A Communal Business Model
By Elizabeth Barrette Published in the Fall 2011 issue of Communities magazine - Issue #152
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You may already be involved in crowdfunding but not know it by that name. Crowdfunding is a collective financial approach that allows individuals to pool their resources in support of favorite projects that might not succeed under a more conventional model. It also lets creative people and businesses cater to niche markets willing to support them, even if the product or service seems odd to outsiders. Crowdfunding both encourages and thrives upon community, as creators and sponsors form close relationships with each other and as the audience also develops a collective culture. These features make crowdfunding a business model that meshes well with intentional community. It goes by various names, so you may recognize some of your community’s projects or your personal activities as fitting this model. If you’re new to the idea of crowdfunding, perhaps you’ll decide to explore it further or discuss it with your neighbors in community. Types of Crowdfunding Crowdfunding spans a wide range of methods. Some projects rely on subscriptions or donations. Others sell products or services at a particular rate. There are also websites that offer fundraising pages for crowdfunded projects. Amidst all the variations are some common threads.
Community Supported Agriculture may be the example most familiar to folks living in community. You won’t often see this listed as crowdfunding, but it is. CSAs sell memberships, allowing people to share both the risks and the benefits of farming. Members usually influence what foods the farmers grow for the CSA; they may also volunteer their time or visit the farm on open house days. Crowdfunding CSAs let farmers use sustainable methods and members enjoy healthy food when the mainstream doesn’t readily support those options. The main crowdfunding sites such as IndieGoGo, Kickstarter, and RocketHub serve well for two types of project: small business launches and big project launches. Starting a new business takes money; that’s hard to raise conventionally if your business isn’t conventional. But if you can connect with your niche market, they may help you launch, and then stick around to support your business as it grows. Big projects include examples like an art gallery show, a print of a digital movie, a professional printer for a small press, and other instances where an established project or creator needs a lump sum to accomplish something important. This is a bit easier because they can often draw support from an existing customer or fan base. The crowdfunding site just makes it simpler to lay out the business plan for the project, tell people the goal and the perks for contributing, and track progress. Both of these project types put the control in the hands of small business owners and ordinary people, not bank executives. Cyberfunded creativity is the arts branch of this business model. It spans such things as webcomics, serial fiction, poetry events, divination, music, illustration, sculpture, and other media. Some shared-world projects involve a mix of contributions like stories, artwork, and even jewelry. Most cyberfunded creativity focuses on one creative person, though, and relies on gathering enough of an audience to support the project. This removes the bottleneck found in conventional publishing, art galleries, etc. by letting the fans fund the items they love by the people they admire. It also has the advantage of promoting uncommon viewpoints or themes that people value, which might otherwise get overlooked. Those projects that invite audience prompts also help promote people’s favorite ideas; if you participate in such projects outside your community, consider suggesting communal living as a topic. Projects are most often funded with donations or subscriptions, although the details vary widely. This branch of crowdfunding is particularly prone to strong community development, and in fact supporters list that as a reason for participating. My most successful project is a monthly Poetry Fishbowl that I host on my LiveJournal. People give me prompts about a theme, then I write poems based on
whatever I get. I post at least one poem for free, and people can sponsor more. There are even series of poems about favorite settings and characters. This project has been running for over three years; it has a great sense of community among fans who live nearby and far away. The project draws us closer together. Another crowdfunding project of mine is Torn World, a science-fantasy shared-world launched by Ellen Million. I actually joined that one partly to practice my people skills, because it is highly collaborative. Rewards of Crowdfunding As a business model, crowdfunding has multiple advantages compared to more conventional models. Some apply more to creators, others more to donors. Some apply to both. First, it’s easy to start small. Setup costs for creators can be low or nonexistent, depending on the type of project. This is crucial in a world where most ways of making money start off with a lot of expenses. You can start a crowdfunded project in your garage or on your blog. Then if it proves popular, you can expand. Second, crowdfunding is all about control and influence. As a creator, you retain greater control over your work: what you do, when you do it, and how you release it. As a sponsor, you gain improved influence through the money you spend, especially in terms of supporting ideas you consider important. Ideally—and this is where community plays in—creators and sponsors find common ground in projects they both love, and their shared ideas and enthusiasm make those projects thrive. This interactivity is one of the hallmarks of crowdfunding, which helps distinguish it from mass-market business models. As a crowdfunding provider and/or a donor, you can connect with other people interested in this approach. Find out what projects they are creating or supporting, what techniques other people are using, what works or doesn’t work and why. A key feature of crowdfunding is insight parallax: many heads are better than one. Instead of guessing, creators can ask fans what they want more of. Feedback from multiple people tends to find more errors than just one person might, and more solutions. This is particularly good for answering questions like “Which of these sketches should I finalize and paint?” or “Should we add an herb garden or a berry patch to our CSA next year?” As a result of these factors, crowdfunding is more flexible in its initial construction and more adaptable to changing needs when compared to traditional models. Creators can design a system that works for them. Audience members can ask for what they want. A healthy crowdfunding project grows and changes over time in a
fairly organic fashion. The feedback loop is fast and tight so that necessary changes are usually noticed and enacted promptly. Cutting out the middlemen of traditional business makes for more efficient function. Challenges of Crowdfunding Of course, all business models have drawbacks. Crowdfunding requires more work than standard models in some areas. It also misses out on benefits that are targeted toward conventional businesses. First, in crowdfunding, the creator has to do everything or arrange to have it done. That means you either need the skills yourself, or you need to pay or barter for someone else to do what you can’t. This can take a lot more time and energy. Compare this to, say, mainstream publishing where an author turns in a manuscript and then it’s the publisher’s responsibility to have it edited, typeset, printed, shipped, advertised, etc. With a crowdfunded webserial releasing a paperback edition, the author is responsible for all of that. Next, crowdfunding creators must figure out fair pricing and keep things affordable. This depends on your offering and your market. It’s hard to know what to charge if you can’t find similar projects for comparison, and little information has been published thus far regarding typical examples. You also need to know what people need and can afford—an issue familiar in Community Supported Agriculture, which deals with weekly shares of food, and sometimes allows members to lower cash contributions with work-trade. The success of crowdfunding depends on making a connection between provider and supporters. For the creator, this means attracting and maintaining an audience. For the sponsor, it means finding worthwhile projects to support. Since crowdfunding in its modern incarnation is relatively new, the venues and methods for connection aren’t fully developed yet. Even a good project may struggle to find the people who would love it. Even a careful shopper may have trouble identifying which providers are reliable and will deliver what they promise. Finally, crowdfunding practitioners must cope with a hostile environment from conventional business. Crowdfunded projects and providers are often ineligible for loans, grants, awards, facilities, and other benefits aimed at standard models. Crowdfunding as a movement has only a few replacements for these so far. Also, laws and expectations tend to favor conventional over alternative approaches. Compensating for this requires more research and sometimes more fiddling around to find a configuration that will work.
Crowdfunding in Community Intentional community is a good environment for crowdfunding. You have a bunch of people already accustomed to working together. You can explore different options to find out what works for your community. First, consider crowdfunding vs. groupfunding. Do you want a given project to reach beyond your immediate neighbors, or do you want to keep it all within your community? Ravan, who lives in a shared house, had this to say: “Regarding the household business(es) that we keep trying to put together: we do more groupfunding than crowdfunding—we keep it inside the household, and some put in time versus cash. We actually have an umbrella business partnership that we collectively assign our ideas to, and hope we can put together everything to make something work. I usually end up putting up the most actual cash, because I make the most at a day job (when I’m working).” Bear in mind that you can also begin a project as groupfunding and then shift to crowdfunding if it works well enough to expand beyond your own community. Some Community Supported Agriculture projects start with a community garden and then grow into a business. Crowdfunding can offer community members an opportunity for onsite employment. Many people dislike needing to leave their community every day for an outside job. If you have, for example, a small press running on a crowdfunded model, then it may employ an editor/publisher and a designer/artist full-time plus some part-time office work for other members. Similarly, community members enjoy opportunities to collaborate on projects (such as a spinner and a knitter making soft sculptures for sale based on audience requests) or to trade skills (such as a computer expert designing a gallery website for an artist, who reciprocates with original art for the other person’s site). Community buffers some of the challenges in crowdfunding—among other things, it makes it easier to find people to do what you can’t do personally. Intentional community is about people sharing each other’s lives and supporting everyone’s goals. For creators, a community is a good source of potential audience members. For donors, it’s a place to find people you know and like, whose projects are worth supporting. Vicka Corey shares some of her experiences with crowdfunding in community: “When I played in bands, I played mostly house concerts. Community is very important to me, in a day-to-day way. I occasionally throw money at crowdfunded projects, but not in any organized way. I did a bunch
of support of my ex-communal-housemate-from-Seattle Dara’s Kickstarter project, which was indeed successfully funded.” Notice that she brings up another helpful aspect: crowdfunding as a way to keep in touch with people you used to live with. Similarly it offers a way of supporting people you’d like to live with, who are a part of your life long-distance, but circumstances don’t allow living together. Crowdfunding also offers benefits for the community as a whole. Shared projects give people a chance to work on their community-building skills. Brainstorming sessions provide inspiration and connection. Some projects can also enrich the community holdings. For instance, a community with plenty of artists and crafters might set up studio space for them to share, first crowdfunding the budget to build or stock the studio and then later crowdfunding gallery shows for members to display their work. Outside fans who admire a particular creator’s work may become curious about intentional community and decide to explore that, too. Conclusions Crowdfunding and intentional community have a lot to offer each other. Look for crowdfunding examples in intentional communities. Many people who live in community also prefer alternatives to mainstream business and may have personal projects in progress. Look for people interested in community among crowdfunding projects. Donors who enjoy supporting their creative friends, or creators who love interacting with an audience, may also like the idea of community as part of everyday life. Consider inviting your crowdfunding friends to an open house or other event. Encourage everyone to be creative and make connections. Networking makes the world go ’round, both in crowdfunding and in community.