The Slow Funds Movement

For liveblogged transcripts of this talk, see the MIT Center for Civic Media blog.

Participants

Rick Devos

• Grand Rapids, MI

ArtPrize

• giving away prizes to artists - have to be over 18, have to show art somewhere within a 3 sq. mi. area, public votes to allocate the prizes

Momentum

• YCombinator-like accelerator
• started a prototype called 5 by 5 night, team selects 5 ideas, each gets 5 slides + 5 minutes, a panel of judges selects how to allocate $5000 between those groups

StartGarden

• Building on previous ideas, put ArtPrize and Momentum on ice
• For-profit
• Start with $5000

Jay Lee

Smallknot

• just graduated out of TechStars New York, team of 5
• want to change small business financing through community
• Operating in NYC and Greenville, SC
• Want to spur small business growth in a grassroots, decentralized way
• Empower communities

• Smallknot works as a hyper-local crowdfunding platform
  • Business puts up a page on Smallknot
  • people donate
  • Business takes the money and repays it in kind - with goods and services to the community
• win-win-win
  • businesses repay in kind, for much cheaper ($0.30 or $0.40 on the dollar), investors get disproportionate repayment
  • strengthens the community
• Small businesses are important, we need to support those
  • We can send money across the globe
  • But it's really hard to get it from you to someone down the street through traditional means (like bank loans)
  • There's no way to build the community you want
• Reclaiming our neighborhoods, reclaiming our community
• Cash mobs: like flash mobs, but instead of dancing people give money to local businesses to show support
  • Ex: show up at a local business and everyone spends $20 on something

Stephanie Pereira

Director of Art Program at Kickstarter

Kickstarter

• 13 categories
• "the cool thing about the internet is that it's redefining local"
• Kickstarter is a place to test ideas
• sharing some stories of Kickstarter projects
  • international reach
  • directly engaging with the people who care about what you're making
  • connecting people over a topic area across the internet
  • helping communities push and grow creative ideas

Question and Answer

• Slow food movement gets critiqued for being too boutique - is that also true for your projects? (scalability)
  • Jay: Demand is what drives scale, and once more people get engaged costs go down, and transport and prep issues don't apply to finance
  • Rick: There are different levels of involvement, there are layers of involvement
  • Jay: You can even argue now that the financial system doesn't scale
  • Stephanie: What we're seeing is that everyone has an idea, small or big, which makes it very human-scale

• Do you think there is a point where we'll be saturated with these personal beyond-economic transactions? Ex: couchsurfing vs. air bnb, sometimes it's too tiring to deal with couchsurfing, sometimes people want a less entangled transaction
  • Stephanie: Sometimes you want air bnb, sometimes you want the hotel. Sometimes you look at projects and you will just wait and see, sometimes you're really excited. It's about helping people connect on those many levels.
  • Christina: So it's about offering that spectrum of choices
  • Rick: Our desire for stories is bottomless
  • Jay: If it happens, it's a good problem to have, if everyone is too engaged we're in a good place

• Another problem the slow food movement has encountered is elitism and silos that lock other people out, with the digital divide what demographics do you see missing from your platform and what is your plan to engage people?
  • Rick: Startgarden just launched in April, we've been seeing a broader age range than we expected
  • Jay: We see people recruited through businesses networks, so the demographics shift by project and they're driven by the offline world so we don't see that divide
  • Stephanie: It's happening organically. the slow food movement analogy totally holds

• Jay, can you tell us about the slow money movement?
  • Jay: It's tied to the slow food movement, setting up financing opportunities for slow food businesses. It's been around about 3 years, book by founder: Reflections on the Nature of Slow Money.

• I'd love to hear about your failure rates? Esp. Kickstarter, we always hear about success rates, how many fail, what happens to them?
  • Stephanie: Comes up a lot, stats are published live. Average site-wide is ~44%, it varies from category to category. Some learn from it and go via another avenue, some immediately re-try (with pretty high success rate).
  • Jay: From our part, we see people viewing crowd funding as magic. We have a high dependence on local networks, people who have put effort into building networks and doing outreach have a 100% success rate, those who expect it to just come to them have a harder time.
  • Stephanie: What we do know from our stats is that if someone gets even 1 pledge they have over a 50% success rate, goes up even more if they get to 30%.

• Where did the money for Startgarden come from?
  • Private investors

• Christina: Advice Joi Ito - always think about how much work it takes to say no. Sometimes it's easier to give a blanket yes.
  • We don't need to plan for everything or mitigate the 5-year failure rate, let's just get things started.

• Scale vs. replication - do you want to grow nationally or have clones and things happening?
  • Jay: Our real goal is replication, replicability. Initially aimed at large cities, but doing more research into hyperlocal, it's smaller cities where people are the most engaged in their community. We're trying to find ways to let the model replicate, not build a one-size-fits-all. Goal is to build self-sustaining communities.
  • Rick: We're specifically about Grand Rapids, but we're open to hearing about ideas from other places. But we want it to benefit West Michigan.

• How would you feel about someone replicating Startgarden somewhere else?
  • That would be great. We hear about people replicating artprize through Google alerts, it's great.

• Stephanie, what is your take? There are lots of Kickstarter-like services now.
  • Stephanie: We're really focused on what we're doing, we're excited to see people making things in the world. Our attitude is that it's about enabling more opportunities for people, so if other services are trying to do the same thing as us all the better. I don't think it takes away from us.

• You can plead the 5th, but where would Kickstarter would draw the line?
  • Stephanie: I think you'd have to ask our lawyer.

• One of the things I worry most about is long-term planning and sustainability. Are there ways to translate these ideas about crowdfunding into a long-term sustainability model?
  • Stephanie: You're almost answering your own question. The process of running a campaign helps a lot with building the long-term sustainability model. Amanda Palmer is a great example of this, she goes to her fans over and over again to create something with them and continuously engages them and thinks about what they want. People have funded sequels on Kickstarter, if you manage a project well you are getting fans, not just money, and can keep engaging them.
  • Jay: Engagement is the key. If you provide value to them, they will keep funding you. We require that people provide value, not just $100 t-shirt. There's no sense of a donation involved, it's a fair transaction. It's not about asking them to give money, it's a value exchange.

• You (Rick) do investment, and you do barter. What about donation?
  • Stephanie: Getting something of value is important, we really want people to getting a return on their investment. It's like going to the movies - you pay $12 every time, you don't go "oh I already gave that movie theater money".
  • Rick: We thought from our perspective, culturally it would make more sense to be a business investing in businesses. We didn't just want to give a whole bunch of grants at once.

• How are people held accountable to doing their projects?
  • Stephanie: The thing that has impact on what people deliver is how invested everyone is in the project. If you talk with people and engage them along the way, they will support you with money and social capital.
  • Rick: We were thinking about social collateral when we put together the 5 by 5 night. Soft agreement that people needed to come back with an update in a few months. Similar concept with Startgarden, contract includes making people come to an update night to check in.
  • Stephanie: I really want to underscore that social contract thing. Comes up a lot at Kickstarter, especially when projects are overfunded. People are invested in the investment of their backers, they get excited about the enthusiasm of their backers.

• Startgarden has chosen $5000 amounts, I'm curious about what's typical for the other 2 platforms, what is the scale?
  • Stephanie: Close to half of projcets on Kickstarter are in the $1000-5000 range. 2/3 under $10k.
  • Christina: A lot of international chapters ask how to translate currency and we say enough to get something done but not enough to fight over.

• Do people who are not online have an opportunity to get involved in things like small business development? Is there an option for people who don't have access or who are blocked by the digital divide?
  • Jay: It's sort of a difficult question. At heart, we are a technology company. It's difficult for us to monitor and track funds that don't go through our system, building an offline platform that's scalable to small businesses is really difficult to do.
  • Christina: Do stores advertise that they are running Smallknot campaigns in their stores?
  • Jay: Yes
  • Stephanie: There are ways to engage people offline, people throw parties and have donations for example. (examples of traditional fundraisers)
  • Rick, Jay: We do see a lot of offline activity. It's a great side effect, collateral.

• Role of curation in the context of funding: you still have to be approved to have a Kickstarter campaign, there is vetting. How much gatekeeping, if any, should platforms be doing to be a democratic funding model?
  • Rick: Our tolerance is pretty high. For Artprize there is a huge range, international art exhibits vs. chainsaw bear carving, there is a spectrum. Getting comfortable with that is important. We really have two channels: public vote and our team. Public vote has picked things that our team would never have chosen, and sometimes they see things we don't. If you're opening up to the point where you're a little bit scared, that's a good thing.
  • Jay: The real point comes down to the idea of accountability. We let the crowd source the ideas as well as fund the ideas. The guidelines we set is between a business and not a business, we let a lot of the vetting process happen on the ground.
  • Stephanie: People don't really realize how permissive Kickstarter is, ~80% acceptance rate. A lot of that 20% is people who have a vague idea, not an actual creative project. It's about the idea and doing something, not the content but whether or not it's resonating with people. We don't think of ourselves as a donation platform, so exchange of value. Community value. And if those things are happening we're happy to recommend it. It's about putting good energy into your project.