Giving power back to the people

Sheffield Antiques Quarter (pictured above in promotional shot) used civic crowdfunding to raise £16,753 to flag up its presence throughout the local area with signs and murals (picture by Amie Parsons)

UPDATED: 2017

Iona Bain

Having community pride used to mean organising charity bake sales or supporting your neighbourhood watch. Now you can make a difference without getting off the sofa.

Giving something back has never been easier thanks to so-called “civic crowdfunding”, which allows the time-poor to make online donations to various public projects, whether it’s restoring a local landmark or creating a new playground.

Civic fundraising is well established in the US, where it came into its own after the 2009 recession; local governments slashed budgets, forcing many communities to rely on individuals’ generosity to fund public projects. Now it is taking off in the UK, with sites such as Spacehive and Crowdfunder.co.uk raising more than £30 million in the UK for worthwhile causes over the past five years. For example, in 2014 the Sheffield Antiques Quarter raised £16,573 through Spacehive to advertise its 35 shops throughout the local area using banners, signs and murals — with the cash provided by just 93 devoted backers. It has made Sheffield a serious destination for lovers of all things vintage.

These crowdfunding sites not only provide a shop window for campaigns, they make it possible to organise a whip-round quickly and securely, carefully screening projects to make sure they are beneficial and achievable. Other success stories include Hastings Pier, which was seriously damaged by fire in 2010 and reopened in June partly thanks to crowdfunding worth £204,000; and a new distillery in the Scottish Highlands powered by renewable energy that attracted £2.5 million — £1 million more than its fundraising target — in only 77 days.

Civic crowdfunding has even helped a David and Goliath battle to stop an unpopular housing scheme going ahead in Rotherhithe, southeast London. Southwark council last year announced plans to build 213 new homes in the South Dock boatyard in high-rise buildings. Local residents said the development would undermine businesses in the boatyard and ruin views of the marina, so they quickly formed the campaign group Save South Dock Boatyard and used Spacehive to raise £7,475 for legal and consultancy fees and promotional material.

Helen Jones has been a resident of Rotherhithe for 17 years. She says: “We weren’t getting anywhere as individuals. If we wrote letters of objections, we feared they would be brushed aside. So the best way forward was to get professional help as a group to fight this battle.”

Ms Jones, who runs a property management company, says that Spacehive insisted on the campaign independently verifying its target figure of £7,455 as accurately reflecting costs. “It was quite a process [to get approval]. We also couldn’t depend solely on our Spacehive page. We had to reach out to people using mailshots and social media to alert them to the campaign, but within a matter of days we were getting the money we needed,” she says.

In a statement, Southwark council said it had listened to local residents’ concerns and would be revising the plans.

The South Dock crowdfunding campaign was organised on an “all-or-nothing” donations basis, which means the organisers would not receive any money unless the full target was reached within a certain time period; only then would contributors see the money leave their bank account.

Tim Wright, a co-founder of the crowdfunding consultancy twintangibles, says: “If a campaign is aiming to raise £10,000, even if £9,999 is raised the campaign receives none of the money and the people who back it will be very disappointed. Success rates across crowdfunding remain quite low, at 30 per cent, but they vary enormously depending on the platform.”

The alternative model used in civic crowdfunding is “keep it all”, where the campaign holds on to the money raised, regardless of whether it has reached its target.

Mr Wright says: “The campaign has to honour its commitments, so if it offered shares or rewards this can be problematic. It may have been able to only deliver what it promised had it reached its funding target.”

It is crucial to distinguish between the different types of crowdfunding available. Civic crowdfunding is often done on a donations basis, where the contributors receive no personal benefit (other than seeing their dream project come true). Rewards-based crowdfunding is more commonly associated with quirky commercial projects, such as a microbrewery or indie film. In this situation, contributors actually receive tangible perks as a result of handing over cash; the bigger the contribution, the bigger the reward.

Equity crowdfunding, on the other hand, involves selling shares or bonds to the public and when used in civic crowdfunding it is described as a “community share issue”. This has a much higher level of risk than other forms of crowdfunding and should not be taken lightly, says Mr Wright. “A community share issue needs to produce an offer document, clearly setting out what will be done with your money, and ideally it should come with a quality mark to show there has been independent due diligence. People should be under no illusion that they could lose their money — so if you buy into a share offer for a local shop that will run as a commercial entity, you need to go into it with your eyes open.”

Civic crowdfunding sites usually take a small cut of the total amount raised and collect money through independent payment systems such as PayPal and GoCardless. They ensure that money can be collected securely, but charge their own fees.

Charities also insist they are more efficient than crowdfunding campaigns. That’s partly because charity donations are tax-free through gift aid, which doesn’t, at present, apply to civic crowdfunding.

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