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Exploring how crowdfunding can enable new models of community investment, governance and ownership

Over the last 8 years our research has shown how crowdfunding and peer-to-peer lending platforms have disrupted how start-ups and SMEs get investment, how companies engage their users in developing new products and services, and how individuals access personal loans. More recently we have focused our efforts on how crowdfunding can create new opportunities for fundraising and connecting people to charity and community projects.

Our work on crowdfunding for for good causes, and our subsequent matched crowdfunding pilot for arts and heritage organisations, drew attention to there being an appetite among project backers to support projects with more than just their money. For instance, when surveyed a large proportion of backers of donations-based crowdfunding campaigns reported that they also gave feedback or advice to those running the campaign, offered to volunteer directly with the project or made introductions on behalf of the project. The GLA’s Crowdfund London programme has observed similar tends.

However, both Nesta and the GLA’s work has found that while crowdfunding is a great way of getting new projects off the ground, the focus on one-off donations presents challenges around how crowdfunded projects will be maintained into the future and the legacy of their impact or that of the group responsible. There are also practical limitations in the amount of money that can be crowdfunded through donations alone—raises of over £80,000 are rare—which places constraints on the scale of projects that can be funded through this model.

We want to understand how other innovative models for community investment, governance and ownership (such as community shares and community bonds crowdfunding) can help formalise the relationship between investors and projects and potentially lead to more sustainable and resilient community projects at a larger scale.

The social investment market in the UK is now reasonably well-developed and a few crowdfunding platforms already offer models for community investment, with uptake being particularly good amongst community housing and energy projects. However, our research suggests that these models may currently be underutilised by other types of community organisations. For example, a survey of civil society organisations showed that while usage of the community shares crowdfunding model was low (<1%) a much higher proportion (16%)believed that the model was suitable for their organisation's needs.

Over the next 7 months, we will be conducting research to explore:

  • What models for community investment are available in UK (or what international models could be adapted to UK)?
  • Trends in who is using different types of community investment and for what kinds of projects?
  • Opportunities and challenges in their use (for fundraisers, investors and institutions)?
  • What existing programmes led by public or institutional funders have worked to promote or support community investment models in the past? And what could be done in the future?
  • How does could new technology make fundraising and decision making simpler for community organisations

We are aware that there are many ongoing debates and discussions around social impact and community investment and as we begin this research project we welcome any feedback or comments you have about this new project, so please feel free to get in touch with me at: [email protected]

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Crowdfunding

Author

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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Peter Baeck

Peter Baeck

Peter Baeck

Head of Collaborative Economy Research

Peter focuses on the collaborative economy, crowdfunding, P2P lending and the role of digital technolgies in public and social innovation. Peter lead much of Nesta's research into cr...

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