediaInformation ResourceYesYesYes<br />Recently there has been increased media focus on crowdfunding as a number of crowdfunding platforms have emerged. It should be noted that prior to the recent wave of crowdfunding platforms, there have been a number of online funding platforms that support registered charities in various countries.<br />Social Change, Crowdfunding, and Engagement Platforms<br />Over the course of the last several years, a number of websites have emerged that provide the opportunity for those who want to support social change activity to connect directly with various causes of their choice. There are hundreds of platforms of this sort. Here are a few examples:<br />OrganizationFundingVolunteer EngagementCommunityPetitionsCollaborationAvaazNoNoNoYesNoCare2NoNoYesYesNoChange.orgNoNoNoYesNoCharityFocusNoYesNoNoNoDonorsChooseRegistered Charities OnlyNoNoNoNoGiveMeaningRegistered Charities OnlyNoNo NoNoGlobalGivingRegistered Charities OnlyNoNoNoNoIdealist.orgNoYesYesNoNoWiserEarthNoNoYesNoNo<br />Note that, once again, these platforms provide no opportunity to collaborate.<br />Crowdfunding Platforms<br />[We have gathered a lot of data for this section and are still organizing it into a taxonomy… will have it fleshed out for the final publication version.]<br />(INSERT TABLE HERE)<br />Now that we have introduced crowdfunding as a financing mechanism into the mix, it behooves us to examine the nature of funding for social change more closely so that we can identify some of the dynamics that drive this space and explore alternative solutions.<br />THE EVOLUTION OF SOCIAL CHANGE FINANCE<br />The function of money in the existing economic paradigm is to provide both a mechanism of exchange as well as to serve as an end-in-itself; to act as the primary motivator for activity. Within this context we have created an institutional form—the corporation—the object of which is to provide a framework to structure and organize resources in as efficient and productive a manner as possible. Hence, money, in and of itself has no direct relation to human well-being.<br />That said, we are fortunate that money is, at least to some extent, used for creating social goods. The industry is wide and deep and continually evolving. <br />To frame the following analysis, we will suggest that, notwithstanding the fact that there are some resources available for those that want to bring about positive social change, there is a gap at the front end of the investment cycle in that there needs to be substantially more capital available for early stage social innovators.<br />The Motivation to Deploy Financial Capital and It’s Structural Result<br />By and large the motivation to deploy financial capital is to garner further financial capital. This is what is understood as `investment`. The deployment of financial capital is based on an analysis of risk relative to potential reward. `Rational` investors then, ostensibly, make this evaluation and deploy capital accordingly.<br />Social investors need to think differently. Traditionally they have had to assume that funds they deploy will provide no financial return; that their contributions are to be `philanthropic.` This leads to the following polarization: First... A picture of the current landscapeCharities/ Not For ProfitsFor Profit Companies-100% rate of returnTraditional market rate returnsNOTHING!!NOTHING!!Socially MotivatedFinancially MotivatedNOTHING!!<br />Hence, either funds are deployed for financial gain according to well understood risk-to–reward principles or funds are donated by socially motivated investors with no expectation of financial return. This creates a structural gap in the investment landscape. <br />Social Finance<br />Relatively recently we have seen the emergence of the social finance sector which is attempting to fill this gap. Social financiers aim to provide financing, at various stages of the investment cycle, for projects that both deliver financial and social value. Due to the nascent stage of this industry’s development, the infrastructure and institutional frameworks continue to evolve as we speak. Over time the hope is that an entire parallel institutional framework will emerge in support of social ventures (organizations that deliver both social and financial value).<br />We would like to take this opportunity to raise some red flags regarding the nature of the institutional frameworks that are evolving in support of the social finance space for the following reasons:<br />Many attempts to cultivate social finance models are built on faulty aspects of the old paradigm and simply won’t work;<br />These concerns reveal what is needed in order to make social finance work properly.<br />The Problem With The Social Finance Institutional Model<br />Before addressing this question directly it makes sense to examine what social finance institutions actually look like. Due to the nascent stage of the whole industry space, there are no very large players; no institutions that would parallel the large global or even national investment banks. That said, the intention within the social finance space is to build an infrastructure that directly parallels what is transpiring in the private sector. The intention is that, in time, there will be investment banks, trading desks, stock exchanges, research groups, investment advisors and so on.<br />The reason that this intention seems to be pervasive in the social finance space is that it is easy to look at the massive success of the institutional framework that supports the private sector and simply assume that this model will work for the social finance space too.<br />It is easy to assume that the institutional framework that allocates financial capital within the private sector is the correct model within the social finance space. <br />We submit that this assumption is false.<br />We need to realize that the institutional model that has evolved over the course of the last 150+ years in the finance space has evolved as the mechanism that is best suited to support the growth of financially profitable businesses. The goal of venture capitalists and financiers alike, therefore, parallels the objectives of those that start businesses; they establish investment criteria that are based on maximizing financial profit. This leads to two related phenomena:<br />The Development and Endorsement of the Values that Guide Financial Investment and Capitalism in General: It is no secret that capitalism relies on self interest, greed, avarice, a focus on the survival of the fittest and so on. No further need be said about this.<br />A Focus on Scalability: Since traditional financiers focus solely on maximizing their own financial profit, their criterion for selecting appropriate investments is determined by identifying those projects that will provide the most possible financial return for the least possible risk. In other words, they focus on projects they believe will do disproportionately well.<br />This dynamic is most apparent in the venture capital industry, the sole function of which is to provide capital to new and emerging businesses. Due to the fact that the vast majority (roughly 9 out of 10) early stage businesses fail, it is necessary for venture capital investors to be efficient in the selection of the one out of ten businesses that will increase by twenty fold, for example. It is only if this takes place that it will be possible for them to develop a business model that is financially sustainable as an investment firm.<br />On the Purpose of Social Finance<br />Of course this orientation is natural within the context described above. But it raises a larger question: What is the purpose of social finance? Is it not to provide the necessary resources to bring about positive social change? If so, we submit that a different orientation to how financial capital is deployed should be considered; one that takes into account that bringing about positive social change requires creating a culture of change. It requires populating the world with change agents and widely supporting those that already are change agents, even if in a small way.<br />On the Wide Dispersion of Social Goods<br />We believe that the world would be a better place if we create an institutional framework that supports many different people, projects and organizations that want to bring about positive social change. This orientation stands in stark contrast to the current model which selects a few ‘promising’ projects at the expense of the vast majority of smaller, less ambitious projects. <br />The result of this is that we create and maintain a class of individuals that are disillusioned with the status quo and that want to do something about it, but get no support whatsoever. This absence of support causes them personal grief and forces them to go back to work in what, for them, are dead end, meaningless jobs. It perpetuates unhappiness, misery and the status quo.<br />Simply put, we need to completely rethink the institutional models in such a way that the foundation upon which they are built is the values that the social finance industry purports to support; community, sustainability, collaboration, love, etc. As an example of how this sort of shift might be conceptualized, here is a comparison of the traditional investment banking model in relation to what it could be:<br />On the Possibility of Innovative, Values Based Social Venture Investment Banks<br />Maybe the following comparison chart will serve to make what we see as possible a little clearer:<br />Comparison PointsTradition IBanksCurrent SV LandscapeNew SV IBank ModelFunctionProactively drive industry transition and trends through capital allocationIsolated service offerings not based on defined macro perspective of the entire landscapeFocus on developing sector specific intelligence and support services to cultivate an emerging class of social entrepreneursService Offerings: single institutionFull Service:FinancingAdvisoryResearchTradingM&ABrokerageFragmented:Some financingSome advisorySome researchSecondary markets under developmentNo single institution offers the full breadth of servicesFull Service: via collaboration across industryORMaturityMATURE. Industry models have evolved over the last 100+ yearsIMMATURE. Industry models are very new and in fluxThere is an opportunity to develop innovative models that incorporate current trends in information technology etc.Proactivity/PassivityVERY PROACTIVE. The depth of their knowledge unique positions them to actively drive the direction of the entire space.PASSIVE. I see little evidence that social venture infrastructure players are actively engaged in trying to map out the landscape, potential relationships and deals etc. to make them happenVERY PROACTIVE. IncubationNO. Industry participants play at a later stage in the investment cycleSome incubation. Mostly incubators act independently of funding sources.Integrate incubation (real world and virtual) with rest of service offeringThis follows since the focus is early stage.Collaboration: information sharingNO. IBanks compete and likely don’t share much information.There is a principled reason that collaboration is less likely – institutions are explicitly self interestedNO. There does not seem to be much activity coordinated across the entire social venture ecosystemYES, why not? There does not seem to be any principled reason why this is not possible.Collaboration: transaction syndicationYES. Financing are almost always syndicated amongst a group of financiersNO.Why not? There doesn’t seem to be any reason why risk can’t be sharedOpen Information SystemsNO. In large part due to competition issues and the fact that the institutional culture formed before open source models evolved.NO, but why not? There does not seem to be any principled reason why this is not possible.YES, certain information is made available by participating institutions in service of the larger collective mission.Sectoral/Ecosystem FocusYES. Large investment banks conduct in depth sectoral research that provides them with intelligence and positions them well to drive transactional activityNO. Transactions are, for the most part, conducted on an isolated basis by evaluating projects on a case by case basis.YES. Organize the sector focus on the basis of ecosystems.Identify those in the industry to partner with to develop relationships within ecosystemsIdentify opportunities early on.<br />The Structural Challenge within the Social Finance Space: Risk/Reward Imbalance for Early Stage Investors<br />Financially motivated investors have, over the course of the last hundred years or so, developed a set of institutions and practices that we refer to as the `investment banking industry`. Investment bankers have, over time, segmented their investment portfolios such that they focus on certain types of investments; all of which have different risk-reward profiles. <br />We have, for example, angel investors, seed investors that specialize in early stage enterprises, venture capitalists that specialize in Series A financings, others that provide mezzanine financing, still others that provide debt financing and so on. This segmentation has resulted due to the fact that investment at the various stages of the cycle require different interests, competencies and so on. <br />What is most important about this equation is that there are financially motivated investors that will provide capital at the very front end of the investment cycle; to those entrepreneurs that are just starting new ventures and therefore pose the greatest risk. It is a well documented fact that the vast majority of entrepreneurial ventures fail. What makes it possible for financial investors to invest even in such a high risk situation is that the few early stage businesses that succeed do sufficiently well enough to compensate for all of the other losses. This is only possible because early stage businesses are focused on making money!<br />This is where the problem begins. If we assume that those that are socially motivated will not be as focused on maximizing financial profit what follows is that the financing of early social ventures poses a specific challenge since they carry the same level of financial risk but do not provide sufficient levels of financial return to compensate investors. This makes it substantially more difficult for financially motivated investors to invest in early stage social venture projects. What can be done about this?<br />There are only three theoretically possible solutions:<br />Increase the financial return potential of social ventures<br />Reduce the financial risk for early stage investors<br />Change investor expectations such that they don’t require ‘traditional’ financial returns<br />Option 1 is self defeating in the sense that we don’t want social entrepreneurs to focus on financial profit. They’re mission is to deliver social value and this should not be diluted in any way.<br />Option 3 is being worked on in many different ways; most obviously by working with foundations to change the nature of how philanthropic monies are deployed. Grants and donations provide a -100% rate of return. Is there any reason that some of this money could not be converted to a interest free loan pool. This would at least provide some capital back to foundations that then could be redeployed.<br />Our focus in the forthcoming will be on considering option 2.<br />REDUCING FINANCIAL RISK THROUGH COLLABORATION<br />The substance of the preceding discussion is the suggestion that a major contributing factor to our current context is the communications and technological infrastructure that makes collaboration much more feasible than ever before. We live in a highly networked world where we can ‘see’ each others’ activity via social networks like Facebook and Twitter and connect and interact across geographic boundaries. <br />The question we must now ask ourselves is: how does this massive shift in the way that we stand in relation to each other and the ways that we can now interact with each other influence the deployment of financial resources to early stage social finance projects? Is there any discernible relation? <br />Microlending: The Grameen Bank story<br />As of 2007, the Grameen bank had lent small amounts of money to 7.34 million people, 97% of whom are women. They claim a staggering 98.35% repayment rate. There are two basic ideas that make this sort of lending unique that are worthy of close consideration:<br />Group Lending: Monies are lent to groups of people (primarily women) with the stipulation that any default in the loan impacts the whole group. <br />Social Cohesion: This creates an immediate group dynamic that has personal implications. No longer is your failure to repay the loan something that impacts only you and your relation with the lending institution (Grameen), it also impacts others in the group that are likely to be your friends.<br />This is especially successful since the Grameen model is applied largely in rural African villages. One can literally imagine that the others’ in the lending group might be close friends, relatives and so on. It is quite likely that you see many of those in the group in your day-to-day life. <br />Hence, in understanding why the Grameen model works it is also important to understand the context in which the Group Lending is taking place. The relations between the lendees are not necessarily arms length. There may be personal relationships at stake. These personal relationships, no doubt, not only serve to create social pressure that minimizes loan defaults, it also creates a mutual support network.<br />What is it that gives rise to the closeness and the intimacy in the lending circles? It is that there are close personal relationships between the lendees. Can this be replicated in urban environments where projects are operating at a distance and not part of a local village? It is optimistic to think that we can replicate the bonds that exist in closely knit rural communities, but we can do certain things that, over time, bring to bear on relationship formation and trust formation. <br />We can, for example, increase the visibility of each others’ activity, we can create shared virtual spaces that foster ongoing real-time interaction, we can coordinate regular face to face meetings. We can provide interaction frameworks that connect people on a human level through regular social interaction and rituals of various sorts. <br />If we are innovative there is much that we can do. In order the understand the import of what is possible, it is first necessary to understand the way that the technological context within which we are now situated serves to connect us in a way that can create a culture of collaboration.<br />ON VIEWING THE RELATION BETWEEN PROJECTS AS PART OF AN ECOSYSTEM<br />In general terms, an ecosystem can be understood as a natural set of relationships that exist between projects that makes it possible that they collaborate. Hence projects that are a part of an ecosystem interact with each other, the leaders know each other, and the projects are mutually interdependent in some way.<br />In more specific terms, an ecosystem can consist of projects that share the same larger goals, that share common team members, share common customers or markets, that are a part of the same value chain (partners, suppliers etc.), share a common technology infrastructure etc. There is no theoretical limit to what is constitutive of an ecosystem and this will be determined in practice by talking to projects that might form a part of an ecosystem. An example of this is the Open Manufacturing Ecosystem.<br />There are two important points that need to be emphasized, and the rationale for these points will become clearer as we proceed.<br />Relational/Holistic Paradigm: an ecosystem perspective views the world as a system of interdependent relations, and models the world with that as the starting point. It views projects and our activity as a part of a larger picture.<br />Cross Boundary Paradigm: a related notion is that in viewing the world relationally or holistically, we must give credence to how we are related to other projects; those that are distinct from us but that are related to us in some way. The ecosystem models attempts to provide some formality to this idea.<br />Why Does It Make Sense To Have An Ecosystem Perspective?<br />There are two reasons that we want to highlight:<br />Timing: The development of a networked world: We all know that the following is true:<br />Internet connectivity penetration rates are increasing<br />Bandwith limitations are being reduced<br />The cost of communication is dropping (thank you Skype!)<br />Interoperability protocols, applications etc. are evolving<br />Social networking platforms (Facebook...) are changing the culture of communication <br />Processing power is being pushed to the edge of the network (Smartphones etc.)<br />The real time infrastructure is evolving (Twitter)<br />All of these, and other, socio-technological forces lead to an environment and culture of interaction where :<br />Information flows freely across organizational boundaries<br />Geographic constraints are less meaningful<br />Structural limitations on information management don’t constrain participation (thousands of people can work on projects!)<br />Meetings can be run virtually<br />Projects can be scaled to involve many people with minimal incremental cost <br />The communications infrastructure can be scaled to include many people with minimal incremental cost<br />These forces lead to a world where we are connected across boundaries. This makes the notion of boundaries less relevant at all levels; between people, organizations, nation states etc. This is leading to many well studied phenomena such as the increase in distributed workforces, global mass media, globally distributed teams etc.<br />Hence, advances in the communications infrastructure now make it possible for us to organize ourselves from the perspective of ecosystems. <br />Project IProject IIIProject IIClimate Change EcosystemConnecting Projects Within anEcosystemConnect via common technology infrastructure and collaboration processes<br />Ecosystems, Visibility and Social Cohesion<br />In citing the Grameen Bank model, we note that the reason that it works is that there are bonds between the lendees. We submit that in viewing the connection between projects as a part of an ecosystem we can develop associated processes that will help to build the sorts of human bonds that support the Grameen Bank model. Of course, there will be a great deal of complexity and much needs to be worked out, but the possibilities are vast since there are no theoretical geographic constraints to participants in the working groups.<br />What we are suggesting is that technology can bridge the divide between us. It can create visibility into each others’ activity in a way that serves to develop human bonds. It can also provide an infrastructure to support collaboration at a distance.<br />So what does this have to do with finance, you ask?<br />Collaboration (and Pooling) in Traditional Finance Models<br />Prior to microlending (Grameen) model, collaboration principles have been applied in the finance sector on the funding side of the equation in what is known as syndication. Competing investment bankers regularly work together to finance larger transactions by dividing up the responsibility for raising the required capital. This results in an increased probability of being able to raise the funds to the satisfaction of the client as well as the sharing of risk with others in the funding syndicate.<br />Aggregating (pooling) of investments is commonplace in the form of mutual funds of various sorts. In this scenario a large pool of capital is raised. The monies are then managed by an investment manager who selects specific investments within the pool. This, again, safeguards the investment risk by distributing it across a wide range of investments.<br />How can we utilize collaboration principles to take reduce investment risk even further?<br />Project 1Project 2Project 3Project 4Project 5Investor 1Investor 2Investor 3Traditional Pooled Fund<br />The Ecosystem Pooled Fund: funding groups of early stage projects that are collaborating<br />Previously we identified that there exists a systemic funding challenge that inhibits the flow of capital to early stage social ventures; those ventures that aim to both deliver social and financial value. The challenge is that early stage projects carry significant financial risks yet do not provide sufficient financial return to offset this risk. This structural constraint substantially reduces the possibility for the wider dispersion of social goods which we believe is necessary if we want to bring about the broader paradigm shift towards sustainability and care for each other and the world.<br />We can take the use of collaboration principles to the next level by focusing on funding early stage projects that are actually collaborating. We submit that in doing so two key themes that we have identified can be, to at least some extent, satisfied; the wider dispersion of social goods (since we are funding groups of projects), the reduction of investment risk for the reasons outlined below.<br />Investor 1Investor 2Investor 3Ecosystem Pooled FundProject IProject IIIProject IIConnect via common technology infrastructure and collaboration processes<br />Now that we have a better understanding of what it means to collaborate within an ecosystem and the factors that will lead to increased collaboration amongst social venture projects, we can examine how ecosystem collaboration mitigates financial risk for investors. The risk for investors is tied directly to the prospect of the failure of the project. Hence, this risk can be offset in two specific ways; increasing the probability of success of the specific projects and decreasing the probability of failure of projects.<br />Increasing the Probability of Success of Projects<br />Working within a collaborative environment will increase the probability of the success of social ventures for the following reasons:<br />Scale: In grouping projects together, we create scale (more people, ideas, resources etc.). Projects have access to each other’s networks, can bid for projects together, can attend meetings together, can share certain costs (trade shows, for example) etc.<br />Modularity: In viewing ones enterprise as a part of a system of relations, one can direct ones activities in a way that is aligned with ones ecosystem partners. This provides increased opportunity for sales, increased partnership opportunities etc.<br />Social cohesion: we hope that some of what works in the Grameen Peer Lending model, works in this context as well. In support of this idea, we will be developing non-binding collaboration agreements that formalize the commitments between groups. Although we don’t expect these agreements to be binding, we do expect that commitments that are made openly will bring social forces to bear that will result in those that one is collaborating being more likely to provide support.<br />Offsets technology risk: A constant challenge for investors is to be able to assess the value of technology and processes that have not already garnered market acceptance. In getting peers to use your technology, processes etc., (as ecosystem collaborators) the functional utility of the technology is validated by people that understand the technology. <br />Increased Product Validation: in fitting your technology or process into a value chain of collaborators, you will solve problems and enhance the product thereby making it more market worthy.<br />Increased Network/Channel Capacity: In working collaboratively with others, you will build networks and contacts that will open up other market opportunities.<br />Decreasing the Probability of Failure of Projects<br />An important feature of this model is the fact that in working collaboratively with others, one can make drastic changes in ones business model, technology etc. while remaining a part of a collaborative process that supports this transition. <br />To understand this idea better, consider the circumstances in which early stage entrepreneurs function when operating in isolation. If there is a fundamental problem with their project that places the project at risk and where failure is imminent, there is little that one can do other than attempt to raise further capital or sell the business, if possible. <br />In contrast, if the project is a part of an Ecosystem Collaboration, problems associated with the project might be identified at an earlier stage (offsetting the risk of ‘entrepreneur myopia’). Strategies can be collaboratively developed that might even result in completely changing project structures. One can, for example, work with partners with a view to selling ones project to a partner. By operating more openly and in a more accountable fashion, the chance of failure is reduced.<br />Building A Social Finance System Through Open Collaboration<br />Taken together, these benefits of an ecosystem paradigm for social finance demonstrate how monetary flows can become tightly coupled with positive social outcomes. Now we’d like to shift gears and ask the question; how might a social movement employ social finance to influence political outcomes, accelerate cultural shifts in the values landscape, and lead to rapid deployment of solutions that move us toward a sustainable world?<br />A pooled ecosystem model won’t simply pop into existence all at once. It must grow organically through the local activities of people who are working to bring about social change. This is where crowdfunding campaigns come back into the picture. <br />We have discovered that innovative projects pave the way to a new financial system built on the open collaboration paradigm. It is possible to aggregate small financial contributions in order to create pooled funds for strengthening social movements. <br />This manual is a great example. It is a resource for social entrepreneurs that would be difficult to fund using the traditional investment mentality. There are few monetary rewards for creating a resource that will be freely distributed when it is finished. We reached out to members of our community to pool enough money to bring it into being, with a purpose of creating social impact as it gets passed around on the internet.<br />So how do crowdfunding campaigns work? What does a practitioner need to know if they are to run successful campaigns? This is the topic we’ll cover in depth through the next several pages.<br />What You’ll Need to Run A Successful Campaign<br />Creating a successful crowdfunding project is both an art and a science. It is an engagement process that requires you to do the following:<br />Find A Crowd<br />Remember that this isn’t primarily about money. Otherwise you could just go to your rich uncle or pitch to a friend with deep pockets. It’s about getting a lot of people involved in your cause. So you’ll need a crowd of people who want to see your project succeed. In the section The Wisdom of YOUR Crowd we’ll help you gauge what kind of crowd you’ll need to make your project a success.<br />Tell A Good Story<br />Getting the attention of your friends and followers can be tough in our time-crunch world. You need to engage them with a good story. What is it that you’re trying to do? Why should they care about it? What will they get out of the experience that makes it special to them? In the section Getting to “Yes We Can” we’ll cover the core elements of engagement and interactivity that are essential to crowd-based efforts.<br />Create Value for the Community<br />Not just any project will do. You’ve got to propose something that your crowd really wants or needs. In other words, you’ve got to carefully consider just what your community values enough for lots of people to pitch in and make it real. In Creating the “Killer Product” we will walk you through the design process to ensure that your promised deliverable takes a form that crowds can rally around.<br />Use Social Media Tools<br />Working with crowds takes a special kind of conversation. Monologuing just won’t cut it. You’ve got to sustain meaningful dialogue with your crowd that encourages the word to spread. This is not a “low touch” activity. Talking with the crowd is ongoing, dynamic, and sometimes outright intense. In Carrying The Conversation we’ll explain how to leverage your Facebook friends, Twitter followers, blog readers, and real-world networks throughout the entire campaign.<br />Get Your Fans to Spread The Word<br />Few among us have a thousand followers already hanging on our every word. And simply talking with your two best friends for weeks on end isn’t going to get the word out (or bring you a large enough range of people to get the pledges you’ll need to fund your project). You’ve got to ask more of your fans AND do it in a way that helps them feel good about doing more than dropping money into the coffers. We’ll help you figure out how to grow your crowd in Spreading Like A Virus.<br />Follow Through on Your Promises<br />At the end of the day, if all goes well, you’ll have all hands on deck and enough fuel in your tank to make the drive. Even when you reach your fundraising goal the conversation continues. Remember that this is about engagement. You’ve got to deliver the rewards, stay in contact with your fans while you create your killer product, and get it out in the world like you said you would. In Keeping It Real we’ll share a set of techniques for keeping your crowd involved all the way through to your next round of engagement.<br />We weren’t kidding about crowdfunding being about more than money. It takes a lot of hard work and careful planning to succeed. If you want engagement, you’re going to have to work for it. And you’ll discover that new possibilities can be unleashed along the way that are well worth it.<br />No one said social change would be easy. That doesn’t mean it can’t be fun though. By the time you get to the end of this manual, you’ll have all the tools you need to get the crowd involved in the change process. And you’re sure to make new friends along the way.<br />The Wisdom of YOUR Crowd<br />So first things first… you’ve got to have a crowd to crowdfund something. Who are you going to reach out to with your pitch? How do you know if they’ll care about what you’re doing? How will you identify your early adopters, those precious individuals who step up first and get the process rolling? And how much money should you ask for from your community of potential supporters?<br />In this section we’ll identify the criteria that you’ll need to consider as you step out front and appeal to the masses. <br />You’ll learn how to:<br />Define the user group that will benefit from bringing your project into being;<br />Measure your sphere of influence to get a handle on the power of your crowd for leveraging change;<br />Determine the scope of your project based on insights about your crowd;<br />Set priorities for who to engage first before you get started;<br />Get the momentum rolling and grow your support base as you go along.<br />What Are You Trying to Accomplish?<br />Figuring out who’s in and who’s not is all about identifying a shared purpose. The “crowd” can be any self-selecting group of people that shares an affinity for something (e.g. loves bird watching), wants to achieve something (e.g. have a great school in our neighborhood), or wants to be part of a meaningful experience (e.g. we elected the first African American president!). <br />What you want to accomplish will shape who might be part of your crowd. In the marketing and technology worlds, this is called your user group—the people who will use your product or service. Here are some examples:<br />This Crowdfunding Manual is likely to be used by social entrepreneurs who want to create social good;<br />Facebook is likely to be used by people who want to stay connected with their friends;<br />Text messaging is likely to be used by socially active people who stay too busy for long conversations;<br />A car is likely to be used by people who need to travel long distances in their daily routines.<br />Each of these examples demonstrates how the product or service matches a profile of people who may care about seeing it come into being. As a project host, you will want to consider who is likely to get excited about what you’re offering and why they’d get involved to make it a success.<br />What Can You Achieve This Time Around?<br />With every crowdfunding campaign, you’ll want to start out with a set of realistic expectations that fit your situation. Two important considerations are:<br /> <br />How much money should I ask for?<br />How long should I take to raise it?<br />We recommend using the Goldilocks Principle to answer these questions:<br />“The target amount shouldn’t be so big that it feels unachievable. Neither should it be so small as to feel insignificant for a crowd to address through collective action. It needs to be just right.”<br /> In our experience, a good balance is somewhere between several hundred dollars and several thousand dollars depending on what you hope to create, how much work will be required to get it done, and how big your sphere of influence is (more on this in a moment).<br />Note that we are talking about micro-scale ventures that fall outside the realm of typical fundraising models. If you want to develop a world-changing technology, you’ll seek a lot more venture capital than crowdfunding typically delivers. You might pitch your business plan to investors who feel they can benefit from partnering with you by offering seed money to get you going. But if your goal is more modest in scope, say $5,000 to $10,000, there really aren’t other good funding options. It isn’t worth competing for foundation grants or reaching out to potential investors for such a modest chunk of change.<br />This is where crowdfunding becomes like magic. <br />It should feel reasonable that a competent person with a good idea can raise a modest amount of money, if well enough connected to a supportive community that stands to benefit from the idea growing into something useful for them.<br />As you scope out the target amount, consider the following:<br />How much work will it take for me to do this?<br />What amount do I feel comfortable doing the work for?<br />What is the money going to be used for?<br />What are my larger strategic objectives that this project fits into? Am I wanting to grow my audience? Build my reputation? Create a tool that I’ll use too?<br />It may be helpful to think about the dollar amount as a feasibility metric to determine whether you feel like what you’re proposing is feasible for the time and resources you’ll put into the work. And you’ll want to be sure to think about the long haul and what kinds of relationships you need to build out of the projects you host.<br />Regarding the issue of time frame, you’ve got to figure out how long you want to spend engaging your crowd in the fundraising process and whether you know enough potential supporters to reach your goal in time. It may be that you’ve got a large email list with a high “click through rate” that you can make appeals to. Or you might have several hundred Facebook friends who can help get the word out.<br />This leads to the next important question…<br />Who Do You Know Already?<br />If you run a non-profit, you’ve probably got a list of donors and an email list for people who want to stay informed about your work. Or if you are a local artist, you’ve got some fans who signed up for your Facebook group to get the inside scoop on upcoming venues and exhibits. Figuring out who you can reach out to at the moment of kick-off is important for gauging how easy it will be to build a crowd of passionistas who will step up and play when the fundraising begins.<br />You might want to make a mental check-list of the following:<br />Email lists or social media groups for fans of your work;<br />Online forums where the issue you’re addressing is a common conversation topic;<br />Other organizations or community groups who stand to benefit from what you create who might help promote your cause;<br />Individuals you know personally who can be asked to contribute money and help spread the word.<br />This will help you map out the web of people who can be invited into the process. Your crowd will likely spread beyond these immediate contacts as people in your network spread the word to others in their networks. But you’ve got to start with who you know.<br />And now that you have a sense of who your crowd might be, you’ll want to clarify the pitch that will appeal to them. You need a good story…<br />Getting to “Yes We Can”<br />A great example of successful crowdfunding is the historic presidential campaign of Barack Obama in 2008. The story that inspired tens of millions to get involved can be expressed in three simple words — yes we can. It is a story about empowerment.; a story about hope; and a story about collective action.<br />So many people believed in this story that fundraising records were broken as the Obama campaign raked in $750 million over a 21 month period. According to the campaign staff, more than 80% of this money came in as small donations of less than $200. Now that’s an engaged crowd!<br />There is tremendous power in storytelling. Your ability to engage your crowd will be strongly influenced by the narrative that lays out:<br />What you are trying to accomplish;<br />Why I should care about it;<br />What we’re capable of doing together;<br />How we’ll get to the better world if I get involved.<br />Typically, stories in the political realm have been in the “what I can do for YOU” category. There is no story of WE. Yet crowdfunding is about collaboration. The locus of action is in the synergy that exists between leaders and followers. Members of the crowd really need to internalize the mantra that “yes we can” do this together. <br />A useful way to think about this is through the Criterion of Belief: <br />The Criterion of Belief is reached when members of your community begin to believe that what you’re doing is going to happen because they are making it so through collective action. It is the perceptual shift that arises when they start to believe they can make something significant happen.<br />Getting beyond this threshold involves a combination of shared purpose and shared enthusiasm. It happens when your story of collective action begins to feel real. Psychologically, this emerges through four stages.<br />Stage 1: I want to SEE it become real.<br />You want to set the right tone early on that what you’re doing is clearly described and of obvious valuable to your community. Your story needs to convey that collaboration can lead to a desirable outcome that members of the crowd can visualize—and feel good about being a part of.<br />Stage 2: I see that OTHERS are getting involved.<br />Many desirable futures never materialize. In order to believe that this one can, you’ve got to attract early adopters who throw their chips down right away. It isn’t enough to tell a good story and walk away. You’ve got to demonstrate that others in the community want to make it real too. And this means taking the story forward in time as the crowd begins to act, expressing that others share the same sense of purpose that needs to become contagious for your project to succeed.<br />Stage 3: I see myself as a SIGNIFICANT person.<br />Most members of your crowd will sit on the side lines and watch what happens. Getting them engaged will require that participation be meaningful and significant. They have to feel either (a) that the desired future won’t become real unless they contribute; or that (b) they can increase the momentum that helps others get inspired by what’s going on. <br />Stage 4: I feel the INEVITABILITY that this is going to happen.<br />Your story needs to progress as the campaign unfolds. Bystanders who haven’t jumped on board will watch to see if it looks likely to succeed. Many of them will take action only when it begins to feel inevitable that enough people have gotten involved. Others may feel that failure is eminent… and that their contributions could be what pushes it over the top. This increases the significance of their actions and makes their participation more meaningful to the effort.<br />It should be noted that a story is not a static thing. It will evolve and change as time passes. Getting to “yes we can” moves through all four stages of engagement. It can be stressful at times with all the uncertainty. And plenty of surprises will pop out of nowhere along the way. Get ready for the adrenaline rush of depending on the actions of others for your ultimate success!<br />Creating the “Killer Product”<br />A good story has substance. It is about doing something meaningful. So it is essential that the shared purpose you advance leads to an impactful outcome. What you choose to do together is a major influencer for why people choose to get involved.<br />Consider this example from one of the authors:<br />Something very interesting happened at the launch of my first crowdfunding campaign. I set out to create a strategy handbook for the progressive movement and published an announcement to my email list inviting pledges to help fund it. Right away, more than 20 emails came back with urgent pleas for something more—the crowd wanted to help write the handbook! <br />Psychologists wanted to write sections on motivation, values and beliefs. Marketing professionals wanted to draft materials on brand strategy and political identity. Political scientists wanted to describe various governance structures that shape the dynamics of politics. They didn’t just want to contribute money. These people had important things to say. <br />Why did so many people feel compelled to do unpaid work as a prerequisite to helping fund the project? And how was it that my response—that I promised to let them contribute their ideas if they helped get it funded—actually increased their participation? This violated the common sense of fundraising that says “make it easy to give money and start with simple and painless requests.” <br />The answer lies in the nature of the work I suggested we do together. Strategy handbooks are typically written by individual experts who have their own take on what is needed to advance an agenda. Many progressive activists feel disenfranchised and powerless to contribute their knowledge to help the movement. <br />I tapped into this feeling to engaged their participation. And the outcome was truly inspiring. Nearly 70 people helped fund the project (spanning 21 U.S. states and 5 foreign countries) and 30 of these investors went on to contribute substantive thoughts to the manuscript as it was written.<br />I had suggested we create something together that the crowd was anxious to sink its teach into—a Killer Product with the right mix of features for collaboratively creating it.<br />- Joe Brewer, Founder of Cognitive Policy Works<br />Successful crowdfunding campaigns are designed for impact. This is what the “Killer Product” represents – creating something profoundly valuable that requires collaboration to see it through.<br />The design criteria for a Killer Product are:<br />It is broadly useful to the entire community;<br />It is something that benefits from broad inputs from people with diverse backgrounds;<br />It is owned collectively and easy to share;<br />It is something none of us could create on our own.<br />It helps everyone address a major need of the community.<br />This crowdfunding manual is an excellent example. We are attempting to address a deep-rooted need among social entrepreneurs for a micro-scale financing model that builds community and attracts intellectual and monetary resources to social change efforts. As a burgeoning field of practice, we are all learning together and have benefited greatly from the valuable insights of social impact investors, bloggers, online community organizers, and collaboration designers throughout the writing process. <br />At the end of the day, (hopefully!) a useful handbook will be created that is licensed for collective ownership by all members of this dynamic community of change makers. And it will be easy to share in digital form for activists and campaign designers across the globe to use in their engagement and fundraising efforts.<br />Creating a killer product requires knowledge of the community you want to activate. We’ve found it helpful to ask ourselves the following questions as part of the design process:<br />Is there a common roadblock that hinders everyone?<br />Identifying a shared need and offering tools to address it will be highly valued by your community. We often ask ourselves what is holding people back. Is there something that gets in the way of bringing solutions to scale? Are there recognizable obstacles that are obvious to everyone? <br />In the case of this manual, we observed that all-too-often the most important work doesn’t get funded because it isn’t part of the institutional DNA of non-profits, government agencies, or businesses. So we set out to discover a path to funding for activities that keep falling through the cracks, yet are widely acknowledged as vital for changing the game.<br />If so, who is responsible for removing it? <br />A common reason for activities to be divided into silos across the community is that responsibilities tend to align with the goals of specific organizations. As a result, no one is responsible for increasing capacity across the entire community. Getting to a killer product means finding something that everyone needs, but no one is responsible for delivering. <br />We set out to create this manual because the venture capital model doesn’t work for small-scale social enterprises and philanthropic institutions remain entrenched in silos defined in a previous era, unable to bridge across domains in this vital period of global transition. No one has taken responsibility for socially networked communities to collaborate across institutional boundaries where it is most needed.<br />How can the crowd contribute?<br />Many problems cannot be solved by individuals. Solutions for systemic challenges—like building trust among strangers, shifting cultural norms across society, and creating new hybrid organizations that change the institutional landscape—all require diverse inputs from people with many kinds of expertise. So we ask whether the crowd can bring vital resources to the effort. Does cross-cutting knowledge need to be applied in a novel way? Is the solution an emergent phenomenon that arises only after a significant portion of the population adopts new behaviors?<br />For this manual, we didn’t presume to know ahead of time what would be useful for readers. This is why we created a Google Group to host online discussions about content for major sections of the manual—to get the crowd’s input into the writing process and ensure that we truly create something useful when all is said and done.<br />By answering these questions, you will be well on your way to discovering a desirable tool or resource that many members of your crowd feel strongly about seeing to completion. You will be more likely to get recognition for your strategic thinking and insights into the needs of your community, which will help you build “street cred” as a person who can get the job done.<br />Taken together, you will start to see increased engagement and personal commitment from members of your crowd who will help make your project a success.<br />Carrying The Conversation<br />Okay, so by now you’ve learned how to map out your crowd and design a killer product they want to own for themselves. You’re ready to strike up a conversation. This is going to require some savvy with social media tools and a few insights into the patterns that are commonplace in unfolding peer-to-peer dialogue across the digital landscape.<br />Let’s start with a simple schematic. The following picture shows how an idea spreads across the community, starting with a few people exchanging information. As time unfolds (left to right), the number of people exposed to the idea increases. This may be due to an email blast going out to a list with more people opening the email over time.<br />Without dialogue this increase quickly comes to an end as the number of emails opened gets saturated. The number of people engaged will decrease if communication continues to be directed toward all the same people who were approached the first time around. Reaching more people will only happen if the idea spreads beyond those who were targeted in the first round.<br />This can happen in several ways. You may reach out to a new list of people on Facebook or through a blog post to a website that gets a stream of new visitors. Or individuals you reached out to may share your idea by forwarding the email or linking to online materials using a social media platform.<br />Sounds simple enough, but the skills involved in creating an “echo chamber” where the conversation spirals to new communities are not the same as traditional skills from mass media—which are tailored for a one-to-many conversation that is essentially a monologue. Social media requires that you engage in interactive dialogue in a space where conversations can be one-to-one, one-to-many, and many-to-many. This means you have to actively participate in multiple ongoing discussions throughout the entirety of your crowdfunding campaign.<br />It may sound a bit trite that using social media requires you to be social. But the power of social media comes with the ease of sharing information and making it visible for others to share again. As you begin reaching out to potential contributors, you’ll want to prepare yourself for ongoing engagement that includes repetition and novelty—reposting the same information to remind people what you’re doing alongside updates that mark your progress.<br />Some techniques you’ll want to employ are:<br />Invite people to add their own ideas instead of simply making declarations about yours;<br />Request that people spread links to their friends and colleagues;<br />When you see others reposting on Facebook and Twitter, acknowledge and thank them by “liking” their status or “retweeting” their post;<br /> Give daily updates on your social media sites to keep others aware that your project is still happening;<br />Create web videos and blog articles about what you are doing, how things are progressing, and what you need from your supporters for the campaign to be a success.<br />It is helpful to keep in mind that the pattern depicted in the graph on the previous page repeats itself. Each time the conversation begins to wane you’ll want to stimulate new discussions, create content others can link to and share, and invite participation to increase the number of supporters for your work.<br />Keeping the conversation going is the goal. It will falter and fade on its own if you don’t feed it continuously throughout the entire campaign. Many projects fail because this follow-through doesn’t happen. The key to your success will be navigating the conversation so that it grows more engaging and inclusive over time.<br />Spreading Like A Virus<br />In the last section we described how a conversation waxes and wanes, making it necessary to actively keep it going. We suggested two strategies for doing this: (1) Routinely renew the conversation by generating new content and reposting links to social media sites; and (2) Make it easy for others to help spread the word.<br />Keeping a conversation going isn’t the same as helping it grow. Typical rules of engagement for online interaction suggest that 80% of the work is done by less than 20% of the people who participate. In the campaign we ran to fund this manual, a few thousand people saw our project and 87 people contributed money to it—a rate of roughly 3%. So it is helpful to increase the number of people who interact with your crowdfunding project to reach those precious highly engaged individuals who will actually step up to the plate.<br />A useful way to think about the spread of ideas across a community is with the model of a virus. Just as a contagion spreads through the physical contact between individuals until it infects a critical percentage of the population, an idea can spread through social contact until it becomes highly visible as a hot topic of discussion. The practice of viral marketing takes this epidemiological model as inspiration for reaching large audiences through peer-to-peer conversations in existing social networks.<br />The two most important considerations for viral marketing are (1) is the idea virus worthy; and (2) who are the super sneezers that will spread it far and wide?<br />Features of an Idea Virus<br />An idea can go viral if it is:<br />Easy to remember;<br />Easy to explain;<br />Something that fills an existing void;<br />Cool enough to share with friends;<br />Pre-packaged in a way that makes it easy to pass along.<br />This is why we mentioned hyperlinks in the section Carrying the Conversation. Creating content that is easy to repost helps others share it more easily. It is more difficult to make a killer product that is “sticky” in the mind and instantly appealing, but the benefits of aspiring to these ideals should be self-evident. More eyes will tend to see web content that is provocative, memorable, and appealing.<br />Features of a Super Sneezer<br />Ideas don’t spread on their own. People have to pick them up and pass them on. And not all people are created equal for this task. Extending the vernacular of viruses, those who spread ideas around may be called “sneezers”. Individuals who make exceptionally good sneezers are:<br />Highly visible in the community;<br />Well respected opinion leaders;<br />Connected to a diverse community of people;<br />Eager to share new discoveries with their friends.<br />An introverted roommate with 19 Facebook friends is less likely to influence as many people as your charismatic co-worker with 700 friends and a finger on the pulse of emerging trends. By reaching out to such influential people, you can get your project before the eyes of a large number of strangers. And their public endorsement will elevate your reputation among those who haven’t yet formed an opinion about your capabilities.<br />This is where those design considerations we talked about in Creating the “Killer Product” become vitally important. If you are able to inspire a few Super Sneezers to put out a good word with an exciting proposal, it will get before a much larger audience than you have direct access to.<br />And the more people who see your project, the more likely it is that you’ll attract enough supporters to reach your fundraising goal.<br />Keeping It Real<br />We’ve now walked through all the steps of the fundraising part of the campaign. You are ready to:<br />Identify who your crowd is and gauge your sphere of influence for mobilizing them to take action;<br />Craft a powerful story that gets to “yes we can” and invites collaboration;<br />Create a killer product that only the community can build together;<br />Use social media to carry the conversation forward throughout the entire fundraising period;<br />Increase your chances for success by seeking influential “sneezers” to spread your idea virus across social networks you don’t have direct access to.<br />If all goes well, you will engage enough people to reach your crowdfunding goal. Let’s say everything works out and you’ve got a bunch of committed investors and a check in your hand. Now what do you need to do?<br />Remember that crowdfunding is a social process, so you’ve got to keep the conversation going and fulfill your promises. Better still, you can keep it real by making it easy for supporters to help build your killer product and get the word out when its ready for distribution.<br />Perhaps you’ll want to create an email list for all our contributors and keep them informed about how things are progressing. You might even want to invite them into the design process by asking research questions to gauge how they’d like to see the content develop. Regardless, you’ll want to keep the conversation going so that your funders know that you are acting in good faith and delivering what you promised.<br />