Community Development Crowdfunding: The Need for Better Data

January 19, 2016

Rodrigo Davies
MIT Center for Civic Media

Amanda Sheldon Roberts
Federal Reserve Board of Governors

In the past half-decade, crowdfunding has emerged as a popular way to raise money online for a wide range of projects, from films and video games to technology and clothing. It has grown both due to its success as a fundraising mechanism and its ability to build demand and engagement among audiences.

Social causes also have the potential to benefit from crowdfunding. The community development field in particular might be uniquely positioned to benefit because crowdfunding has the potential to create fresh pathways to community-led development and to bring an infusion of new capital into an industry that has seen repeated cuts in government funding in recent years. In addition to being a fundraising mechanism, community development crowdfunding can serve as a way for members of a community to express their preferences, and the intensity of these preferences, as measured by dollars donated to a project. 

Despite these possibilities, the idea of using crowdfunding for community development remains largely unexplored and the field is small and scattered. In our recently published working paper Understanding the Crowd, Following the Community: The Need for Better Data in Community Development Crowdfunding, we argue that the lack of reliable and comprehensive data is a key limit on the field’s expansion. Why focus on data? Without it, there is no way to know who is contributing to crowdfunding projects or what their motivations are. There is also no way to conduct large-scale analysis of community development crowdfunding activity and outcomes, which discourages the involvement of established impact-driven organizations. Better data can help the field in a few keys ways: it can provide transparency and help enhance the credibility of crowdfunding; it can inform user expectations and decisions by donors and campaign organizers; and it can allow researchers to measure the impact of community development crowdfunding. 

Our paper thus makes the case that in order for community development crowdfunding to reach its potential scale, and to involve the full range of potential stakeholders, better standards of data reporting and collection need to be established. Our paper proposes a draft crowdfunding data model to enable community development professionals and the crowdfunding industry to more thoroughly analyze the field, begin to measure the impact of crowdfunding and better understand its potential future pathways. We offer these ideas not as prescriptions, but rather as stimuli for further debate among crowdfunding platforms, community development professionals, and other stakeholders.

Download the working paper (pdf, 368.13 kb)

The views expressed are not necessarily those of the Federal Reserve Bank of San Francisco or of the Federal Reserve System.