Awesome Summit 2012: Slow Funds
Rahul Bhargava creates playful websites, explanatory data visualizations, award-winning educational museum exhibits, and interactive robots. He has led workshops on a number of topics across three continents, leading to a special interest in finding ways to build technologies and experiences that meet the disparate needs of varying communities and cultures. Rahul is currently working on a variety of technologies to support community building and civic engagement.
Awesome Summit 2012: Slow Funds
Live notes from the "Slow Foods" session at the Awesome Summit, by Rahul Bhargava, Ethan Zuckerman, and Willow Brugh.
Christina is a foodie, so she looks to food movements for driving messages. A critical one for the Awesome Foudnation has been the Slow Food movement. She is starting to champion "slow funding" based on the slow foods movement. She just substitutes "food" with the word "funds" and gets:
Raising public awareness, improving access and encouraging the enjoyment of funds that are local and sustainably grown.
Christina introduces a few people to share their work along this idea.
Rick DeBos (Grand Rapids, MI)
Rick's work has come from a hope to get things happening in his community. They run the ArtRise progam, which gives $50k in prizes to artists. The only requirements to entry are to be over 18 and show your work within a three mile radius of Grand Rapids. The general public of the city votes to allocate the majority of the prizes. Over 1000 artists and 150 venues have participated - from the Grand Rapids art museum to a mechanical shop.
They have a YCombinator-like accelerator called Momentum. The reason those accelerators work is that they are part of larger ecosystems, and people who want to grow and fund these companies. They have found themselves forcing projects to become businesses, if they'd simply had more resources. So they started an experiment - a 5x5 night. Select five ideas, from nonprofit to business, and each give them 5 minutes and five slides. They have five judges, all local celebrities, that select how to split up $5k. For example, StartGarden emerged from Momentum and 5x5 Night, both of which are now on hold. They ahve a for profit fund, which makes $5,000 investments every week, using a $15 million pool of money from accredited investors. They select one idea internally, but another is selected via public vote. Their goal is to broaden the conversation and bring more people into the endeavour.
Jay Lee - Small Knot
Small Know is a team of five ex-lawyers and designers, trying to change the world of small business financing. They operate in Brooklyn, New York and Greenboro, SC. They do hyperlocal crowdfunding for small business. Small business will put up a page, raise money from neighborhood and customers. This money is paid back in kind, at a premium. The model is a blend of barter and crowdfunding. For example, a local coffee shop wants to build out a back patio, but finds it hard to get financing. They ask people to put in $100, with the idea that you might get $120 in house coffee account, or a coffee of the month club. The underlying idea is that you get more back than what you put in. They see this as a win all around:
- win for the business - paying in kind means you're repaying at 30-40 cents on the dollar
- win for the participant - you're getting real value back for your investment
- win for the community - local self-determination of community businesses
Jay argues that human scale businesses need human scale funding, and that's not how the financial system works. All the rails for finance are built to transfer money to arbitrary places around the world without friction, but inrfastructure for moving money 50 yards away, just down the block, doesn't exist. Even in the most romanticized version of local finance, you put money in a bank and a loan officer figures out how to give it out. Jay is trying to figure out how to finance the community and neighborhood you want to build.
There has been a lot of press around flashmobs as a way of robbing businesses (no doubt a disturbing trend). Instead we can think about cash mobs - people get together and spending to show their support for a local business. Big box has canibalized small retail, and it in turn is being killed off by online retail. One path forward is to return to small-scale, local, community-based business. Small Knot is trying to support that by rewiring finance for small business and community.
Stephanie Parerra - Kickstarter
Kickstarted is a creative platform for creative projects. Kickstarter has been around for about three years. They have had 2 million backers, pledging $290m so far. There have been over 26,000 succesful projects. They fund projects in one of many creative categories: arts, games, design, film, fashion, music. Games is a very small but incredibly vital category. They are revolutionizing the games industry, both around video and tabletop games. The design category has had less projects, but has raised a lot of money. The film category has had the money and many projects. Music has more projects, but film has more money and backers.
Stephanie shares a few stories from the platform:
- Flint and Tinder - premium men's underwear made in the US. They are redefining local - bringing things back to our own country.
- Brand New Windowfarms - vertical food gardens. Project launched with $50k goal, and was quickly overfunded. They realized that if they could raise $200k, could be built in NYC. Reached $257k, now being injection-molded in NYC.
- Matter - promising very deep, thoughtful journalism on science and tech each two weeks. Local is also about picking something very specific to appeal to a particular audience. For $25, you can could join the Matter editorial board. For $1000, you can be a guest editor (those slots have sold out).
- Amanda Palmer - Raised $1.19 million to release a new album in a really innovative way. She said "here are all the things I want to do for my fans". This included acoustic shows, art shows, hanging out with her fans - traveling the world, meeting her fans. This enabled her to directly connect and engage with the people who care about what you're making.
- Punk Mathermatics - A guy who wanted textbooks to be better. He made a charming and engaging video. The basic pitch was "hey, math nerds - let's connect online and make the best math book ever".
- Burning Man: it's now burning man season on kickstarter - over 40 live burningman projects on Kickstarter. They hare all trying to take existing projects and bring them to higher and crazier scales.
Q&A Within the Panelists
Christina asks whether slow funding can scale. One concern in the slow food movement is that it's an elitist, inaccessible way of eating. Is that true for these community projects as well? Jay believes it's scaleable, but depends on consumer preferences. Once you reach a high level of demand, with lots of people who want to spend and invest locally, this should be able to work. Rick notes that this can work at different scales - growing tomatoes in your back yard is different from running a farmer's market. The projects we're seeing here represent different levels of being involved. Stephanie suggests that everyone has ideas to explore - sometimes you're growing tomatoes in your back yard, while others might want a tomato business. Having projects that are small and manageable makes this way of thinking highly accessible
Christina asks whether the key to this movement is a level of involvement beyond financial investment. Will that energy continue beyond an initial fascination? She notes that she's been an enthusiastic couchsurfer in the past, but now tends towards AirBnB, towards "less entangled" transactions. Stephanie notes that sometimes you just want the Marriott - sometimes you want something predictable. Other times, you want the deeper level of engagement. She's frequently blown away by how people are thinking about building inclusive, inviting projects... but you still might not want to work that way all the time. Rick tells us that our desire for stories is bottomless - some we experience face to face, some through the screen. Jay notes that having too much engagement would be a good problem to have.
Christina notes that slow food can be exclusionary for people who don't have sufficient knowledge about the space. Could the slow funding movement be exclusionary in terms of not making space for people with low internet access or low experise? Rick is seeing a larger age range on StartGarden than he expected. Jay notes that SmallKnot leverages the customer base of existing businesses - it's incumbent on those businesses to bring their customers online. As a result, you can see very broad involvement, based on how broad the business base actually is. Stephanie says she's seeing slow food in small cities all over the US - we're seeing making emerge in a smiliar range of communities. The top ten cities on Kickstarter aren't a surprise, but there's excitement in Missoula, MT as well.
Christina asks Jay to talk about the slow money movement. Jay explains that the movement comes from the world of financing food. They're looking for channels to fund local food. This includes investment groups, where a community will get together and fund food projects. Woody Tash from Investors Circle - wrote a book, there's a national conference
Q&A With the Audience:
Tonya asks Kickstarter about failure rates - what percentage are reaching their goals, and what happens to projects that fail? Stephanie responds that the average sitewide is a 44% success rate. Art is higher, film is lower. Statistics are now up on the site and are transparent. Some failed projects turn into new, more successful projects... others were simply learning exercises. People are learning from each other through success and failures. Jay notes that there's still a view that crowdfunding is a type of magic. There is an assumption that you put something out there and it will succeed. SmallKnot has done 14 projects, 7 currently ongoing. They have a 100% success rate for the ones where the project initator puts real time and effort into the campaign. In this case, the funding is local, so it's harder to get things to "go viral". Stephanie notes that once you get a single donor, your Kickstarter project is at a 50% success rate - it's all about promoting your project. Rick notes that he expects up to 90% failure rates on his projects in Grand Rapids. Many will fail. Many will end up as Kickstarter projects. Christina reminds us that Joi Ito (director of the Media Lab) likes to talk about how much you should say "no" - you shouldn't say yes to everything. Rick isn't trying to mitigate that failure rate, they just want to get things happening.
Another audience member asks a question about scale versus replication. For instance, the economy and culture of Boston and New York are very different. How do we think about these projects at different scales? Does it make sense to try to replicate these models in different cities? Jay believes his product is all about replicability. In small towns, where people tend to own their homes and send people to public schools, people are most engaged in their communities. This is much harder to replicate in New York City, where a neighborhood might be six blocks. The goal is to build self-sustaining communities, but those communities may look very different between cities and small towns. Rick's focus is on western Michigan - it doesn't matter if someone lives there, but the project needs western Michigan roots. He's very open to people replicating StartGarden, much as they've replicated the ArtPrize movement. In many cases, people replicate only part of the model - the public vote. Stephanie says that she's excited that people are making things in the world, and isn't especially concerned if people are taking advantage of the Kickstarter model. "We all feed each other - it doesn't take away from us" when others use a kickstarter-like model.
Deanna Zandt tells us she's drunk the Kool Aid and crowdfunded her book. But she wonders about sustainability - how often can you go to your community and ask for support? How do these models work in the long term? Are there ideas we can take from crowdfunding and bring them into long-term sustainability Stephanie points to Amanda Palmer as someone who's been able to return to her community again and again. People aren't just giving money - they are fans, and they're engaged in supporting you over time. Whether the same platform works again and again, people have used Kickstarter to write multiple books, for instance. Jay wants to make sure there's real value within the benefit structure of SmallKnot - you can't charge $100 for a t-shirt, as his isn't a donation model. It's about value exchange, which should be more sustainable over time.
Christina asks whether donation is bad - Stephanie notes that you can only hit the donation well so many times. People often want something of value - she wants to see real return on investment, either creative product or creative experience Rick suggests that there's a false distinction between investment and philanthropy. Culturally, Start Garden sees investment over time as a more sustainable model than grantmaking
Willow Brugh wonders whether the failure rate on Kickstarter is high because there's no face to face interaction between funders and the funded project. If you get funded, what's the relationship of obligation between the funded project and the investors in it? Stephanie suggests that the best determinant of a successful project is an effort that engages funders throughout the project. It's not just about financial capital, but about social capital. Projects succeed when people put in positive energy over time. Rick notes the value of social capital in the 5x5 Night model and the Start Garden model. There's an expectation that people funded become part of the community and offer regular updates on the project. If you use $5k to buy a Playstation and Doritos, and you are left with Dorito dust, there's a social capital problem that emerges.
A question mentions that Start Garden has chosen $5k as a given funding level. Awesome Foundation has chosen $1k. Stephanie notes that half the projects on Kickstarter are $1-5k, and two thirds are $10k or below. Jay notes that $10k is about as high as they've seen, given the locality of the project. Christina notes that the amount doesn't need to be $1k USD - it needs to be enough to get something done and not enough to fight over.
A question from Kara Lindstrom: what's the role of face to face in all this? Can someone who doesn't participate online become part of SmallKnot? What are the options for those on the other side of the digital divide - is this self-selection for the digital haves? Jay acknowledges that his company is, fundamentally, a tech company, It's hard to track funds that don't go through the system. Stores will advertise that they are running SmallKnot campaigns in their physical spaces. Stephanie notes that there are offline models to handle Kickstarting - come to a party and give $10 to help get a community garden off the ground. Local restaurants have chosen to donate profits to help start a community garden - in that case, the community garden was part of a school, and this was a way to reach out to parents who were otherwise disengaged. Rick notes that he runs numerous events, trying to ensure that people get engaged, and that he is now building out a physical space to allow people to be more involved.
There's a question about curation, and about the "romantic rhetoric" of connecting anyone to anyone - how much gatekeeping, if any, should platforms be doing in this space? Rick notes that his tolerance is pretty high. Art Prize has accomodated people from contemporary art centers to chainsaw bear carvings. It's been important to get comfortable with that diversity, and he notes that the public voting mechanism brings in fascinating projects. Reindeercam involved a group outside Grand Rapids who got a group of reindeer and feeds them twice a day, while dressed as Santa. Rick says he thought the project was a joke, but the public community loved it and voted for it, and it routinely gets hundreds of thousands of views.
Jay says his simple limit is that you're a business, not just an idea. You can sell a few products on Etsy and be a business, but you need to have moved beyond the idea phase. Local structure tends to take care of the rest, as locals tend to vet projects. Stephanie suggests that most people don't understand how permissive Kickstarter is - more than 80% of ideas area accepted. For the 20%, it tends to be because someone is pitching an idea, not a project. The staff picks are a different matter - to become a staff pick, it's helpful to have a video that's engaging, rewards that offer an exchange of value, and a founder who's treating the community well.