Crowdfunding Cities

By Professor Paul Langley

What is the relation between crowdfunding and the City? ‘Crowdfunding’ is a rapidly expanding online method of raising money and finance that, according to The Economist (2016) magazine, will raise $34 billion worth of funding across the globe in 2016, double that of 2014. But, how does crowdfunding presently figure in processes of urban change? And, given the research focus of the PUrSI project, what are the indications from the cities of Athens, Berlin and Newcastle upon Tyne that crowdfunding can generate resources in support of urban social innovation?

Crowdfunding draws on the collaborative and distance-shrinking capabilities of the internet. Those in search of funding appeal to potentially diverse and geographically distributed audiences who are collectively referred to as ‘the crowd’. Online platforms act as intermediaries, enacting a business model predicated upon earning fee income from facilitating the comings together and transactions of the crowd (Langley and Leyshon 2016a). What began a decade or so ago as a method of mobilising fan communities to fund the endeavours of musicians, artists and computer games developers has gradually found a broader and more diverse range of applications (Leyshon et al. 2016). Crowdfunding now provides capital for projects initiated by actors and institutions that also include charities and community groups, start-up businesses, small- and medium-sized enterprises (SMEs) and real estate investment companies. As it has developed to date, crowdfunding has thus become regarded as something of an ‘alternative’ to long established funding practices organized through dedicated public or private institutions (Nesta 2013), whether branches of government or banks, venture capital firms and other financial market agencies.

Given that the crowdfunding economy is gathering pace through processes of marketization and financialization (Langley 2016), it is perhaps tempting to try to suggest that there is a singular, dominant and defining relation between crowdfunding and the City. In a recent commentary piece, for example, David Bieri (2015) argues that little is actually new in the crowdfunding of urban processes. For Bieri, crowdfunding provides a further channel by which finance capital in search of speculative returns is able to switch investment from the circuit of production into the built environment. However, Bieri’s concern is primarily with one, relatively discrete form of crowdfunding – that which aggregates and mobilises investment funds to capitalize (i.e. leverage debt against) large-scale urban real estate and infrastructural projects, especially in New York and other global cities.

Investment in the built environment is certainly one way in which crowdfunding and cities are presently attached, and this is an increasingly significant sector of the crowdfunding economy. Yet, the crowdfunding economy combines a diverse and dynamic array of monetary and financial ecologies (Langley and Leyshon 2016b). In the UK, for instance, Abundance Investment (formerly Abundance Generation) was the first platform globally to pioneer the crowdfunding of investment in fixed-income debt instruments. Abundance thus opened up the channel in the crowdfunding economy through which those with capital to invest can realise a relatively healthy and stable long-term return. But the debt instruments that Abundance intermediates are only issued to fund renewable energy projects, including initiatives to retrofit particular urban sites with solar panels and biomass boilers. Abundance begins to illustrate the manifold connections between cities and crowdfunding’s novel monetary and financial practices. Crowdfunding may well be facilitating the further prospecting of urban asset classes by finance capital, but it is also supporting socially progressive urban innovation and change.

From its outset, crowdfunding has taken so-called ‘donation’ and ‘rewards’ forms that resemble charity and gift giving or have parallels with the making of pre-payments in return for future discounts and/or markers of social and cultural capital of some kind. This creates potential for social entrepreneurs, community groups and activists to appeal to the crowd for funding to support all manner of progressive urban projects and initiatives. Such potential is rendered explicit by the notion of ‘civic crowdfunding’ that, according to Rodrigo Davies (2015), is ‘the use of crowdfunding for projects that produce community or quasipublic assets’.

At the time of writing in September 2016, research by the PUrSI project team has identified three illustrative and ‘live’ crowdfunding projects in Newcastle upon Tyne – i.e. all are presently campaigning to gather funds through donation and rewards forms of crowdfunding. In Tynemouth, a relatively wealthy small fishing seaport at the eastern edge of the urban conurbation of Newcastle, a group of residents have formed Friends of Tynemouth Outdoor Pool. This community charity aims to restore the former glory of a derelict 1920s tidal salt water swimming pool. Crucial to the Friends’ plans are their on-going call for donations on the Just Giving crowdfunding platform and an accompanying social media campaign that has generated over 14,000 Facebook followers. To date, their efforts have funded the commissioning of an expert report into the condition of the original pool infrastructure (see photo below) that will inform the design and planning process for the restoration.

tynemouthoutdoorpoolSource: https://www.tynemouthoutdoorpool.com/

Meanwhile, in central Newcastle, two arts and culture organizations are also currently seeking the backing of the crowd. Alphabetti Theatre launched a campaign on the Kickstarter platform to raise £2,500 needed to ward off closure, and thus far have received pledges that total over £5,500. By way of reward, all those who pledge over £15 can have their name written on the Theatre’s ‘wall of fame’. The 55 seat venue is a social enterprise hosting performances by local artists that it creates, produces and programmes, and also includes a bar and second hand bookshop. Along with a large number of other artistic and cultural endeavours, Alphabetti are based in an area of Newcastle city centre known as the East Pilgrim Street Creative Quarter. The buildings here are owned by property developers, the Ruben Brothers, and have been due for demolition since 2010. The space is presently made available by Ruben Brothers in return for peppercorn rents.

The Star and Shadow Cinema’s campaign on the Crowd Funder platform is targeting £50,000 towards the cost of opening new premises in Shieldfield, a relatively deprived area close to the city centre. The Cinema are a cooperative who operate an open programme that encourages community organizations, independent artists and the public to promote their own social interests via film, music, discussions and working groups. Their programme ran for ten years before their former, nearby rented premises were earmarked for demolition. While the cooperative members and volunteers are themselves undertaking much of the work necessary to convert a disused carpet warehouse into the Cinema’s new home, those from the crowd who contribute funds towards the costs of materials and the like are promised a gradated range of rewards, from opening night tickets and T-shirts to places at film making and bread making workshops.

starandshadowSource: https://starandshadow.org.uk/

As these examples from Newcastle show, the connections between particular sites in cities and donation and rewards crowdfunding can be very different from those typically produced through the crowdfunding of major investments in urban property markets and infrastructures. The networks that attach crowdfunding and cities may enrol the activist spirit and entrepreneurial experimentalism of so-called ‘DIY urbanism’ (Iveson 2013). In her account of ‘The Makeshift City’, for example, Fran Tonkiss (2013) is rightly wary of making ‘pious gestures’ towards the potentiality of the informal economy and ‘the pocket park or the crowd-sourced start-up’ (p. 321). Nonetheless, and with reference to innovative urban projects taking place in disused and dormant sites in Berlin, Paris and London, Tonkiss contrasts what she terms ‘slow money and non-monetary investments’ that ‘produce gradual spatial, social and economic value and continued returns to actual users’ with ‘”cataclysmic money” leveraged to produce rapid returns to investors (most of them very distant) and to build the physical and economic ruins of the crises to come’ (p. 320).

It remains problematic, however, to reduce the diverse relations between crowdfunding and cities to two contrasting and somewhat oppositional modes: a formal financial mode of lending and investment relations that attach to the urban economy and enclose the built environment, on the one hand; and, an informal monetary mode of pledging and gifting relations that connects to the pragmatic and innovative projects of the urban commons, on the other.

By way of extended example, consider Crowdfunding Berlin, a ‘knowledge transfer’ website which features a ‘real-time’ listing of the live projects in the city that are presently seeking funding.

crowdfundingberlinAt first blush, Crowdfunding Berlin would seem to support the view that, in essence, there are two modes of relations between crowdfunding and cities; that is, a formal financial mode, and an informal monetary mode. When covering projects across arts, culture and education and media, ICT and the creative industries, Crowdfunding Berlin’s ‘projects’ tab directs users towards one of two listings: what it calls ‘crowdinvesting projects’ or ‘crowdfunding projects’. However, the Crowdfunding Berlin example also begins to highlight that much greater attention also needs to be given to the variegations present in the crowdfunding of cities; that is, crowdfunding-city attachments can be comparatively ‘thick’ or ‘thin’ and may become the object for quite different forms of policy interventions by city authorities. And, as the Crowdfunding Berlin example also calls to attention, any attempt to hold apart the formal financial and informal monetary modes of crowdfunding-city relations encounters significant ambiguities; that is, donation and rewards crowdfunding may resemble charity and gifting and empower the building of social and cultural capital through the crowd, but they are also big business for platform intermediaries.

Crowdfunding Berlin provides a window on the extent and intensity of the connections between crowdfunding and sites in the German capital, thereby drawing attention to the pooling of crowdfunding flows in some cities and not in others. Berlin is the leading city in Germany’s crowdfunding economy. Athens occupies a similar place in Greek crowdfunding, where the Give&Fund and Groopio donation and rewards platforms are being used by a growing number of social enterprises, co-operatives and non-profit educational, cultural and environmental initiatives. That said, crowdfunding in Greece remains relatively new and underdeveloped, especially when compared with the diverse crowdfunding economies of Germany and the UK. London dominates crowdfunding in the UK, and is celebrated as a global leader (Moules 2014). While strong and dense connections have developed between crowdfunding and some cities outside of London and the South-East – a considerable volume of the dedicated flows of civic crowdfunding concentrate in Bristol, for instance – this is not the case for Newcastle, notwithstanding the examples discussed above. Data from an industry monitor, The Crowdfunding Centre, shows that crowdfunding projects are relatively thin on the ground in Newcastle relative to other major UK cities. Over two-years from January 2014, successfully funded projects in Newcastle raised £270,000, a 0.1% share of total rewards and equity crowdfunding in the UK. Where cities such as Berlin, Athens and Newcastle stand in the crowdfunding economy clearly does not determine whether an innovative urban project will successfully attract the backing of the crowd, but the variegations of diverse modes of crowdfunding-cities relations are an important consideration.

Reflection on Crowdfunding Berlin also foregrounds the various ways in which governments and urban authorities are attempting to harness and grow the connections between crowdfunding and their cities. The Crowdfunding Berlin website is operated by Kulturprojekte Berlin GmbH, part of the Kreativ Kultur Berlin initiative that is backed by the European Regional Development Fund through to 2018. A number of public and private sector partners are also involved in Crowdfunding Berlin, including the Senate Department for Economics, Technology and Research (Projekt Zukunft). In addition to showcasing and spurring the funding of projects in the city, Crowdfunding Berlin provides a range of ‘how to’ information and consultancy services for would-be entrepreneurs and organizations who are considering future projects. In Newcastle, meanwhile, the City Council’s approach has largely mirrored that of other UK local governments, including the office of the Mayor of London: partner up with a particular peer-to-peer business lending or equity crowdfunding platform, and offer to match-fund private investment in those urban projects that successfully reach their funding goals. Compared to Crowdfunding Berlin, policy engagement with crowdfunding-cities connections in the UK is relatively narrow, focusing on the formal financial mode of relation and largely leaving aside the affordances of the informal monetary mode of relation for urban social innovation. Attention needs to be given, then, to the different ways in which the attachments between crowdfunding and cities become objects of policy, and to the distinct consequences of those policies that may compromise or even co-opt crowdfunded urban social innovations.

Moreover, and finally, the example of Crowdfunding Berlin underscores the ambiguities that cut across the formal financial and informal monetary modes of crowdfunding-city relations. The ‘platforms’ tab on the Crowdfunding Berlin website directs users to around twenty commercial partner platforms from where existing projects stage their funding calls. The portal does not feature all platforms operating in Germany. For instance, Germany’s leading platform specialising in civic crowdfunding, Better Place, is itself based in Berlin, but cannot be accessed via the Crowdfunding Berlin portal. This provides an illustrative reminder that those platforms that position themselves as the ‘go to’ place for donations and/or rewards crowdfunding campaigns are – like all crowdfunding platforms – in the business of intermediation. Platforms that explicitly enable civic crowdfunding, such as Better Place and Space Hive in the UK and Citizinvestor, IOBY and Neighbor.ly in the USA, are no exception. The intermediary role of all platforms generates fees and profits for the platforms and their backers. Even when it is the ‘slow money’ of charity, gifting and pledging that is enrolled in the crowdfunding of urban social innovation, this is entangled with the venture capital and other forms of investment that typically back the business of crowdfunding. Future research should move beyond the incorporation of crowdfunding into the circuits of ‘cataclysmic money’ and consider the diverse and variegated connections between crowdfunding and cities. It should, nonetheless, also be attentive to the ambiguities present in this method of generating resources for urban social innovation.

References

Bieri, D. S. (2015) Crowdfunding the city: the end of ‘cataclysmic money’? Environment and Planning A 47 (12): 2429-2435.

Davies, R. (2015) Three provocations for civic crowdfunding, Information, Communication and Society 18(3): 342-355.

Langley, P. (2016) Crowdfunding in the United Kingdom: A cultural economy, Economic Geography 92(3): 301-321.

Langley, P. and Leyshon, A. (2016a) Platform capitalism: The intermediation and capitalization of digital economic circulation, Finance and Society, online early.

Langley, P. and Leyshon, A. (2016b) Capitalizing on the crowd: The monetary and financial ecologies of crowdfunding, paper under review.

Leyshon, A., N. Thrift, L. Crewe, S. French, and P. Webb (2016) Leveraging affect: Mobilizing enthusiasm and the co-production of the musical economy. In The Production and Consumption of Music in the Digital Age, eds. B. J. Hracs, M. Seman and T. Virani, In press. London: Routledge.

Moules, J. 2014. London emerging as world leader in crowdfunding. Financial Times:15th August, http://www.ft.com/cms/s/0/8e5be7d0-23c2-11e4-8e29-00144feabdc0.html#axzz3xhSS3r6F.

Nesta (2013) The Rise of Future Finance: The UK Alternative Finance Benchmarking Report, London: Nesta.

The Economist (2016) Economic milestones of the year ahead, The Economist: 1st January, http://www.economist.com/blogs/graphicdetail/2016/01/daily-chart.

Tonkiss, F. (2013) Austerity urbanism and the makeshift city, City 17(3): 312-324.