Why I Love/Hate Crowdfunding
Me and Sushi the cat pondering our love/hate relationship with crowdfunding as we look on the logos of a few of the platforms that engage in crowdfunding in different ways.
I love crowdfunding.
Having co-organized half a dozen crowdfunding campaigns on different platforms and contributed to over 100 more, it is by far my favorite and most liberating form of fundraising. It’s a great marketing and community-building opportunity for an organization, it empowers founders to set their own terms, and while campaigns can often be frustrating and unpredictable, that’s what makes it such an exciting challenge and learning opportunity for a team of founders.
I also hate crowdfunding.
Well, maybe “hate” is a strong word. I’m frustrated by it for the same reasons I’m frustrated by every other form of fundraising - from philanthropy to loans to venture capital: too often, it perpetuates inequity and rewards those who are already in the positions of highest privilege.
Platforms like Wefunder and Republic were supposed to democratize access to capital and make it easier for entrepreneurs from historically marginalized communities to raise funds. And they absolutely have done that, to an extent - the summary of this report by Investibule points to 77% of women-owned and 75% of POC-owned companies reaching their minimum funding targets, well above the 66% of funded businesses overall. But a closer look also reveals that the total amount raised by those campaigns is only 25% of the investment crowdfunding average. The average investment amount is also $249-$296, well below the $1,000 average.* As usual, there are indications that historically disinvested folx are feeling pressured to set lower expectations and consider it a “success” when they meet them.
“Funded!” Wait, why are we excited again? Source: Investibule Community Capital 2000 Report
What is the point of a movement to democratize access to capital if it mainly benefits extractive businesses and white male founders? Without a set of guiding principles, crowdfunding - particularly debt and equity crowdfunding that can lead to significant wealth creation - will only accelerate the worst aspects of capitalism that manifest as the massive racial wealth gap, climate destabilization, and so on.
For social entrepreneurs, who are building organizations with the express purpose of creating positive impact in the world, crowdfunding represents a powerful opportunity to raise money on terms that aren’t dependent on rapid growth, build wealth in disinvested communities, and raise awareness of the systemic problems we face head on. It also means they have tough choices to make. A successful campaign requires a lot of people to engage with it, positive user experiences with the platform, and a basic understanding what it even means to invest in their businesses.
So if you want to raise money from the crowd, what platform should you choose that is in right relationship with your values and gives you a good shot at getting funded? In the coming weeks, I’ll be posting about my specific experiences with different platforms and how they engage with this question. If you don’t want to wait, feel free to reach out to me here - I’m always glad to talk about it.