A guide to crowdfunding for local authorities

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This article by ECN’s Head of Advocacy, Francesca Passeri was first published by URBACT, a European exchange and learning programme promoting sustainable urban development operating a blog for sharing ideas on current urban issues and innovative solutions for cities in Europe and in the world. The full article can be found here

How do local authorities in Europe tackle growing economic and social challenges in their territories with an ever-shrinking budget?

Many of them have started partnering with local and national crowdfunding platforms, ranging from civic and cultural projects, to entrepreneurial and “green” business ideas.

What is crowdfunding?

Crowdfunding is a relatively new form of raising funds for specific projects or ideas, that allows any citizen to give a small contribution to their preferred project. Crowdfunding platforms are websites where projects can be published and can receive contributions from the wider citizenship. When a local authority partners with a crowdfunding platform, citizens can communicate their preferences by providing economic support to specific project, therefore becoming co-decision makers and co-funders of initiatives aimed at territorial development. So in how many ways can local authorities benefit from this alternative funding tool?

4 ways to use Crowdfunding for local authorities

  • As ‘Sponsor’

The public authority runs its own campaign for a specific project on an existing civic crowdfunding platform.

In 2013, the Municipality of Bologna (IT) launched a crowdfunding campaign for the refurbishment of an historical monument in the city, the Portico di San Luca. The campaign, called “Un passo per San Luca”, aimed at collecting EUR 300,000. While the Municipality committed one-third of the budget, the remaining EUR 200,000 were provided by citizens and local businesses.

  • As ‘Manager’

A sub-national government creates its own crowdfunding platform to foster the development of its territory. Sub-national governments usually create generic platforms that promote both entrepreneurial for-profit projects and non-profit civic initiatives. This partnership has been implemented in the territory of Bozen (IT), where the Autonomous Province of Bozen has funded the creation of the crowdfunding platform Crowdfunding Südtirol. The crowdfunding platform, funded in 2016 through ERDF resources, is managed by the local Handcraft Association (lvh – Wirtschaftsverband Handwerk und Dienstleister) who offers 360° consulting in launching and processing a Crowdfunding campaign. The platform only hosts project form South Tyrolean companies coming from different sectors, mainly from craft, agriculture and film & culture.

  • As ‘Facilitator’

The public authority selects a list of projects that reflect their agenda from an existing crowdfunding platform. This partnership scheme has been implemented by the Belgian Sociaal-Cultureel Werk – VGC, who provides funds for community development projects from the Flemish Community Commission in Brussels (BE). VGC commits to pledging up to EUR 3,000 to projects in the social and cultural fields which have already closed a successful crowdfunding campaign on the crowdfunding platform Growfunding. In this specific funding scheme, resources from the public authority are awarded as a prize to those projects that can already prove a wide support from the local community. 

  • As ‘Curator’

Some local authorities have set up partnerships with crowdfunding platforms, mainly aimed at co-financing projects. In this scheme, the public authority pledges a pool of resources that will be automatically distributed among those projects that successfully raise a certain percentage of their final budget. The most common combination is the 50-50 scheme, where the first 50% comes from the ‘crowd’ and the final 50% from the pool of resources pledged by the public authority. A perfect example of this partnership model is represented by two partnership schemes set up in Spain with the crowdfunding platform Goteo. The first partnership scheme (MetaKultura) has been implemented by the Province of Gipuzkoa since 2015, and aims at funding projects in the cultural and creative sectors. The second partnership scheme (Conjuntament) has been implemented by the municipality of Barcelona (ES) to support 24 projects related to the local economic development in the social, education, agro-ecology, consumption, exchange and cooperative fields in Barcelona neighbourhoods.

These four examples represent some of the many Good Practices of cooperation between local authorities and crowdfunding platforms in Europe, collected and further explored in the Triggering Participation Report (ECN, 2018).

Since 2015, more and more initiatives have been sprouting around Europe. This growing interest has led to the formalisation of the CF4ESIF working group within the European Crowdfunding Network, where public authorities and crowdfunding platforms are working together to explore how this type of partnerships can benefit and maximise the impact of ESIF resources.

Together with the Triggering Participation Report, the working groups have already published a white paper on the European dimension of civic crowdfunding and will continue working on the topic looking to the coming programming period (2021-2027).

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