Philanthropy & Funding

Civic Crowdfunding: A New Way of Spending Down?

Civic crowdfunding shouldn't support core public services; it should create immediate impact and inform future projects.

When the excitement of the crowdfunding campaign is over, who keeps the project going?

That's one of the biggest questions facing groups interested in using crowdfunding for projects that serve communities—the emerging field of civic crowdfunding. If a few hundred people come together to transform a vacant lot into a public park, for example, who will pay the gardeners two years from now?

First, crowdfunding is a project-based rather than organizational model, and few crowdfunding platforms have formal mechanisms to ensure that groups complete a proposed project, let alone guarantee its future. Crowd members' contributions are one-offs, and the crowd has no obligation to remain a group.

Second, government likely won’t step in. Most civic crowdfunding doesn't involve government resources; some groups even see crowdfunding as a way to cover shortfalls in municipal budgets. Just ask James Diossa, the 26-year-old mayor of Central Falls, Rhode Island, who used Citizinvestor to fund recycling facilities for a public park after his city went bankrupt. Critics of civic crowdfunding argue that these campaigns create ersatz public services in the face of dwindling government spending, based on a financial model that is temporary by design. They have a point. If civic crowdfunding were to replace essential services, it would create great distortions in the provision of those services (it’s widely acknowledged that crowd-based markets are highly skewed) and raise serious questions about a crowd's ability to repeatedly raise funds to keep them operating.

But the reality of civic crowdfunding is quite different, and the majority of projects are far from the core of public service provision. My own study of civic crowdfunding between 2010 and 2013 found that the most common civic crowdfunding projects are parks and gardens, education and training initiatives, and public events. Most are small-scale interventions that bring new services, facilities, and knowledge to neighborhoods. Initiatives often include building on abandoned land and working with forgotten communities. In other words, they are usually additive actions that deliver impact in places that need it. Furthermore, the best campaigns raise capacity as well as funds, building volunteer communities around a project to help execute it. Some platforms, such as ioby and Spacehive, actively solicit this non-monetary engagement, giving visitors the opportunity to donate their time while asking for funds (58 percent of ioby’s donors also volunteer to help on a project).

Comparing these projects to public services and focusing on their long-term future (or lack thereof) may, then, be the wrong approach. It may be more productive to think about crowdfunding as a means of realizing the maximum possible civic and social impact now, using the resources at hand—in other words, as a form of spend-down philanthropy. The comparison isn't exact, since funds originate from a distributed crowd in one case and a single benefactor in the other, but in both cases, one campaign organizer or group is charged with spending the money. As Jean Russell has pointed out, spending down has two main benefits: It directs many more resources toward current needs, and it avoids creating bureaucracies that are hard to sustain. The average civic crowdfunding campaign organizer who wants to create a new community resource may be an expert in her field (say, urban agriculture), but may not have the time or resources to maintain an organization. That doesn't mean that she should shelve the work she wants to do. If a tactical, small-scale, short-term intervention brings opportunities for education and growth, social impact practitioners should encourage it.

A spend-down project is not a one-off opportunity for a community. With crowdfunding, a single powerful campaign can show a community what's possible and spark a range of other activity. There are some interesting examples of repeat activity among civic crowdfunders who raised and spent with immediate impact, and then returned to raise more, either for iterations of the same project over several years or for new projects in different locations based on a common model. In Sao Paulo, Brazil, for example, the artist collective Parede Vida crowdfunded a public art project called Pimp My Carroca in 2012. They decorated the city's waste picker carts and gave workers access to basic healthcare services. The campaign raised more than one-and-a-half times its original target via the Brazilian platform Catarse, finishing at BRL 63,950 (about $28,500) from 792 backers. The success and subsequent media coverage encouraged the group to crowdfund a similar project in Curitiba. That campaign also beat its target, raising BRL 44,888 (about $20,000) from 502 supporters.

Civic groups can also use this repeat spend-down model to help projects grow. In December 2011, residents in the Greenpoint neighborhood of Brooklyn, New York, decided to turn a vacant lot into Java Street Community Garden, a public garden and agricultural laboratory. They turned to ioby to seek funding (a modest $625, which they raised) and volunteer support. The following September, the group returned to ioby with a bigger target, $1,027, which they also met. This year, sights are even higher: The group is currently seeking $21,809 to fund improvements such as solar powered lighting, equipment storage, and a rainwater harvesting tank—and they are about halfway there. In my own study of civic crowdfunding, I found that replication and growth projects such as Java Street Community Garden comprise a small but robust aspect of crowdfunding (around 2 percent of projects between 2010-2013). While these cases are outliers, they demonstrate that civic crowdfunding can be compatible with sustainability and growth.

The power of crowdfunding is the creation of shared experience and impact. Concerns about sustainability shouldn’t prevent civic and community projects from benefiting from that opportunity. Civic crowdfunding isn't about supporting core public services or establishing formal organizations; it creates immediate impact, and offers a valuable model and set of practices for future projects. In fact, the Spanish organization Goteo built a whole platform around this idea: All its projects are open source so that other organizations can freely replicate and build on them. If civic crowdfunding's ultimate social impact is to empty thousands of small coffers but teach millions of people how to refill them, it will be a game changer for philanthropy and community development.

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  • BY Michelle Fadelli

    ON September 16, 2014 10:44 AM

    Hi Rodrigo—great article, great ideas…and just the expertise and encouragement I was looking for! 

    Would you be willing to speak about crowdfunding opportunities to local governments, non-profits and NGOs in Marin County?  I coordinate monthly workshops via the “Marin Communications Forum,” and I wanted to get “crowdfunding” on our schedule.

    Marin has the Marin Community Foundation—which great for stem cell research and big, game-changing initiatives, but there doesn’t seem to be much funding for great little ideas and neighborhood projects.  Your expertise would be very welcome among our participants.

    We would love to hear what you have to say!  Thanks in advance if you are willing to discuss the possibility of a speaking engagement with us.

  • Drake Zimmerman's avatar

    BY Drake Zimmerman

    ON September 16, 2014 07:22 PM

    Great article, Rodrigo. As You and Jean Russell point out, communities contribute human and other capital as - or, actually more- important than the financial capital. Some other sources of financial capital already are piling up funds. How much money is going to community foundations each year without projects identified? People across the country are setting aside money for future good projects. How many donors with Donor Advised Fund accounts are looking for local projects? Tens or hundreds of thousands is a very conservative estimate. The money just starting to trickle into DAFs and community foundations suggests there are many more dollars seeking good causes than the wildest dreams of the entire movement of crowd funding. Thank you for tracking a bit of the funds. Now to connect up the varieties of community capital. Better than tracking, Practical yet visionary efforts like Jean Russell’s can train all varieties of capital on making impacts, plural. Once shown what is possible, and better still,  how, community activism may eventually become a form of the currently rare bird, well - and self - funded local governance.

  • BY Adam Pressman

    ON October 20, 2014 08:43 AM

    Rodrigo points out the reality that is interfering with community centered crowdfunding we saw a couple years ago in forming Crowdfund Roundup.  To that end, our MyStateCrowdfunding program delivers turnkey investment platforms designed to reduce cost, risk and hassle for community and business development groups who wish to bring durable wealth and opportunity to their communities.  As part of that program and the Crowdfund Guarantee, where investors would have their principal returned if a project didn’t meet milestones for success, there’s a two year mentoring and management program designed to get the great idea executed and sustainable.  For as little as about $50/day an organization can get a project funded and and guided post-raise through that critical period all at the expense and with the participation of the investors in that community.

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