Financing Sustainability Projects

Crowdfunding Lets Citizens Invest a Little to Get a Lot

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Ryan Stover is co-founder and chief creative officer for a Fort Collins, Colo.-based crowdfunding site called Community Funded

Dan Miller is co-founder of the Washington, D.C.-based real estate startup Fundrise, and its companion crowdfunding site, Popularise.

Francesca Vietor is program director with the San Francisco Foundation.

John Nordgren is a senior program officer with the Kresge Foundation.

Scot Spencer is associate director of advocacy and influence for the Annie E. Casey Foundation.

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Posted: Wednesday, March 12, 2014 7:18 pm | Updated: 4:18 pm, Tue May 13, 2014.

DENVER, Colo. – City budget deficits are far from rare. Chicago, Phoenix and Newark are just a few examples of cities confronting likely shortfalls in the upcoming fiscal year. And on the extreme end of the spectrum there’s Detroit, which filed for bankruptcy in the summer of 2013 citing a staggering $18-20 billion in debt.

So how can cities find room in their budgets for sustainability initiatives?

Well, in Colorado the recent legalization of recreational marijuana use means cities like Denver could begin seeing millions in new revenue starting this year. Such a distinctive way of generating new money makes it perhaps fitting that this year’s annual New Partners for Smart Growth conference took place in the “Mile High City.”

But, most municipalities represented at the conference couldn’t bank on taxation and regulation of a controlled substance to pay for smart-growth projects. Two conference sessions in particular offered attendees a number of other compelling ideas and options for funding projects.

One session, “Follow the Crowd: New Funding and Civic Engagement Tools for Equitable Development,” addressed how funding models are shifting and new avenues are opening up to basically anyone with an internet connection, assisted by recent legislation and an increasingly civic-minded public seeking to connect with each other and support their communities.

One model discussed – crowdfunding – has become a buzzword in recent years. Popularized by platforms such as Kickstarter and Indiegogo, crowdfunding provides a way for many people to pool resources, typically through online donations, toward a larger goal. Ryan Stover, co-founder and chief creative officer for a Fort Collins, Colo.-based crowdfunding site called Community Funded, described the fundraising tool as “a big shift in the way things are being funded.”

Scrolling through Community Funded’s website, Stover pointed out inspiring examples of crowdfunding: a family raising money to pay for a child’s exorbitant hospital bills, Fort Collins residents coming together to maintain a bike lending library, a young man with little money but a lot of entrepreneurial spirit launching a new brand of energy bar.

“Crowdfunding is storytelling with this funding process built in,” Stover explained.

Add to it the power of technology, he said, and the possibilities soar.

“The multiplicative effect of communication takes these concepts to a whole new level,” he said. “Technology allows incredible connectivity.”

Crowdfunding could be modified and used for many different purposes, Stover said, including use by government entities.

“We’ve had conversations with governments of all sizes,” he said. “There’s the idea of taking these tools and you can put them on any website and open up any platform. It works great for government programs aimed at revitalizing and creating startups and business incubators. Things are being created already. It’s a set of tools that can be adapted and fit to any niche.”

According to both Stover and Dan Miller, co-founder of the Washington, D.C.-based real estate startup Fundrise (and its companion crowdfunding site, Popularise), the momentum around crowdfunding will be boosted by enactment of the 2012 Jumpstart our Business Startups (JOBS) Act. Though not yet fully in effect, the legislation, among other things, deregulates securities rules on raising capital, including lifting a ban on public solicitation of, and marketing to, investors.

The changes will have powerful effects not only on crowdfunding ventures, but business startups like Miller’s as well.

“It’s going to create a revolution in capital and how the entire system works,” said Fundrise’s Miller, whose business eliminates middlemen in real estate transactions and allows individuals to invest in their communities for as little as $100. “The JOBS Act will allow people to raise capital with really little to no upfront cost. It will be a few thousand in legal fees instead of nine months of filings and hundreds of thousands [spent] preparing.”

Meanwhile, philanthropic foundations also remain a stable option for cities and organizations in need of supplemental funding to support programming. A session called “Where’s the Money: 2014 Smart Growth Funding Report” brought together representatives from several well-known philanthropic foundations to relate trends and offer advice on funding opportunities.

Panelists returned to themes of resilience and adaptability in their recommendations. Funding appeals related to climate change mitigation also are particularly appealing to foundations right now, they reported. Panelist Francesca Vietor, program director with the San Francisco Foundation, emphasized the need for grant applicants to also be cognizant of the country’s shifting demographics.

That doesn’t mean organizations should feel limited though, said John Nordgren, a senior program officer with the Kresge Foundation.

“You can start with where you are,” he reassured. “You can start with water if that’s what your community is wrestling with and use that as a door through which you can work on other agendas. But have a broad conversation. Engage across sectors. Do multi-sectoral, multi- jurisdictional engagement on your own as a matter of course.”

Scot Spencer, associate director of advocacy and influence for the Annie E. Casey Foundation, emphasized the powerful role that philanthropy can play. He cited as an example the aftermath of Superstorm Sandy in 2012, when the Federal Emergency Management Agency (FEMA) was limited in the ways it could offer assistance to affected communities.

According to Spencer, about 20 early childhood centers were devastated by the storm, but FEMA was able to offer assistance only to federally-funded Head Start-affiliated centers. This not only created the burden of leaving a number of childcare centers closed for an extended period of time, but also caused some parents to be unable to work as a result of the absence of childcare.

“But a bunch of philanthropies came together to give money upfront to get some things taken care of,” Spencer said. “In times of emergency, philanthropy can come to a pretty hefty rescue and in a pretty good way that government cannot at all times.”

Thomas Gougeon, president of the Gates Family Foundation in Denver, cautioned that philanthropies should not be viewed as a panacea.

“The real resources are in the public sector and the private economy,” he said, “not in philanthropy. While philanthropy can be additive, you have to harness the other two to do the things you want. Just trying to work off philanthropy isn’t going to get it done.”

The future might well lie in the innovations unfolding at Stover’s Community Funded and Miller’s Fundrise. Reflecting on his aspirations for Fundrise, Miller said, “The real vision is you give people a tool to build their own city. They’re using this as a vehicle to organize, invest and manage and be a part of development around them. … It’s going to create better cities that are more connected and relevant to local community.”

Philanthropists agree.

“We’re going to be very vulnerable if we do things the way we’ve always done,” Gougeon said.

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