Posted on July 17, 2013 By iPledg With 0 comments

Crowd Funding – The Key for Local Governments to Unlock Funding.

final logo new small-01When the government of the City of Rotterdam turned to crowd funding to finance their wooden walkway, the campaign was not only about a physical bridge linking the city, but a bridge between a conventional problem facing governments and an innovative way of thinking. Initiated to raise over €400,000 by offering residents and businesses the chance by one of 17,000 planks, the success of this project became the template for Rotterdam to fund many civil-minded projects, as well as an example to local governments everywhere as to how crowd funding can offer a much needed solution to their fiscal woes.

Local governments are themselves governed and funded by state and federal governments. They too are finding that the funding pipeline is no longer flowing as freely as in previous times, putting the onus back on local governments to better balance the books, and to self finance. This is not such a simple exercise in a time when constituents are struggling financially themselves, so taxing more heavily is not the answer. Stopping the implementation of new civil-natured projects is not a solution, and the demands of the communities they serve do not dry up at the same rate that funding does.

Undeterred by a lack of funding, the City of Rotterdam not only succeeded in crowd funding their “Luchtsingel footbridge” project, they set up crowd funding as the vehicle that would fund many of their civil project such as rooftop gardens, playgrounds, and an array of beautification, community, aid, and environmental programs. Governments around the world then started to adopt this manner of financing, some offering to match funds pledged by the community, thus leveraging government finances whilst allowing the community to determine which projects would proceed and in what manner.

Crowd funding undertaken by local councils is not simply a tip jar for governments, but a way to put the decisions back to the people. It is becoming a true democratisation of funding whereby people vote with their money. In times when governments are struggling to meet the funding needs of the local community, crowd funding allows local residents and businesses to really have a say in what projects they want to proceed. Put simply, the crowd funding campaigns that receive the most support are the ones that proceed, and those that receive a lack of support by way of pledges are the ones that they leave on the back burner.

At a time when trust in governments is at an all time low, crowd funding allows smart governments a chance to engage and build trust. Crowd funding allows for clear and transparent fund raising and allocation of spending through true democratisation of funding.

And with the “tipping point” format such as that offered by iPledg, constituents decide how far projects will be funded and in what manner the project will be delivered. For example, the local government can look to run a campaign with a funding target of $100,000 for beach restoration, including beautification and the establishment of parklands, but set a tipping point of 30% which sees just the bare restoration work without the “bells and whistles”. If community pledged funds reach $30,000, the campaign is then “live”. If the campaign only raises $30,000, then the people have spoken and the basic restoration work goes ahead. If they are totally passionate about getting the project delivered in full, they will drive the campaign, and the $100,000 will surely be reached for the full project to be implemented.

The motivators for people to pledge come in various forms. Some are simply driven by a passion to see the project implemented and the outcome delivered. If we speak of the beach restoration project, those who want to see their beaches preserved will pledge their support simply to ensure that the place where they enjoy their free time is cared for. Others will be motivated by a “reward”, whether that be to have their name immortalised in some way (like they did in Rotterdam where the government offered personalised engraved planks in the walkway for each person or business who pledged), or to receive rewards that may be offered by local businesses. Such rewards not only get people and corporates pledging, but also serve to stimulate the economy – a further win for local government.

Crowd funding offers astute governments a real chance to not only stretch their coffers, but to better engage and build trust with their constituents. It becomes a vehicle to give the power back to the people they serve, and who put them there in the first place. And correctly implemented, crowd funding can serve to stimulate local economies. It is no wonder that crowd funding is being considered by more governments at all levels around the world, as it takes the focus and pressure off them and their declining budgets, and allows for more sustainable funding channels.

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