Yesterday saw the DCMS Culture White Paper announce a pilot scheme to explore the opportunities for matched crowdfunding as an innovative way of funding cultural projects. But what is matched crowdfunding and why is it interesting?
Crowdfunding has been much touted as a way for people and projects to raise funds by attracting small amounts from a relatively large number of individuals.
However, as the crowdfunding market continues to grow (Nesta research estimates crowdfunding facilitated £3.2 billion worth of loans, investments and donations in the UK in 2015) institutions, investors and funders are increasingly exploring how they can work with the crowd on identifying and funding promising projects.
This has emerged across the crowdfunding landscape, with investment funds lending to businesses through P2P lending platforms, business angels investing in equity crowdfunding sites, and large grant funders offering matchfunding with rewards and donation crowdfunding sites.
Matchfunding, where institutional funding is matched with crowdfunding on an online platform is attracting increasing amounts of interest from public and philanthropic funders interested in understanding if a match fund can make public grant money go further, get more people involved in developing and supporting projects and use the knowledge of ‘the crowd’ to test public demand for projects.
The most popular model for matchfunding design to date has been the top up model where the institutional funder releases the remaining funding in the form of a grant investment or a loan to the project or business once it hits its crowdfunding target. For example, a grant giving organisation might offer to top up the remaining 40% of a project if it can raise the first 60% via a crowdfunding campaign.
Other matchfunding models include the 'up front' model where the institution provides the upfront investment which the crowd then matches and the '1:1 model' where for every £1 donated/invested by the crowd the institutional funder will top up with an equivalent (or smaller/larger sum) until the funding target is met.
Interesting examples of this type of matchfunding include:
Other initiatives in this area include the SME P2P lending match funds by the British Business Bank and local authorities, the matchfund for the arts by dutch platform Voordekunst, the Crowdfund Plymouth by Plymouth City Council, The London Mayors crowdfunding programme and the Department for International Development funded Crowdpower programme.
Despite the examples discussed above, there is still very little robust, systemic knowledge about what works and what the different opportunities are in relation to matchfunding more broadly. Could these models be optimised to provide an even more effective means of using public or private money in collaboration with ‘the crowd’? And are there potential challenges that need to be understood before matchfunding can be utilised confidently by a range of funders and sectors?
Within this context, a number of interesting areas of further exploration are:
We therefore welcome the DCMS’s announcement in the Culture White Paper on the launch of a new pilot scheme in partnership with Nesta, the Heritage Lottery Fund and Arts Council England to explore the opportunities here. Over the coming months we will be working closely together on refining the scope of this project - providing matchfunding to a range of arts and heritage projects and expanding the evidence base around matchfunding specifically.