Crowdfunding for a better world

By Fiona So | 27 May 14

By Fiona So

This article is part of our May issue, Human Rights and Money.

The latest weapon against malaria is a humble 1.5 inch by 1.5 inch square sticker—the Kite Patch—that attaches to clothing and disrupts mosquitoes’ ability to detect humans. Thanks to one crowdfunding campaign (which ran for six weeks and involved 11,254 supporters pooling together a record-breaking $557,254) the Kite Patch is now undergoing extensive field trials in Uganda, where malaria rates are amongst the highest in the world. Amro Albanna, founding CEO of ieCrowd (the company who ran the campaign), hailed the success as proof of a “new crowd-powered process for solving global challenges”.

He’s right on the money. Since tech blogger Michael Sullivan first coined the term in 2006, crowdfunding has exploded to the tune of billions of dollars. Essentially, it refers to the funding of projects by sourcing small financial contributions from many people, typically via online social platforms. These platforms provide the scaffolding needed to kickstart a successful campaign—a public interface to help the “crowd”engage with an idea that includes progress tracking tools and payment mechanisms to accept and disburse funds.

Crowdfunding has financed a dizzying range of human endeavours and shows no sign of slowing. The World Bank estimates the crowdfunding market will balloon to a massive $96 billion by 2025—an astonishing prediction, given it is a relatively new phenomenon. Besides breathing life into critical clinical trials, crowdfunding has allowed music artists to bypass record companies and release chart-topping albums on their own terms, turned science-fiction worthy technologies into affordable consumer products, and given the city of Detroit their very own ten-foot Robocop statue.

Not surprisingly, crowdfunding has also made a big splash in the arenas of governance, human rights and development. Individual activists, grassroots communities and NGOs are harnessing the power of crowdfunding to keep governments and corporations accountable and to develop important projects in previously unheard of ways.

Crowdfunding for better governance

In 2008, Barack Obama essentially wrote the manual on how to crowdfund your way to a presidential win. Led by Facebook co-founder Chris Hughes, Obama’s online campaign team meticulously built a powerful social media presence for the candidate, setting up personal fundraising pages for passionate supporters on that raked in $30 million in small donations, inspired community action and secured a strong voter turnout. The connection between crowdfunding and political change was truly solidified—and it wasn’t just politicians that were catching on. Increasingly, crowdfunding has opened up new avenues to challenge unpopular government actions, demand transparency and distribute public information that isfree from the bias often found in mainstream media.

Crowdfunding is attractive to political activists for a number of reasons. It offers a way to clear the hurdle of exorbitant public litigation costs. At the time of writing, Australian advocacy group GetUp! is crowdfunding a historic test case against Environment Minister Greg Hunt’s decision to green light the dredging of the Great Barrier Reef seabed for coal seam gas mining. This isn’t the first time they’ve reached out to the community to fund a legal challenge. In 2010, GetUp! relied heavily on crowdfunding to bankroll and eventually win a landmark Federal Court decision allowing Australians to enrol online for future elections.

Crowdfunding can also resuscitate key policy advisory bodies that fall victim to political expediency. Within days of winning the Federal election last year, the Coalition axed the Climate Commission, originally set up to advise the government on carbon pricing and provide the Australian public with reliable information on climate change. Following a record crowdfunding campaign that raised over $1 million, the revamped Climate Council emerged. Ironically, the climate science body is now in a better position to carry out its work free from government constraints and with the support of the public.

Beyond Australia, crowdfunding is helping disseminate politically sensitive material in the name of transparency. Successes include Rospil, a Russian anti-corruption website that publishes government tenders online and invites citizens to scrutinise them for signs of nebulous dealings, and the Freedom of the Press Foundation’s crowdfunded stenographer, who ensured Chelsea Manning’s court transcripts were made available to the public in spite of the US government’s attempted media blackout.

Crowdfunding for corporate social responsibility

It is notoriously difficult to ensure corporations make good on their corporate social responsibility (CSR) commitments, particularly when it comes to accountability for human rights abuses. The absence of an enforceable global regulatory regime, the sheer complexity of subsidiary company structures and the cost of filing lawsuits often leave victims with no viable remedies.

CSR is a broad umbrella term: gauging its potential for crowdfunding depends on how it is defined. If CSR is equated to philanthropy (ie. “giving back”to the community), then crowdfunding is an exciting new platform upon which corporations can raise their social profiles. Take the social enterprise crowdfunding initiative, Dreamstarter, launched by the bank ING Direct. Projects which attract the most community support receive additional funding from ING Direct; in return, the company gains CSR credibility. However, if CSR is taken to mean a broader concern with how business practices affect human rights and the communities in which corporations operate, crowdfunding’s capacity for positive influence has been less clear-cut.

The most straightforward way crowdfunding can address corporate misbehaviour is to level the litigation playing field. For example, JustAccess is a North American venture whose goal is to allow people to share their court case stories on a crowdfunding platform and raise money to cover their legal costs. According to the project description, this process enables plaintiffs and defendants to “act as your representatives in the courts, [while] you help shape society through their legal battles”. The practical merits of this idea remain unknown—the project failed to attract enough funds last year and has been temporarily shelved.

Perhaps only exceptionally high-profile corporate scams spark enough outrage to get crowdfunded cases off the ground. In 2012, Spanish activists successfully crowdfunded a citizen lawsuit against Rodrigo Rato, a former director of Bankia, one of Spain’s largest banks. The campaign was a reaction to the failure of the justice system to impeach Rato for his alleged misuse of bank funds, which stripped customers of their savings and spurred a costly government bailout. It raised more than the requisite 15,000 euros in less than a day, and evidence for the case was collected in record time. Even so, no official charges have been laid since, highlighting the difficulty of pursuing justice through litigation—a difficulty that is often compounded when cross-border activities are involved.

Most crowdfunding projects aimed at addressing corporate abuses instead fall under the rubric of awareness raising, like this series of short films exposing human rights violations in the Mekong area. Another approach has been to crowdfund start-ups that produce ethical alternatives to consumer goods containing raw materials sourced from tainted supply chains. One such pioneering project is Fairphone, which recently confirmed a second batch of 35,000 orders for the world’s first fair-trade phone—and, in the process, has become a trailblazer for conflict-free business practices.

Sceptics may point out that intersections between crowdfunding and CSR have yet to take off on any significant scale. For instance, 35,000 Fairphone orders is a drop in the ocean compared to the 1.3 billion smartphones currently in use. However, it is still early days. At the very least, the emergence of crowdfunding has given corporate watchdogs and socially-minded entrepreneurs a promising tool with which to boost the recognition of their existing work.

Crowdfunding for development and human rights

Out of all projects with a social cause, crowdfunding has warmed the most to those fostering development and basic human rights. This is because it appeals to a growing group of donors wanting to solve tangible problems by funding tangible solutions—a school needing access to clean water, a film spotlighting the plight of LGBT communities, medical supplies for refugees. Also, the social networking aspect of crowdfunding offers donors the emotional and collaborative connection that traditional models of aid donations lack.

The success of Kiva, an online platform that has delivered over $500 million in microfinance loans to the poor, is a shining example of the power of crowdfunding to unite a diverse international community behind social development. Lenders browse profiles of local entrepreneurs and can contribute loans as little as $25. Progress reports are shared throughout the life of the loan, which is eventually repaid to the lender. With Google’s backing, the organisation recently launched Kiva Labs to extend its crowdfunding model to nonprofits and social enterprises involved in poverty alleviation.

Larger development institutions are sitting up and taking note—the World Bank envisions a bright future where crowdfunding supplants traditional capital market structures, stimulates innovation and enables the developing world “to leapfrog developed countries”.

Crowdfunding up to a limit?

Despite the hype and multitude of runaway success stories, crowdfunding is no silver bullet. Statistically, a large majority of projects fail to reach their funding goals. Even when funding goals are reached, lack of business acumen, unforeseen costs and manufacturing delays can still paralyse a project.

Due to the newness of crowdfunding to many organisations, there is a general lack of knowledge about what makes a good campaign. We do know that the viral nature of crowdfunding means that only the most social media-friendly projects will thrive. A rare research paper investigating the determinants of success and failure for crowdfunding ventures found that strong campaigns are those that take advantage of existing social networks, set shorter time frames, use quality promotional videos and get featured on popular crowdfunding platforms. Finally, according to Forbes, ideas that are highly creative, reward-driven and backed by influential opinion leaders gain the most traction. Those who wish to crowdfund for social causes must keep these caveats in mind to avoid overblown expectations.

Crowdfunding into the future

Crowdfunding is growing exponentially by the day, as is public and private interest in its game-changing potential. Reliable crowdfunding tactics are slowly catching on. In Australia, the government is contemplating laws similar to the JOBS Act passed in the US last year that would legalise equity crowdfunding and raise the amount of investment permitted to flow into the social entrepreneurship sector.

For human rights and development activists, the rise and rise of crowdfunding will expand the scope of potential givers beyond individuals to include businesses and foundations seeking social causes they can get behind. Whether it’s advocating for better governance, responsible corporate practices or equal access to basic rights, the future indeed belongs to the crowd.