The Slow Funds Movement
For liveblogged transcripts of this talk, see the MIT Center for Civic Media blog.
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 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 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.
- 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.
- 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).
- I'd love to hear about your failure rates. Especially Kickstarter, we always hear about success rates, how many fail, what happens to them?
- What about accountability - is the failure rate of Kickstarter so high because people aren't held accountable by face-to-face interactions?
Successful crowdfunding is really about getting people involved - people who take responsibility for reaching out and getting people engaged have very high success rates. For example, on Kickstarter once you get a single donor your probability of success goes from 44% to over 50% - it meas you are telling people and getting them engaged. Smallknot projects have 100% success rate for businesses that are actually reaching out to their networks and maintaining relationships. Rick adds that we don't need to plan for everything or mitigate the 5-year failure rate, we just want to get things started.
As far as accountability, social capital plays a huge part in all three areas. There is a social contract between projects and their funders, and it really is effective. People care about providing value to the people supporting them.
- Scale vs. replication - do you want to grow nationally or have clones and things happening?
- How do you feel about others copying or replicating your projects somewhere else? Where do you draw the line?
Replication and replicability are real goals for Smallknot, because solutions need to be tailored to communities, not one-size-fits-all. Start Garden isn't focused on anything outside of Grand Rapids, but is open to being replicated elsewhere. Kickstarter is not offended by clones - the goal is to make the world more exciting. It doesn't take away from anyone to have more services trying to do good.
- 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?
- Rick does investment, Jay and Stephanie do barter. What about donation?
Engagement is the key to sustainability, and 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, which shows that if you manage a project well you are getting fans, not just money. If you provide value to people, they will keep funding you; it's not about asking them to give money, it's a value exchange.
The Digital Divide
- 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?
Smallknot, for example, is a technology company at heart. It's difficult to monitor and track funds that don't go through their system, and building an offline platform that's scalable to small businesses is really difficult to do. There are also ways to engage people offline - Smallknot businesses advertise in their stores, people do offline Kickstarter activites where they hold parties and events with an admission price. Crowdfunding doesn't have to be digital.
- The 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?
There are lower barriers to entry than people think - ArtRise is extremely open, Smallknot only requires that you be a business, and Kickstarter accepts more than 80% of ideas. Projects that aren't accepted tend to be pitching an idea, not an actual project, and are usually accepted when they come back with more direction. It's about putting good energy into your project.
- Where did the money for Start Garden come from?
Startgarden was funded by private investors.
- Startgarden has chosen $5000 amounts, I'm curious about what's typical for the other 2 platforms, what is the scale?
Close to half of projects on Kickstarter are in the $1,000-5,000 range and 2/3 are under $10,000, and $10,000 is about the highest that Smallknot has seen. Within the Awesome Foundation, many international chapters ask how to handle exchange rates and the rule of thumb is "enough to get something done but not enough to fight over".