The wisdom of crowd funding
As I have written in recent posts, I have found myself increasingly interested in institutional reform and invention as an area for policy and innovation. My own gloss on this relates back to my interpretation of cultural theory with its three active sources of change: individualism, hierarchy and solidarity. Might it be that institutions represent, inter alia, relatively stable ways of combining these three power sources?
Institutional decline might be seen in a loss of organisational viability or by institutions coming to have a less benign impact on society, or – thinking of banks – possibly becoming malignant. Is such decline a reflection of the three power sources becoming unbalanced? Perhaps the hierarchy fails to adapt or the institution has no way of tapping into the growing strength of individualism in wider society.
The perspective makes me alert to institutional innovation and keen for the RSA to get involved; so I am excited that the Society is taking further steps into the world of crowd funding. What we are talking about here is basically on-line mechanisms for fund raising in which people with project ideas appeal to the world for small donations or investments. Unlike the traditional world of fund raising which is based on long complex processes and the needle in haystack search for major funders, crowd funding is simple, transparent and based on mass mobilisation.
Crowd funding looks like a classic clumsy solution (one which combines the three competing change sources). It is individualistic in that it provides people with ideas, on the one hand, and people with money, on the other, an opportunity to get down to business. Also, there is a marked tendency in crowd funding to see donations as in some sense investments; there are often potential rewards – even if only symbolic – for those who put their money in. And those who pitch are generally looking for start-up seed money, not dependency on a continuous revenue stream. Crowd funding is a very modern form of hierarchy – light touch, low cost, fast moving – the characteristics of the growing number of organisations that build, host and oversee crowd funding platforms, of which Kickstarter is the most famous. And, of course, particularly as it relates to charitable giving, solidarity lies in the shared values which motivate the project pitchers and those who back their vision.
And it works. In 2011 $1.5 billion was raised worldwide through crowd funding and NESTA estimates the potential for charitable giving in the UK alone to be getting on for £5 billion by 2018. As the gap between what society’s needs and what the state can finance gets wider, crowd funding can be both a source of funds and way of quickly getting the most money to the best ideas.
The RSA has already dabbled with crowd funding for example, supporting successful crowd funding projects run by Fellows and Catalyst-backed ventures. However, we think there is a major opportunity for us to take a step further and build a closer and longer-lasting connection between the RSA, Fellow-led projects, the Fellowship, and the wider world. Which is why we’re partnering with Kickstarter to launch an RSA curated crowd funding area in September.
In last year’s Fellowship survey nine out ten Fellows said that they “want to engage with and help develop Fellow-led initiatives” and a healthy 14% of Fellows said they’d be inclined to provide material support to the Fellows’ Catalyst Fund.
A strength of crowd funding it also a challenge; because the process of pitching and donating is in the open, if you fail it’s there for all to see. But as many entrepreneurs attest, failure can be as useful as success in helping you learn, grow and develop better ideas. There is a danger that Fellows fail to respond to our invitation to back each other’s ideas but even if that happens in the early stages I hope we don’t get too dispirited: crowd funding is a symbol of the new idea of Fellowship taking root but changes in culture and expectations always take time.
We’ll be giving Fellows more details of our plans before we launch the site next month and – if the wider subject interests you – I will be chairing an event on crowd funding here at the RSA on September 16th.
Many thanks to Alex Watson from our Fellowship team and Ed Whiting FRSA (member of the Fellowship Council) for taking this idea forward and for helping with this post.