Crowdfunding Established behaviour or flash in the pan…?Alice.Casey@nesta.org.uk
Many local Did you knowcommunity the Statue ofprojects have been Liberty and thefunded by plinth it standscommunities upon were(acting off-line) “crowd-Church-spires, funded” by theincubators, citizens of USAreligious and France?buildings…
Gosforth Memorial Health CentreThe people of Gosforth,Newcastle funded theirhealth centre throughpublic subscription in1925. It was built by publicsubscription, which meansthat it was paid for entirelyby the people of Gosforth.“The building cost approximately £4500 when it was built in 1925,which in today’s money is about £600,000. This gives an idea of justhow huge an undertaking this was and it’s something the people ofGosforth should be really proud of.” Cllr John Shipley
Annual growth in the number of crowdfunding platforms worldwideIn 2011 453 platforms raised €1.5 billionin project and business financingSource: Crowdsourcing.org
Types of crowdfunding… Combination ofRevenue Repayment of intrinsic motivation,Sharing Loan/ Investment percentage of profit social and financial motivationEquity Financial return onCrowdfunding Investment Combination of investment in time if intrinsic, social and the business does well. financial motivation. Rewards also offered Sometimes, plus Intangible benefits.
Rewards-based crowd funding :The basics• A set target amount for a specific outcome• “All or nothing” within a specified time limit• Benefits in return – engaging benefits, goods or products, events, tributes, etc.• In some cases, ability to raise loans or equity
Flash in the pan or Here to stay? • Helps people do what they’ve always done – faster, cheaper… differently? • Digital tech uptake + spread • Less of the old sources of finance available • Innovative ideas need backers with belief • Lots of ‘market’ space remains • Long term upsurge in grass roots action • Direct relationship between funder and funded is fresh
Using a crowdfunding platform.. Step by step. • Projects submit funding plans/targets andApply rewards • Some vetting of projects takes placePitch • Publicising fundraising (often a film/video)goes live • Tapping into networks beyond known people • Interactions on website with backers • If target not reached, funds are returned toFunding backersends • If target is reached, funds are awarded • Thank you and interaction on sitePost • Awards/rewards begin to take place – somefunding are social • Promotion to networks of backers
Innovation In Giving…Nesta and Cabinet office back 3 crowdfunding platforms
Features of the site include:• Offering something in return• Multiple levels and types of participation• Embedded video & social media sharing• Gift certificates to share with friends and family• A clear outcome for what the funds will be used for with milestones along the way
Staged rewards – how do they work?Amount Rewards No.£20 Custom t-shirt, badge, thank you letter 69£50 As above, plus handcrafted bag and postcards 28£150 As above plus handmade mini bike frame 10£300 As above plus choice of 1 day course or full size 15 handmade bike frame£500 As above plus 4 day bike making course 56£2000 As above plus a bike and photo yearbook 0Non Need : Accountant and Electrician ?financial
Some possible risks• What if good, effective projects can’t tell their story well?• If supporters come from existing networks, how will those in poorer areas manage?• Wilful misuse (no case known>yet)• Is it replacing or expanding giving?
Some possible benefits• More than money : time, assets?• Crowds of support – network effect• Innovative ideas backed• New types of audience reached• Match funds
Some impressiveover-achieversfrom the USA…!What happenswith the excess?