The Slow Funds Movement

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

Participants

Rick DeVos

Rick runs a number of projects focused on Grand Rapids, MI: ArtRise, Momemtum, and most recently Start Garden, which has eclipsed the first two. All three of these projects are local and focused on investing in the community.

Jay Lee

Jay runs a startup called Smallknot that does hyperlocal crowdfunding to support local businesses. Small businesses put up pages on Smallknot, use the platform to raise funds in their local community, and then pay their supporters back (in full plus interest) in goods and services.

Stephanie Pereira

Stephanie is the Director of Art at Kickstarter. Her focus is on reaching out to artists and helping them develop successful Kickstarter campaigns, and she shares a number of examples of projects that have a done a good job engaging funders in meaningful and innovative ways.

Panel Discussion

Moderated by Christina Xu. These are the main themes; for more complete transcripts see the liveblog.

Scalability

• The Slow Food movement gets critiqued for being too boutique, which hurts scalability. Is this a danger for slow funding?
• A big part of crowfunding is getting funders involved beyond just giving money. Is there a point where we'll be oversaturated with these personal beyond-economic transactions? For example, sometimes it's too tiring to deal with Couchsurfing, and you just want Airbnb or a hotel.

It's easier to scale slow funding because there aren't the same material and logistics costs with funding, and there are a lot of layers of involvement available. Projects really work on a human scale. Sometimes the demand for funder involvement can be overwhelming, but you have the choice to be more or less involved, and decide whether or not to fund something.

Elitism and the Digital Divide

• 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?

Startgarden and Smallknot have both had great success reaching a broad range of people, especially Smallknot because it leverages the existing customers of a business (and it's the responsibility of the business to reach out). Stephanie points out that Kickstarter's most active cities are the usual suspects (major metropolitan areas), but that there is also a lot of excitement in places like Missoula, Montana that people wouldn't predict.

Slow Funding

• Can you tell us about the slow money movement? (directed at Jay)

The slow money movement is tied to the slow food movement, and came out of trying to finance local food. It's been around about 3 years, and Woody Tash from Investors Circle wrote a book (Inquiries into the Nature of Slow Money).

Audience Q&A

• 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.