Crowdfunding in a crisis

www.nesta.org.uk/blog/crowdfunding-crisis/
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Crowdfunding in a crisis

One striking feature of the current COVID-19 crisis is the crucial role that local communities have played in responding quickly to local needs and mobilising much-needed resources.

Identifying which local causes need support and getting funds to them quickly is a common challenge.

This blog gives a short introduction to how crowdfunding can be a good way of raising funds in a crisis by connecting people to local worthy causes, fast.

Understanding the role of crowdfunding

There are some interesting examples of communities and companies trying to raise larger sums of money through debt or equity crowdfunding for COVID-19 projects. These range from businesses developing new medical solutions (there is even an attempt to crowdfund a vaccine), to those responding to new demand caused by the crisis (such as food delivery services) and crowdfunded loans (peer-to-peer lending), as well as businesses that are struggling as a result of the crisis and trying to raise money to stay afloat.

However, most of these examples do not represent the best use of crowdfunding, either failing by asking for more money than the crowd can provide or being in territory that is covered through traditional funding, such as government-backed loans to businesses and the billions invested by public and private institutions in developing a vaccine.

The COVID-19 crowdfunding opportunity

The most significant opportunity in the short term are models such as donations and reward-based crowdfunding which work well for small to medium-sized projects that need relatively small amounts of finance, and won’t be able to offer backers anything in return beyond the good feeling of having supported their project, or a non-financial reward.

Building on this, these crowdfunding models work especially well where funding decisions are driven by a combination of social motivations and local connections where money is needed relatively fast (typically, live campaigns have a four-week window).

What is it being used for in the context of COVID-19?

A non-exhaustive review of donations and reward-based crowdfunding platforms illustrates the diversity of the financial need created by the pandemic and how crowdfunding is being used to respond to those needs.

Some of the most well-known campaigns have been those set up to raise money for personal protective equipment for local hospitals and care institutions such as the recent mask4heroes campaign.

Others have turned to crowdfunding to ensure that vital local community services such as Food Banks have enough money and stock to support vulnerable people during the crisis. Similarly a range of initiatives have been set up by platforms to help people support community businesses that are struggling due to the crisis such as the Pay it Forward initiative.

Crowdfunding is also often used as a last resort when people are struggling to pay their bills. For example, in the US we are seeing people without health insurance turning to crowdfunding platforms to cover the cost of their healthcare.

Fundraising and mutual aid groups

It is estimated that there are now more than 1,000 community mutual aid groups across the UK. These are typically set up as hyper-local responses to the crisis to provide various forms of community support, from shopping for the elderly and delivering medicine to taking dogs for a walk. We are seeing lots of small crowdfunding campaigns such as the Aberdeen mutual aid group which was set up by individual groups to fund activities such as food shops, covering fuel costs for deliveries, purchasing other necessary supplies, such as medicine, and providing financial support funds for specific vulnerable groups, such as care workers.

Matched crowdfunding opportunity

There is also an opportunity for larger institutional grant funders like local authorities, universities, trusts and foundations to work alongside crowdfunding platforms to support COVID-19-related projects. One way they can do this is through matched crowdfunding, whereby larger institutions match the money raised via a crowdfunding with their own grant funding. For example, once a project raises 75 per cent of the money they need from the crowd, the institutional funder might give them a grant for the extra 25 per cent needed to reach their target.

This is already happening; Solent Local Enterprise partnership, Lambeth Council, Portsmouth City Council, Coventry City council and Trust for London are all offering match funding through the Crowdfunder platform to help support communities and businesses through the current crisis. In a similar vein, Borough Council matched contributions from the crowd on this Spacehive Giving for Gedling Food Bank Appeal.

From our past research we have seen how matched crowdfunding schemes like this can help institutional funders leverage more money towards specific causes, and support groups and projects outside of the portfolio of organisations that they normally fund. The offer of match funding can also incentivise more projects to try crowdfunding and, alongside the money, help more initiatives unlock some of the non-financial benefits associated with crowdfunding, such as raising awareness for their cause, mobilising volunteers, and helping develop digital and fundraising skills within their group.

Find out how to mobilise resources in a crisis to fund a project.

Watch this teaching module on crowdfunding

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Practical crowdfunding resources

This blog draws from a teaching module on crowdfunding that Nesta's CCID team have contributed to. The module is part of a new online course called Collective Crisis Intelligence, and is an initiative from GovLab, a research centre based at New York University whose goal is to promote the design of more open, effective and networked governing institutions using data, technology and crowdsourcing. The course includes expert modules by people and organisations who have successfully responded to a crisis before by using technology to engage with a larger 'crowd' of volunteers such as Ushahidi, Safecast and PetaBencana.id.

For anyone interested in how they can make the most of the different opportunities in crowdfunding, please make sure you have a look at our free resources. Our Govlab module gives an overview of what crowdfunding is, how it can help communities and different crowdfunding models. A good place to start planning your crowdfunding project is our advice on how to pick the best platform for your good cause.

We’ve also looked at the different ways crowdfunding can be used and how fundraisers can make the most of it with resources such as our practical guide Working the Crowd, how it relates to philanthropy and giving and the opportunities in crowdfunding community investment.

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Author

Peter Baeck

Peter Baeck

Peter Baeck

Co-Head of the Centre for Collective Intelligence Design

Peter is responsible for a number of large scale research projects and experiments that explore how human and machine intelligence can be combined to solve social challenges.

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Jonathan Bone

Jonathan Bone

Jonathan Bone

Senior Researcher, New Technology and Startups

Jonathan is a senior researcher in the New Technology and Startups team.

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Rosalyn Old

Rosalyn Old

Rosalyn Old

Researcher, Government Innovation

Rosalyn is a researcher in Nesta's Government Innovation team.

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