Crowdfunding community investment has huge untapped potential to transform local communities, but local authorities need to do more

www.nesta.org.uk/press-release/crowdfunding-community-investment-has-huge-untapped-potential-transform-local-communities-local-authorities-need-do-more/
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Local governments are being called upon to do more to support the growth of crowdfunding community investment, the process of communities investing in local projects with clear social benefits. This could be to save a local a shop or pub from closure, or to create a new community arts space. This type of crowdfunding involves making a debt or equity investment rather than simply a donation or contribution in exchange for a product. At the heart of this kind of investment is the idea of the community as both investors in, as well as users of, the organisation that is being funded.

The new report, Taking ownership: Community empowerment through crowdfunded investment, written by innovation foundation Nesta and funded by the Greater London Authority through the London Economic Action Partnership (LEAP), , says that local government, city authorities and institutional funders have a crucial role to play in supporting and growing this sector, with the impact of boosting social infrastructure and community empowerment across the country.

Investment crowdfunding models can be used to fund projects that may not receive funding from more traditional models and helps to create more financially stable community initiatives by facilitating the creation of new revenue streams and increasing use by the community. Other benefits include increasing volunteering and other non-financial contributions and strengthening local resilience, self-determination and social infrastructure by bringing communities together to improve their area.

The report states this type of crowdfunding has been used to fund a wide range of community-led initiatives including shops; pubs; football and other sports clubs; multipurpose community hubs; infrastructure and services; renewable energy; housing; food, farming and community gardens; leisure facilities; and heritage.

It is the responsibility of local authorities to create an environment in which strong community projects are able to thrive. This can be done by supporting local groups in overcoming some of the challenges associated with starting and running a community-owned asset. For example, provision of small grants to cover legal and advisor fees often required before taking an investment crowdfunding offer to the community. Local authorities are also best positioned to help projects access unused space, whether through the transfer of public sector assets or by acting as a matchmaker between private owners of unused spaces and community groups.

Jonathan Bone, Senior Researcher, New Technology and Startups at Nesta says, “By giving communities the opportunity to invest in things they really care about in their local area, these models can give people a real sense of ownership, pride and responsibility over these highly valued assets, whether that's the local pub, skatepark or community garden. Our research suggests that this results in these being used more, increases volunteering to keep them going and can help to build a closer-knit community which feels it has the power to shape its area for the better.”

Crowdfunding community investment in action- Plymouth

Residents’ interest in a new type of economy combined with the need for urban regeneration and the council’s desire to do things differently with shrinking local authority budgets provided the drive for Plymouth to brand itself the UK’s first ‘Social Enterprise City. Contributing to this has been the Council’s commitment to provide match funding to over 200 crowdfunded projects up to £20,000 each from Community Infrastructure Levy funds and the designated £2.5 million Social Enterprise Investment Fund which offers a combination of grant and loan funding to get projects up and running. The Clipper Inn, a project to bring a dilapidated pub back to life as a community market and work space, is one project which has benefited from this to enable the purchase of their building.

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For more information contact Juliet Grant in Nesta’s press office on 020 7438 2668 or 07866 949047, [email protected]

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About Nesta

Nesta is an innovation foundation. For us, innovation means turning bold ideas into reality and changing lives for the better. We use our expertise, skills and funding in areas where there are big challenges facing society. We've spent over 20 years working out the best ways to make change happen through research and experimenting, and we've applied that to our work in innovation policy, health, education, government innovation and the creative economy and arts. Nesta is based in the UK and supported by a financial endowment. We work with partners around the globe to bring bold ideas to life to change the world for good.