CROWDFUNDING AND CIVIC SOCIETY IN EUROPE: A PROFITABLE PARTNERSHIP? MATTHEW HOLLOW Matthew Hollow is a research associate on the Tipping Points project at the Institute of Hazard, Risk and Resilience at Durham University. His research interests include the history of fraud and white-collar crime, bank runs and financial panics, business ethics, and innovation in the financial sector. He holds a BA and an MA from the University of Sheffield and a DPhil from Oxford University. 68 In late March 2012, the small Welsh ex-mining community of Glyncoch made the national headlines in the United Kingdom when it announced that it had, after seven long years of failed funding bids, inally raised all of the £792,000 it needed to build a new community centre. Remarkable was the fact that with just months to go before the planning approval for the proposed centre was due to lapse, the project team still had been some £39,000 short of its target. In a novel move, members turned to a recently launched crowdfunding website called Spacehive.com, hoping to attract funding from people and businesses outside the community. his proved to be an astute move. Within a matter of weeks they were able to obtain the necessary funds to realize their community project. Of course, the Glyncoch community centre’s experience is not the irst time that the internet has proven itself a highly eicient fundraising tool. Advertisers and public-relations companies long have appreciated the lucrative potential of online marketing and have devoted considerable time to devising innovative web-based promotional campaigns. Now, however, thanks to new online crowdfunding platforms (CFPs) such as Spacehive.com, the marketing and networking possibilities provided by the internet are also becoming increasingly accessible to smaller organisations with limited budgets. For those involved in local initiatives and charitable projects around Europe, this has been a welcome development, especially given the on-going inancial diiculties sweeping the continent. Essentially, online CFPs provide funding platforms that facilitate the exchange of money, goods or services between funders and fundraisers. heir power lies in the fact that, by operating through the internet, they make it possible for large numbers of disparate, individual investors to pool together their resources to fund speciic projects. he sorts of returns that these funders receive on their investment vary greatly according to the business model adopted by the speciic CFP. Some platforms ofer investors the chance to earn a conventional ixed interest rate; others provide funders with compensation in the form of some type of equity or proit-share arrangement. As a further alternative, some platforms also allow fundraisers to provide non-monetary payofs, such as a irst-edition release of the product being funded. Although still in its infancy, the crowdfunding industry has managed to attract a signiicant number of investors from across the globe. Current estimates put the amount of money raised in 2012 alone at $2.2 billion (€1.6 billion), with forecasts for continued growth over the coming years. Globally, Europe shares the bulk of Open Mic • Hollow 69 the industry with North America. According to a 2012 report by Massolution, over 55% of all successful crowdfunding campaigns originated in Europe (North America accounted for approximately 48% of the rest), with the latest estimates suggesting that over 650,000 diferent crowdfunding campaigns were launched in 2011 alone. However, the European CFP market still remains very much skewed to the West, with the majority of European-based CFPs currently located in the UK, France, the Netherlands, Germany and Spain. For civil society activists and others concerned with local welfare issues, the emergence of these new CFPs has been hugely signiicant: It has opened up a new source of funding when governments and businesses around the world are cutting back on their spending as a result of the on-going inancial crisis. Many artists, musicians and ilmmakers already have beneitted hugely from the emerging European crowdfunding market. Indeed, at the 2011 Cannes Film Festival, two of the nominations for the Palm d’Or – “Habemus Papem” and “Polisse” – were funded by the French CFP PeopleForCinema.com. Moreover, there are now a number of CFPs, like the Barcelona-based website Verkami.com, that are devoted solely to the inancing of artistic projects and performance pieces. Crowdfunded ilm projects even address the inancial crisis itself: he Greek documentaries “Debtocracy” and “Catastroika” were co-inanced by online donations. (See interview with co-director Aris Chatzistefanou on page 100.) A number of local civic initiatives also have received substantial backing from funders on online CFPs. For instance, when the popular American CFP Kickstarter launched in the UK in October 2012, the irst project to successfully reach its funding goal was a studentled architecture project to design a new pavilion for a park owned by he National Trust conservation charity. Similarly, in the autumn of 2012, the Mansield Business Improvement District successfully raised £38,000 (€43,921) through Spacehive.com to create a free wi-i access area in the town centre of Mansield. Progress also is being made in establishing a new Helsinki-based CFP called Brickstarter.com, which its designers claim will allow “everyday people, using everyday technology and culture, to articulate and progress sustainable ideas about their community”. Yet the signiicance of the emerging European crowdfunding market rests not just on the opportunity it presents to raise muchneeded funds for local initiatives and artistic enterprises, but also on the extent to which it provides project founders with the means to develop more direct relationships with their funders. Diferent CFPs 70 Open Citizenship • Vol. 4, issue 1: 2013 provide fundraisers with diferent promotional tools, but typically there are options to upload videos, pictures and background information both about the speciic project and the individual behind it. his not only makes it easier for investors to fully appreciate a project’s potential; it also helps them visualise exactly what their money will be spent on. Many online CFPs also provide some form of interactive messaging service that allows interested funders to communicate directly with project initiators. For charities and NGOs, in particular, these online messaging systems present huge opportunities both in terms of improving funder-fundraiser interaction and enhancing public awareness about speciic causes. Indeed, there is now even an online CFP – openIDEO.com – speciically designed to provide a forum for charities and other NGOs to receive input and suggestions from interested users. As well as providing enhanced information-sharing capabilities, the unique and decentralised architecture of the internet also makes it possible to fundamentally restructure the spatial dynamics of project fundraising. Indeed, one of the potentially most radical aspects of online crowdfunding is the extent to which it breaks down traditional barriers between the local and the global. For instance, whereas in the past charity campaign managers might have been wary about backing projects that lacked mass-market appeal, now they can use CFPs to cheaply and efectively promote local and small-scale projects to niche markets and special-interest groups across Europe. For individual funders, online crowdfunding provides a more individualised investment experience, in the sense that it ofers more opportunities to engage with and contribute to projects that relect one’s own values and concerns. he fact that most funders who give to online crowdfunding campaigns in Europe still do not receive (or expect) a signiicant monetary return on their investment suggests the value of the emotional and ethical returns from CFPs. Similarly, by participating in online crowdfunding campaigns, funders not only get to enjoy a wider range of investment opportunities. hey also gain solace from the knowledge that they are helping to provide the inancial support needed to sustain that diversity in the future. On a more abstract level, it also is apparent that – aside from the obvious material beneits they can bring to the charitable and social sectors – online CFPs have the potential to help encourage and stimulate the sort of democratic openness and participatory ethos that is necessary to sustain a thriving civic society. One of the Open Mic • Hollow 71 clearest examples of this is the extent to which project founders now see online crowdfunding as both a means for generating funding and an opportunity to get funder feedback and input. Sometimes this is achieved through open discussion forums (as is the case on openIDEO.com); other times, funders actually are given formal voting rights in the project. Websites such as Spachehive.com and Ioby.org also allow individual funders to volunteer on select projects. By increasing the choice of investment options on the market, CFPs help democratise the financial sector by enabling investors to have a greater say over how their money is spent. Another potentially liberating aspect of online crowdfunding is the fact that (internet availability permitting) it makes it possible for anyone to promote any project or idea, regardless of size or ambition. In this way, it ofers ample opportunity for expressions of individuality and diversity. In addition, the fact that the software used to promote projects on online CFPs is relatively cheap and widely available helps to promote meritocratic ideals by ensuring that smaller projects are able to compete for funding on an equal footing with larger ones. From a democratic perspective, and in terms of the EU’s stated goal to produce a multicultural “Europe of Nations” in which solitary actors are encouraged to meet and interact on equal terms as individual citizens, this accessibility and openness has the potential to assist greatly in the promotion of civic-society ideals by both militating against political apathy and promoting the virtues of social self-organisation. he structure of the CFP market also has a number of inherently democratic features. By increasing the choice of investment options on the market, CFPs help democratise the inancial sector by enabling investors to have a greater say over how their money is spent. his is increasingly important given the growing concern over the degree of concentration in the mainstream inance sector. Moreover, the fact that most online CFPs ask project founders to lay out exactly how they plan to use the money collected also helps to improve transparency and enables funders to make more informed 72 Open Citizenship • Vol. 4, issue 1: 2013 choices about how to spend their money. Such openness is important not only because it creates greater accountability, but also because it helps reduce information asymmetry between project founders and investors, levelling the investment playing ield and encouraging greater levels of cooperation and consultation. As the number of successfully funded online crowdfunding campaigns has continued to rise, so has the level of political interest in the crowdfunding market. In 2012, a number of academics and crowdfunding specialists produced “A Framework for European Crowdfunding”, which outlines how EU leaders can help create and support a pan-European crowdfunding market. It proposes, for example, greater transnational platform functionality, increased consumer protection, the establishment of educational forums about crowdfunding procedures and increased research on the crowdfunding market. Hopefully EU leaders will accept these important proposals. It should be said that the online CFP industry is still relatively new. here are numerous issues that will need to be resolved if it is to become a serious player in the European inancial market. Chief among these is the threat of fraud, although the problems associated with transcending language barriers also are clearly of huge relevance in Europe. Again, though, governments and legislators can help in this respect by harmonising collective investment activities and facilitating cross-border transactions. It is still too early to say whether or not there is suicient political will to support such policies, but if Europe’s leaders are serious about promoting cross-border civic society structures and practices, they would be wise to support the ledgling European crowdfunding market. Open Mic • Hollow 73