Matched crowdfunding - new ways for people and institutions to collaborate on funding projects

Matched crowdfunding – new ways for people and institutions to collaborate on funding projects

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Yesterday saw the DCMS Culture White Paper announce a pilot scheme to explore the opportunities for matched crowdfunding as an innovative way of funding cultural projects. But what is matched crowdfunding and why is it interesting?

Yesterday saw the DCMS Culture White Paper announce a pilot scheme to explore the opportunities for matched crowdfunding as an innovative way of funding cultural projects. But what is matched crowdfunding and why is it interesting?

Crowdfunding has been much touted as a way for people and projects to raise funds by attracting small amounts from a relatively large number of individuals.

However as the crowdfunding market continues to grow (Nesta research estimates crowdfunding facilitated £3.2 Billion worth of loans, investments and donations in the UK in 2015) institutions, investors and funders are increasingly exploring how they can work with the crowd on identifying and funding promising projects.

This has emerged across the crowdfunding landscape, with investment funds lending to businesses through P2P lending platforms, business angels investing in equity crowdfunding sites, and large grant funders offering matchfunding with rewards and donation crowdfunding sites.

Matchfunding, where institutional funding is matched with crowdfunding on an online platform is attracting increasing amounts of interest from public and philanthropic funders interested in understanding if a match fund can make public grant money go further, get more people involved in developing and supporting projects and use the knowledge of ‘the crowd’ to test public demand for projects.

The most popular model for matchfunding design to date has been the top up model where the institutional funder releases the remaining funding in the form of a grant investment or a loan to the project or business once it hits its crowdfunding target. For example, a grant giving organisation might offer to top up the remaining 40% of a project if it can raise the first 60% via a crowdfunding campaign.

Other matchfunding models include the up front model where the institution provides the upfront investment which the crowd then matches and the 1:1 model where for every 1£ donated/invested by the crowd the institutional funder will top up with an equivalent (or smaller/larger sum) until the funding target is met.

Interesting examples of this type of matchfunding include:
  • Creative England’s Queen of Code campaign. This programme partnered with the crowdfunding platform Crowdfunder to develop a programme to get more women involved in coding. The campaign sought to address the fact that while up to 49% of people playing video games are women, only an estimated 12% of developers are women. Creative England’s commitment involved topping up each of the first three projects that successfully rose funding on Crowdfunder with an additional £5,000.
  • A programme from Danish central government is currently exploring how crowdfunding can be used to support start-ups. As part of the scheme, companies which have raised approximately €67,000 (500,000 Danish kroner) through a reward-based platform of their own choosing can seek a matchfunding grant of between €67,000 and €207,497.
  • In Rotterdam, studio ZUS set up a successful crowdfunding campaign for the Luchtstingel wooden footbridge In Rotterdam. The bridge was born out of local frustration with the lack of safe crossing of a highway which led to citizens coming together to crowdfund Studio Zus’s idea, with each backer getting their name on a plank on the bridge. After 8,000 local people funded the project, Rotterdam City decided to top up the crowdfunded funding with a grant so that the Studio could complete the project. The campaign has since led to the development of a series of new initiatives related to the Luchtstingel, including the development of an events space and a roof garden.

Other initiatives in this area include the SME P2P lending match funds by the British Business Bank and local authorities, the Crowdfund Plymouth by Plymouth City Council, The London Mayors crowdfunding programme and the Department for International Development funded Crowdpower programme..

What is so interesting about matchfunding?

Despite the examples discussed above, there is still very little robust, systemic knowledge about what works and what the different opportunities are in relation to matchfunding more broadly. Could these models be optimised to provide an even more effective means of using public or private money in collaboration with ‘the crowd’? And are there potential challenges that need to be understood before matchfunding can be utilised confidently by a range of funders and sectors?

Within this context, a number of interesting areas of further exploration are:

  • Understanding if and how matchfunding can make public money work harder including leveraging more money for impactful projects and increase public engagement in selecting and developing campaigns to back towards funding.
  • Experiments testing which matchfunding approach is the most effective, what the ideal mix is between institutional and crowd funding is and what types and size of projects are best suited to matchfunding.
  • Exploring the possible non-financial benefits of funded projects through a matched crowdfunding campaign - such as the opportunity to source both time, skills and marketing from backers as well as funding.

We therefore welcome the DCMS’s announcement in the Culture White Paper on the launch of a new pilot scheme in partnership with Nesta, the Heritage Lottery Fund and Arts Council England to explore the opportunities here. Over the coming months we will be working closely together on refining the scope of this project - providing matchfunding to a range of arts and heritage projects and expanding the evidence base around matchfunding specifically.


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