For a sizable portion of the people running the established cooperatives in the United States, I’ve found, the internet is still regarded as a kind of alien invasion, an ever-bewildering source of trouble. Along with the hassle of building and maintaining a website, the internet has brought new competitors—especially venture-backed startups that love nothing more than to disrupt the kinds of intermediary roles in value chains where co-ops have held niches for decades. And many co-ops seem stuck playing catch-up. They buy the latest software and hire expensive consultants, but it’s never quite enough. The disruptions keep coming.

Playing catch-up is never the role co-ops are best suited for, anyway. They’re at their best when they’re doing another kind of business—when they’re finding value that investors don’t see, when they’re meeting needs that Wall Street doesn’t bother figuring out how to meet.

This is what a new generation of cooperative entrepreneurs is doing. I’d like to introduce you to some of them, and to some of the ways that they’re doing better than catching up to the internet of venture capitalists and aspiring monopolists. They’re letting co-op values and principles guide them to a vision for a different kind of internet economy. As they do, they’re also rediscovering the competitive advantages of cooperation—old strategies, really, that powered this model in generations past but that can be too easily forgotten.

First, take a foray with me into the mind of one of our eminent internet overlords. Consider it a survey of the terrain.

In February 2017, as Facebook CEO Mark Zuckerberg was still coming to terms with the previous year’s election cycle, he published a post called “Building Global Community,” a manifesto of sorts. “In the last year,” he wrote, “the complexity of the issues we’ve seen has outstripped our existing processes for governing the community.” Then he admitted, remarkably, that he couldn’t rule a platform shared by billions of human beings out of the wisdom of his own head.

And so he called for something that sounds almost like democracy: “Building an inclusive global community requires establishing a new process for citizens worldwide to participate in community governance. I hope that we can explore examples of how collective decision-making might work at scale.”

As autocracy and oligarchy run aground, he reluctantly falls back on democracy, then announces it as if it were the latest software update. Should we or should we not tell him that cooperatives have been practicing forms of “collective decision-making at scale” for a long, long time? Perhaps they have something to teach him. Perhaps they can do what Facebook’s investor-owners can’t.

Business model innovation

The designers of the internet didn’t set out to build infrastructure for cat-meme-sharing on social-media monopolies. Paul Baran, who conceived of the “packet switching” system by which the cat memes and all else travel from server to server, was concerned about a Soviet missile attack. In the 1960s, Baran worked for the RAND Corporation, which was helping to build the military communications tool that would later evolve into the civilian internet. The system relied on a complex collaboration among peers to avoid any single, vulnerable point of failure.

Radically centralized systems like Facebook are a departure from the network’s underlying structure. They arose not for technical reasons but economic ones—to deliver the profits that early investors demanded. Centralizing Baran’s distributed scheme has been a gradual, expensive process. Much more akin to the internet’s design are standards-setting organizations like the World Wide Web Consortium, which balance the needs of diverse stakeholders. The internet, like a co-op, is built for federation.

Over and over, we have seen old, cooperative practices imitated online. Take the wonders of crowdfunding, which enable businesses and products to launch without the need for loans or profit-seeking investors; well, co-ops were the original crowdfunding. When people needed something the market wasn’t furnishing, they pooled their money and built a cooperative to provide it. And they got more than one gets in the usual Kickstarter: real ownership and accountability. Around half of U.S. households have an Amazon Prime membership, which delivers convenience to customers and loyalty to the company—but, again, without shared ownership and accountability to back it up. The internet giants are getting by with a pale imitation of what co-ops have in their bones.

The technology has added something new, however. When we talk about the online economy, we’re not just talking about slapping websites on existing business models. The real disruptions have been bigger than e-commerce; they’re happening through platforms. Platforms are a kind of business model that the internet has supercharged: multi-sided markets that generate value through interactions among users, not just through what the company provides to them. The canonical and over-used examples are platforms like Airbnb, the hotel chain that owns no hotels, and Uber, the taxi company that owns no cars.

Once again, cooperatives got to it first. When rural electric co-ops were forming across the U.S. in the 1940s, they depended on their members’ collaboration and sweat equity to build a shared asset. Marketing co-ops have enabled independent producers to set the terms on which they sell and even compete. For decades, Italian “social co-ops” have maintained balanced markets between care providers and patients who co-own their companies together.

With age, however, many co-ops have conformed themselves to the business models of their corporate competitors. They’ve come to focus on the value the co-op can deliver to members, not on the unpredictable interconnections it might facilitate. It’s service more than sharing. The rise of online platforms thus presents itself as a terrifying disruption, when it should be an opportunity for co-ops to take the lead.

The investor-owned platforms have been ambivalent creatures. In come Amazon’s conveniences, and out go the local retailers that co-ops enabled to thrive. In come flexible schedules on gig platforms like TaskRabbit, and out go protections and benefits that workers have fought for centuries to achieve. Inequality and conglomeration accelerate. And there’s no going back; the perks are too irresistible. But what if co-ops could face those disruptions on their own terms, with their own strengths? What if they invested in a new generation of cooperative innovation instead?

Silicon Valley likes to have us believe that innovation is the purview of its investor-driven formula. But when you look at a lot of the most successful companies there, they didn’t begin with a miraculous invention. From the GPS behind Uber to Google’s original search algorithm, the tech often comes from publicly funded research in government and universities. The Silicon Valley magic, more often, lies in spinning up a seamless interface and the means to monetize it.

According to Fred Wilson, a renowned investor at Union Square Ventures, “Business model innovation is more disruptive than technological innovation.” What innovations can the co-op model deliver?

The rise of platform cooperativism

I’ve been dwelling in abstractions so far, and please forgive me for that, because what I’m talking about is not an abstraction at all. I came to notice the potential that cooperative business might have for reinventing the online economy not through theoretical reflection but, as a reporter, by noticing how people were already making it happen.

Starting around 2014, hiding behind the fanfare and controversy surrounding “sharing economy” platforms like Airbnb and Uber, I began coming across startups that were trying to build a real sharing economy. This usually meant adopting cooperative models. They were working in isolation, not aware of one another, with little in the way of mentoring or co-op-friendly financing to support them. But there they were. By the end of that year, I was publishing about what I’d found, and one of my sources, the New School media professor Trebor Scholz, put a name to it all: “platform cooperativism.” The following year, we organized the first conference on the subject in New York, and more than a thousand people came. Even The Washington Post called it “a huge success.” Something real was indeed afoot.

At first, we had the idea that we could simply copy the Ubers and Airbnbs of the world, slap a co-op label on, and the world would switch over. But the more I’ve watched this platform co-op ecosystem grow, the more I get excited about how cooperation allows these businesses to do things differently. Cooperative ownership isn’t just some add-on mutation, it’s another sort of genome.

Quality, not monopoly

One of the earliest, most successful platform co-ops is Stocksy United, a Canadian stock photo platform owned by its photographers and employees. Its founders were executives for a much bigger platform who concluded investor-ownership was stiffing the photographers and hurting the quality of their work. The founders realized that if they made their startup accountable to its photographers, they could prioritize quality. After just a few years, the company is thriving in a crowded industry.

Stocksy also breaks a cardinal rule for tech startups. You’re supposed to achieve scale at all costs, but the thousand-or-so photographer-owners have been cautious about accelerating their growth. They don’t want to dilute what they offer. They’re growing, but only at their own pace and far slower than they could. They’re making their own rules.

Control over what’s ours

It has become an implicit social contract of life online that—in exchange for useful services like Gmail and Uber—we give up heaps of data about ourselves to who-knows-who for who-knows-what. But for platform co-ops, this trade-off tends to disappear. Users really can be the owners of their data from start to finish. There’s no more need for all the funny business hidden in the legalese no one reads.

MIDATA, for instance, is a Swiss co-op for personal medical data funded through the voluntary use of that data for medical research. Users get a convenient repository over which they have full control. Savvy Cooperative, based in New York, is a platform where medical researchers and startups can benefit from the data of patient feedback—on the patients’ terms, because the patients are the owners. Farmers are doing something similar through the Grower Information Services Cooperative, which allows them to benefit from the data their ever-more computerized machines produce without relinquishing it to third parties.

Federation not centralization

Social.coop brings that kind of user control to social media. It is a small experiment that operates an open-source alternative to Twitter called Mastodon—a federated system in which people can keep their data with a provider they know and trust, while still interacting with the wider network. Federated social networks like this are great for privacy, and the technology has been around for a while. They’ve just lacked a business model, since investors have so much to gain from highly centralized networks. Co-ops might be uniquely suited to change that.

Social.coop is unusual in other ways. It’s not legally incorporated; instead, it operates through Open Collective, a co-op-friendly platform that enables groups of people anywhere to collect money and distribute it without their own bank account. Accounting on Open Collective is public, for all to see and inspect. Social.coop members make decisions about how to use those resources and more on Loomio, a decision-making platform built by a New Zealand-based worker co-op. Most of them—well, us—have never met each other in person. We’ve built the trust we need to cooperate through transparency.

Trust on a trustless network

When the Bitcoin digital currency system first appeared in 2009, it promised the possibility of “trustless,” pseudonymous transactions over a network that would rely on no central authorities, like Visa or the Federal Reserve. Companies like Goldman Sachs and Walmart are now adopting the underlying “blockchain” technology. So are credit unions. A project called CU Ledger uses blockchain technology to better manage, secure and share data about credit union members’ identities. The credit unions, that is, are applying Bitcoin’s software to purposes nearly opposite from what others have in mind: to build on institutional trust and to better collaborate.

As the blockchain economy grows, co-ops may be poised to play a vital role. RChain, for instance, is built on a supposition that the co-op model can solve some of the technical bottlenecks that Bitcoin and its cousins have faced. In Berlin, Seedbloom puts the co-ownership back into crowdfunding with blockchains. Already, it has aided the development of Resonate, a music-streaming cooperative co-owned, over its own blockchain, by fans and musicians alike. Moeda, starting in Brazil, is a co-op that uses blockchains to help credit unions expand financial inclusion and to finance its own growth.

Venture capital as cooperative bank

For this platform co-op ecosystem to grow, it will have to develop its own means of financing, just as co-op sectors of the past have done. Already we’ve started to see developments like Purpose Ventures, a new fund designed to grow long-term with its startups, not to sell them off for a quick buck. It’s co-op compatible; in some respects it even resembles an old-fashioned cooperative bank.

The old and the new come together. They converge. And they need each other. One of the most important developments in recent years has been to see co-op veterans start to embrace and support this new generation.

This has been done before

The conditions that have given rise to cooperation in the past are appearing in new guises—workers barely getting by on gig platforms, or customers not sure whether they can trust the companies they nonetheless rely on. It’s not enough for co-ops to tack websites on existing business models. We need co-op business models designed in and for a networked world.

I must confess, however: When I’m in a room full of leaders in big, established co-ops, I’m not sure these kinds of innovations will come from them. I bet most of them would agree. But what we need isn’t coming from the small, experimental platform co-ops I’ve mentioned either. They’re not enough. We need both. We need experienced co-op mentors stepping in to support the new, risk-taking co-op entrepreneurs who will help keep this sector vibrant.

How can that happen? First, it needs to be easier for startups to see the co-op model as a viable option—with tech-oriented co-op incubators and seed capital, as well as outreach to existing startup communities. Second, established co-ops can find ways to pool their funds to invest in promising new co-ops, then share dividends back to their members. Finally, we need to identify the financing and policy tools to help existing platforms that should be co-op converts. Too many online platforms we depend on are stuck trying to meet investor demands when they should instead be accountable to their users.

I’m a reporter, so I don’t like to make predictions. But based on the experiments out there, I’ve noticed some patterns that may become more common in the co-ops to come.

They will create value not just with the services they offer to members, but with the connections they enable among members—and the efficiencies members discover together. Their specialty will be in fostering trust on trustless networks, federating local communities across the globe. And they will build on the long cooperative legacy with forms of online governance that are more transparent than both the competition and co-ops past.

Open software and open data could help co-ops cooperative with each other more deeply than ever. Open supply-chains could display, for potential customers to see, their commitment to the highest quality sourcing. If they’re doing their jobs right, greater transparency will only make the cooperative difference more evident. And that difference matters.

I meet more and more people all the time who are warming to the co-op idea—and not because they’ve already worked for co-ops or studied co-op history. For the most part, they haven’t. A cooperative internet might seem utopian, but they hope for it anyway.

I don’t think it is so far-fetched. Cooperatives brought electricity to rural America when no one else would, and they’ve given Main Street a fighting chance against the big boxes. They help millions buy homes. They pioneered the local, organic revival and the means of delivering fair-trade products from across the planet. Next, the internet. We have done this already, and we can do it again, even better than before.

Photo by Pat Guiney

The post Next, the Internet: Building a Cooperative Digital Space appeared first on P2P Foundation.

Goteo is a complex entity, how would you describe yourselves?

Smart Citizen kit – campaign run on Goteo. Image (c) Goteo

Goteo is a collective that tries to promote participation and collaboration between institutions and citizens. With the Goteo platform, we help create stories through tools, merge them together and grow them; on the other hand, we also generate communities around initiatives. We work on bringing together individuals and public institutions to “collaborate forward,” for example, by opening up the institutional processes of participation or distributing funding evenly and in a more participatory way. We also track different organisational and development systems, including new funding models. More precisely, Goteo is a platform for crowdfunding campaigns, but it is not limited to funding: it also involves crowdsourcing. We do not only help our partners in acquiring the funds to carry a project on, but also in collecting non-economic contributions that a community can help with, and in sharing open-sourced collective benefits for the community, allowing projects to be replicated, reused, disseminated, or even improved or copied for further uses.

What makes the platform specific?

What is unique about Goteo is that we push for open source resources, collective initiatives, and we promote sharing collective benefits after a project passes through our crowdfunding campaign. We ask campaign promoters to publish their digital resources in an open source way once the campaign is over. It means sharing open source licenses, whether it’s a code or a design, a manual or any kind of file that shows the project. It is important for us to think of how this process contributes to the city and to the urban movement of gathering collective resources: we believe that it is an interesting way of putting clusters in movement.

Why so much emphasis on open-source?

We think that when you ask for support from a community, you should give something back. If you are an artist asking for funding for a CD, you should publish your CD with a creative common license or other free licenses afterwards, and give it back to the community. By doing so, we are also helping expand knowledge and provide access to free knowledge at a time when many forces are trying to enclose knowledge. The pressure on knowledge is similar to the pressure on social centres that are trying to resist enclosure.

Isn’t open source a constraint for the projects that run campaigns on your platform?

We really trust that the more open your project becomes, the more it attracts, the more it creates and the bigger it grows. That’s why we always push for the open licensing of the products and projects we support, and their outcomes – and that’s also why our platform itself is open source. You can download and copy the code of our platform, and have your own crowdfunding platform, use it, share it, improve it. We call this crowdfunding with crowd impact and crowd benefits. Goteo in Spanish means “leak”, and that’s how a campaign grows successful, drop by drop. Like the way you irrigate a garden: we understand that a way of funding collectively means that every drop adds to whatever you need to complete the watering of your garden.

How do the events you organise connect to the crowdfunding activities?

We believe that open knowledge creates more open knowledge, this is why we conduct workshops and bring together communities to cross-feed each other. Over 2000 people have come to our workshops, from many different countries and contexts: some apply the new ideas they gathered to urbanism, some to culture management, others to technology as well as many other fields. When you add layers to a project or invite different ideas to engage in dialogue with their counterparts, you can grow together and create more successful projects.

We always ask if crowdfunding is compatible with crowd benefits. People who prepare crowdfunding campaigns, ask us, “Do you think this is viable, do you think this feasible, do you think I can go through with it or is it something that is not going to be successful?” When we assess the project, we look for two ways of rewarding, not only the individuals who support the project, but also the community.
We divide rewards into two different groups: one consists of individual rewards, referring to when a person supports the project with 20 euros, and receives a postcard, a copy of your disk or participation in your workshop. The other refers to collective incentives that are more important for us, to push the community to support a project and add social importance to it. When something feels important and adds value to society, it is likely that more people will support and engage with it.

How do you define crowd benefits?

When we consider a project, we always ask promoters about their own experience, details, facts and issues of their projects that can help them conduct their projects in a better way. We ask about their needs. Of course, all projects in the fields of culture, urbanism and architecture need money. If there are no financial resources available, we look for alternative ways to support the project. We also ask about the tasks to be carried out, the infrastructures that they own, can count on or need and an outline of the materials needed for the project. Based on these, we assess what rewards one is able to give back to the community. Collective benefits can be digital archives, manual guides, codes, apps, websites or designs that can be downloaded, copied and adapted to the needs.

How can you help projects?

When gathering a group of people around a project, some might donate money while others might have important contributions that are not of a monetary nature. We promote our partners to also share their non-monetary needs in their communities. Projects often need a van to move things, or a translation. We have a feature on our platform to exchange these possible means of cooperation. We feel that when people get together and get to know each other and their projects, it is also easier to engage them and create community through social networks.

On average, around 200 people support each project, with contributions that range from 20 euros to 1500 or with their skills. 70% of our crowdfunding campaigns are successful, and one of every three donors does not want anything in return, they are donating because they value the project. We believe it is possible to talk about the culture of generosity in a world where we are constantly told that we have to be individuals, and we have to make it ourselves, be self-made men. We believe instead that the culture of generosity is really at our core, in our heart.

How do you define how much money is obtainable with a crowdfunding campaign?

Spain in Flames – campaign run on Goteo. Image (c) Goteo

We always establish two different budget goals for campaigns: there is a minimum which we consider the project needs just to kickstart, and then there is an optimum budget that could take the project further. We do respect the numbers identified by the promoters themselves, because they know more than anyone else about their needs and the costs in their local contexts, but we keep an eye on budget requests to make sure that what they ask for is clear and the plan is coherent. We suggest to keep the projected budgets at the right scale and advise initiators to make their budgets transparent and modular: if a project needs 10.000 euros, what budget categories does it include? Once initiators understand their own budget better, they often realise that some their needs can be covered with existing infrastructure or non-monetary contributions. Another criteria for projecting budget is an initiative’s capacity of social outreach: if an organisation has never disseminated anything in social media, or the initiator is an individual with limited online engagement, it might be better to keep the projected budget low. To this, we add another specific layer of knowledge about what different people from random places can do in areas that are not necessarily on our minds, for instance, in rural areas. We are generally very much focused on cities, but there are interesting initiatives in rural areas that contribute to the commons.

What is your experience about campaigns that addressed development or construction projects?

We had several campaigns in the fields of urbanism and architecture: they give us insights on how to facilitate different behaviours in urban and rural areas and how to share knowledge among communities that were previously not in touch. For instance, La Fabrika de Toda la Vida is an initiative using a former cement factory in Extremadura, not far from the Portuguese border: they financed their start-up phase, the rebuilding of a part of an enormous factory, with a successful crowdfunding campaign through Goteo, they raised 133% of their minimum budget. Their offer to give back to society was the building itself: they turned it into an open space that anyone can use and suggest activities for.

Another example is the Instituto Do It Yourself: it is a knowledge hub, an infrastructure that helps people exchange knowledge in a peripheral neighbourhood of Madrid. The Institute was started in 2013; it is a nice example of a free knowledge resource, established with the help of a campaign we launched together. There are also journalism projects we supported that are closely linked with urbanism. For instance, Goteo supported a campaign for a research on land use in Galicia, Northern Spain, where wildfires are closely connected to speculation: the devastation caused by wildfires usually opens the way for changing land use and building more profitable buildings on formerly agricultural land. Another project is the Smart Citizen Kit, built with open-source Arduino hardware to be installed in your home. The kit monitors air quality and sends data to a centralised device that collects data from different parts of a city.

The Social Coin – campaign run on Goteo. Image (c) Goteo

How do your campaigns contribute to the creation of a more collaborative tissue of community initiatives?

Processes through our platform turn out to be barometers of what a more collaborative and ethical society could become through implementing more open source collaborative processes and programs. For instance, some projects deal with cooperation in a larger sense. One of the initiatives produced a set of coins, kind of tokens, for collectives, companies of big groups to measure their collaborations: a way to visualise a chain of favours, to highlight how non-monetary contributions and collaborations function within a team or among several teams.

What are the overall results of the platform?

In six years, we collected over 5,7 million euros altogether, with an average contribution of 50 euros, and with over 496,000 euros in match funding. At stats.goteo.org, the platform has open data about our campaigns: it shows tendencies, categories, money collected for each project, and the time it takes a project to collect the necessary funding. We also developed an app with which people can freely use the data. Tracking accountability is very important for us: the more we know about a project we support, the more vigilant we can be in what they do, and also receive better outcomes from them.

Do public institutions play any role in your campaigns?

It is an important issue. Some people would say, “All right, crowdfunding is nice, and so are the collective benefits, but we are exploiting our families, our friends, communities and ourselves just to extract more money from them for our projects. Isn’t it a bit contradictory, doesn’t it promote the notion of ‘Big Society’ advocated by conservative ideologues?” We’re aware of this and work on attracting private and public money, to balance contributions to the projects we support: we work on many of our funding processes with private companies as well as with different local and regional public administrations and universities.

From crowdfunding to crowdadvocacy guidebook. Image (c) Goteo

In the past years, we have been working with various public administrations, and they would agree to add some budget to specific calls, match funding a set of campaigns selected by an open panel including public officials and our team with 10,000 or 96,000 euros. These are projects that go through crowdfunding campaigns, but public institutions double the amount given by citizens; so for each euro made through crowdfunding, the administration offers another euro. It is a way to open the process of decision-making: there are initiatives that institutions would not fund without collective support.

La Fabrika de Toda la Vida for instance, was also supported by the regional government’s match funding. At the time, the conservative government of the Estremadura region would probably have not understood what it meant to restore a former factory in a village; but with the support shown to the project by other institutions, the citizens and us, they realised that it was intelligent to invest in a project like this.

Our cooperation with public institutions is not exclusively monetary. Lately we have been working with public institutions, for instance with different municipalities in Barcelona and elsewhere, on how they are developing their participatory processes, their policy-making, and on how they can engage their citizens and promote more open and meaningful decision-making processes. This is a horizon that we have: we are looking for growing alliances between public and private actors to raise funding for citizen projects, soon at a much larger scale than today.

This text in an excerpt from the book Funding the Cooperative City: Community finance and the economy of civic spaces. Figures have been updated in February 2018 to reflect Goteo’s progress.

The post Goteo – crowdsourcing for open communities appeared first on P2P Foundation.

By Jan Mazur

This article is an excerpt from the book Funding the Cooperative City: Community Finance and the Economy of Civic Spaces

Crowdfunding has emerged as a relatively innovative, Internet-enabled way of financing projects, startups and small and medium enterprises (SMEs), especially in their early-stages. In the EU, where most of the financing for companies comes primarily from banks and not capital markets, it has been burdensome and limiting to seek bank financing for startups and SMEs. Most startups and many SMEs lack relevant operating history and track record, cash flow or collateral to secure bank loans. Angel investors and venture capital funds are an option, but they usually cover specific segments of the startup and SME market. Nevertheless, any finance provider may strongly benefit from the risk reduction based on crowd validation, as the product or service information becomes distributed to large amounts of people who may “crowd validate” them by backing their crowdfunding campaigns. Contrary to their inability to raise required capital, the economic significance and impact of SMEs is greater than their size; they are one of the main vehicles for the creation and dissemination of innovation, and their potential to exploit synergies is usually very strong.

Breakdown of the European alternative finance market by model, 2014. Image (c) EC

Crowdfunding, defined as “a collective effort of many individuals who network and pool their resources to support efforts initiated by other people or organisations”, belongs to the domain of finance-providing activities. Its specific mutations can be unregulated, regulated, or exempted from the regulation, depending on multiple criteria and elements of these activities. Crowdfunding is typically performed on online crowdfunding platforms, which offers intermediate support for projects or companies by individuals (crowd) who wish to support them. On a more general level, we typically recognise (i) donation-based, (ii) reward-based, and (iii) investment-based (including equity-based and lending-based) crowdfunding platforms, whereas the level of regulatory attention naturally increases with the increase of risks and the amount of money provided individually and sought cumulatively. However, the regulation tailor-made for crowdfunding does not exist on the EU level, though some EU legislation may apply to financial relations within equity-based and lending-based crowdfunding. National legislations of certain countries specifically regulating crowdfunding do exist, yet the industry significantly lacks the authority that would provide EU-wide standards and fortify the public trust towards the platforms, which would allow especially investment-based crowdfunding to go mainstream.

When it comes to donation-based crowdfunding, from the legal point of view, we typically understand the relations between projects/companies seeking finance and their backers who provide finance for certain non-monetary rewards as a donor contract without any material reward (other than “a good feeling”). Donor-based crowdfunding platforms nowadays enable fundraising for non-profit and charity contributions and projects, but also for education and scientific research. Reward-based crowdfunding is more complex, though the applicable regulation is also quite unrestrictive. Under the reward-based crowdfunding scheme, financial contribution is exchanged for current or future (conditional) goods or services on a platform, which supports and enables the exchange. The business model of these platforms is based on charging a fee in the amount of a few percentage points of the crowdfunded amount. Reward-based crowdfunding normally does not fall within specific financial regulations as the relationships established by the crowdfunding system are usually considered to be basic civil and business-to-consumer relationships. The regulatory requirements are typically low for these platforms and no special approvals are required, except for the regular trade/business licensing.

Typologies of crowdfunding. Image (cc) Eutropian

There are two main models of investment-based crowdfunding: (i) equity-based, and (ii) lending-based crowdfunding, whereas there are also hybrid forms of crowdfunding models based on revenue sharing, profit-sharing or subordinated loans, just as there are hybrid forms of finance. To generalise the regulatory patterns of these crowdfunding models is not an easy task, as the models vary significantly from country to country where national legislations apply. Moreover, these models are also strongly dependent on the corporate structure and the underlying security or instrument that is being traded or issued against the financial investment. However, certain broad generalisations may be drawn; equity-based crowdfunding may fall within the scope of several EU directives. Each of the investment-based models involve monetary motivation, be it an interest, share of profit/revenue, or exit value, but can also involve other motivations, especially in more locally-oriented and social entrepreneurship-oriented crowdfunding platforms. In equity-based crowdfunding, investors invest money into projects or companies in return for a part of their existing or newly issued equity, which may take different forms, such as stocks (securities), or shares, depending on the corporate form of the target company. It is also permissible to issue various classes of stocks, so the stocks may not always possess typical shareholder’s rights, such as voting rights, but only a share on profits.

Crowdfunding companies are typically startups and small and medium sized companies, which tend to choose private capital company forms or even partnerships. Private limited companies are usually cheaper to run, offer flexibility and shield shareholders with limited liability, which makes them a top choice for starting companies. However, these company forms may not be permitted to raise funds from a large amount of investors and are in general not suited to do so. Transferability of shares may also be limiting and limited in the case of private companies, so it disincentives potential investors.

Bulb in Town crowdfunding platform. Image (c) Bulb in Town

Investment-based crowdfunding campaigns are regulated by national regulations and the Prospectus Directive that requires that Member States shall not allow any offer of securities to be made to the public without prior publication of the prospectus. The obligation for companies to publish a prospectus is related to offers of securities with the total amount of investments of at least 5 million EUR (over a period of 12 months), with specific exemptions depending on the number and qualifications of investors and the size of securities.

Crowdfunding campaigns are typically not aimed at qualified investors only. On the contrary, crowdfunding targets large amounts of mostly unqualified investors for individually smaller considerations, often in thousands of euros per investor, yet the typical campaigns run from hundreds of thousands to several millions of euros in total. Empirical evidence suggests that most of these exceptions would not exempt the company from publishing a prospectus based on the Prospectus Directive. Yet, some Member States choose a specific form of regulation of this obligation, as the publishing of a full prospectus may be quite burdensome for startups and small (medium) enterprises: in France small-scale transactions only require a light-prospectus, in Germany, all authorised crowdfunding offerings with a maximum of 10.000 EUR individual investor contribution and a maximum 1 million EUR total investment are exempt from prospectus publishing. On the other hand, in Slovakia the same regime applies for offers between 100.000 EUR to 5 million EUR as for the large offers of 5 million EUR and above. It is advisable to create a specific, crowdfunding- and SMEs-friendly legal regime for middle-range offers, if not directly harmonised on the EU level, than at least on the national level.

Goteo crowdfunding platform. Image (c) Goteo

Some of the services of crowdfunding platforms (the sale and purchase of the financial instruments on behalf of investors) could be regulated by the Markets in financial instruments directive (MiFID), which harmonises the provision of investment services to professional and non-professional clients by investment firms. In the meanwhile, some of the instruments issued by the crowdfunding companies (such as shares in privately held companies) may not be considered financial instruments under MiFID, i.e. transferable securities, and thereby should not be affected by the directive. From the perspective of the platform, it may be beneficial to be a regulated investment services provider, as the MiFID-authorised platform can benefit from the EU passport rule, which allows them to offer services in other Member States. However, this may be very much dependent on the various national company law regimes, which classify the shares of these companies as transferable securities or not. Once authorised, the platform may not be able to conduct any other business than the authorised and regulated. This may lead to unserviced segments of the market with companies issuing different classes of shares, which is hardly desirable. Moreover, being a MiFID-authorised platform poses a relatively large regulatory burden with subsequent costs, which may be impossible to bear by platforms with campaign traffic below a certain threshold.

Lending-based crowdfunding tends to have a looser regulation than the equity-based one, even though it is more relevant in terms of the market size. In certain jurisdictions, authorisation to provide the platform services may be required. The regulation involves information obligations to investors, clear risk representation, but also minimum capital requirements of platforms and resolution plans. Lending-based crowdfunding represents basically two major groups of unsecured loans: (i) peer-to-peer, where consumers offer each other consumer loans, and (ii) peer-to-business, where businesses borrow from multiple lenders. Interestingly, new forms of secured loans start to develop, such as real estate mortgages and developments.

Civic Crowdfunding guidebook published by Spacehive. Image (c) Spacehive

From the viewpoint of community-led urban development projects, the most important sector of crowdfunding is civic crowdfunding. Typical legal structures of civic initiatives tend to be either non-formal or loosely associated around non-profit civic associations (associating persons) and foundations (associating funds), or mixed for- and non-profit legal forms of social enterprises or cooperatives. All types of crowdfunding can be used to some extent by civic initiatives. Non-profit associations and foundations have historically drawn from wide amounts of donors through charity campaigns or collections, which have fared well in the Internet-enabled environment of donation-based crowdfunding. Interestingly, some platforms, such as Spacehive, have been able to cooperate with municipalities, which matching funds to successful crowdfunding campaigns. Yet investment-based crowdfunding requires a revenue-generating activity, which is to be crowdfunded for and which either pays back the loan with interest or generates profit for investors. Moreover, equity-based crowdfunding requires a legal form, which is allowed to issue subscribable shares; therefore non-profit associations or foundations would not be a well-functioning legal form for typical equity-based crowdfunding. Various legal forms have different features and governance structures, for instance cooperatives may favour a more democratic approach to decision-making and profit distribution. On the other hand certain forms put the amount of capital contributions of shareholders first when it comes to decision-making. Nevertheless, traditional company forms can usually be adjusted to fit the needs of civic-oriented crowdfunding, i.e. “civic-adjusted company.”

Investment-based crowdfunding may be a good form of finance for social enterprises and cooperatives, as, in the absence of social banking, regular banking may pose barriers too high in accessing finance. However, banks may perceive crowdfunded companies positively, as they increase their equity, as is also evidenced by the Bulb In Town case. From a business perspective, local crowdfunding campaigns may also draw substantial benefits from the fact that shareholders are potentially significant stakeholders (and vice versa) and consumers of goods and services of the crowdfunded project; the interests of shareholders and stakeholders are aligned.

In conclusion, any regulation must take into consideration elementary risks that investors or lenders face. They need to have access to clear and accurate information on the borrowers or invested companies. Regulators advise crowdfunding platforms to maintain strong engagement of investors and allow them to exchange opinions and discuss the projects openly on the platform. The investors must be well-informed on the project or company they consider investing in and the risks they face: risk of capital loss, risk of dilution, limited possibilities of liquidating an investment and limited information and track record to base the decision on. The platforms may be prone to conflicts of interest due to their business model, which is based mostly on charging fees for successful campaigns. Investors may also over-estimate the due diligence carried out by the platform. It is in the long-term interest of the platforms to make sure and review whether their investors understand the risks of the crowdfunding investments and restrain their investments into a well-built portfolio.

Even though the crowdfunding is a very promising source of alternative finance, the regulation currently available is clearly not suited for it yet. Crowdfunding regulation, currently at the EU and many Member States level as a by-product of existing legislation, should acknowledge that crowdfunding is not defined by a specific form of company shares (securities), but rather by its specific nature. The overall amount of crowdfunding campaigns usually does not exceed a few million euros. Investors are usually dozens of individual and mostly non-professional investors investing thousands or tens of thousands of euros. As crowdfunding in general does not pose a systemic risk, it poses a consumer finance risk, especially the risks of frauds, deceptive campaigns, or embezzlement of finance from the company etc. These risks must be addressed in order to set a level playing field for the platforms and set professional standards. Thorough due diligence of campaigning companies serves the investors, companies, platforms and the market and society equally, as it safeguards against frauds and unsound business plans. It is advisable that countries adopt rules for crowdfunding platforms in order to better manage the expectations of all the parties.

Some proposals could include a lighter regime of prospectus obligations for companies publicly offering stocks worth 100.000 to 5 million euros, specifically if individual investments do not exceed larger amounts; requirements on transparency of the platforms regarding individual campaigns (including investors’ discussions on these campaigns), platform rules, legal terms and conditions of individual campaigns, conflicts of interest; requirements on information obligations of the platforms regarding the risks of the investments in general and advisory to mitigate them (including obligation to limit individual investments into a single company and investor’s portfolio rules), risks of individual campaigns, minimal due diligence requirements for platforms; specific EU-wide rules to allow platforms offer shares of companies to non-professional investors for limited investments regardless of the legal form of companies; guidance on solving conflicts of interest of platforms.

Photo by Medialab Prado

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We often say that we couldn’t keep this project going without your support — well, this is LITERALLY TRUE. The laptop and the audio software that we use to produce our documentaries are now out of date and no longer working properly. As a result, we cannot begin to produce our 2018 season of episodes until we upgrade our equipment.

Please help us raise money to purchase new equipment so that we can produce our 2018 season and beyond.

We have a limited budget to make this project happen and it takes a certain quality of resources to produce in-depth, high-quality audio documentaries. Because we provide all of our content for free, we need to ask for your support to keep things going.

The work we are doing through Upstream is more important than ever. Our documentaries help give voice to the most pressing issues of our time. By supporting us in this crowdfunding campaign with your tax-deductible donation, you’ll invest in us to continue to tell the stories that we hope will lead us to a better world — one that puts people and planet over profit.

Over the last three years we’ve grown and deepened our impact immensely, producing eleven full-length documentaries and dozens of stand-alone interviews reaching thousands of listeners.

And we’re really just getting started! We have big plans for 2018, with several documentaries already in the works (including a series on worker cooperative and an episode on feminist economics). But we will not be able to produce these documentaries without your support.

Thank you for contributing anything that you can. Every donation helps. And if you cannot afford to chip-in, you can still help by sharing this crowdfunding campaign with your networks.

With deep gratitude, thank you again. Together we can bring about the more beautiful world our hearts know is possible.

In solidarity,

Della & Robert

Photo by tixyvix

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Get your ticket for the conference!

Time flies: it seems that while we weren’t looking Growfunding has already turned five! In the past five years, we have joined hands with thousands of people to build up Brussels from the bottom up. That means it’s high time for a celebration, but also to see if we’re doing things right. On Friday the 19th January we’re organising an international conference

Together with Brussels residents, city makers, academics, policy makers and six ‘partners in crime’ (La Ruche from Montreal, Patronicity from Detroit, Spacehive from London, Co-city from Paris, Goteo from Spain, Ideaginger from Bologna and Voor Je buurt from the Netherlands), we will be sharing our knowledge and experiences an all-day debate on ‘The Civic Crowdfunding City’.

What kind of city do we want to live in? And what role can civic crowdfunding play in building this city?

What kind of a city and society can we create through civic crowdfunding? And just how democratic will this be?

We’ll compare good practices from 8 world cities within four different themes:
>          The inclusive city: how can civic crowdfunding be used to include people that are otherwise excluded from urban life?

>          The pup-up city: which kind of urban spaces are created through civic crowdfunding and what are the characteristics?

>          The Arrival city: which social and cultural infrastructure is created for refugees, migrants and newcomers through civic crowdfunding?
>          The circular city: How can civic crowdfunding contribute to the creation of a circular economy?

Click here for the entire programme e-and the names of the speakers.

PRIX LIBRE / VRIJE BIJDRAGE / FREE DONATION

Tickets for the conference on Friday 19/01 will be available through this growfunding-campaign. Contact [email protected] if you need an invoice.

It’s entirely up to you how much you (or your employer) want to pay to participate in the full-day ‘The Civic Crowdfunding City’ conference. The higher your contribution, the more tickets we will be able to make available free of charge to people unable to afford them. These tickets will be distributed through our partner organisations, such as Globe Aroma, Cinemaximiliaan, Article 27, samusocial and klein kasteeltje.

There is no admission fee for students, contact [email protected] to reserve you place.

Everyone who has provided support for this event will be sent our digital publication on the Civic Crowdfunding City (estimated publication date: May 2018).

Oh, and by the way, we’re also looking for around twenty volunteers to help us ensure that the event runs smoothly. If you’re interested in participating, don’t hesitate to register as a volunteer via our brand-new Volunteer button;-)

PARTY ALONG?

You can find all info and the programme on www.growfunding.be/bazaar. Prepare for a fantastic line-up of Brussels artists: an ‘empty shop’, a fashion show by Tony Bland, a dance performance by The Slayers, concerts by Nawaris, Arumbo and Fanfakids, great beats from the 54Sound, and more. You can find a detailed programme: friday and saturday. Tickets for the concerts and performances can be purchased through the Beursschouwburg theatre. All income generated by this event will go to current growfunding projects.

(This text was translated by Ubiqus Belgium, Growfunding’s language service provider)

https://www.facebook.com/events/161683631093820/

Photo by Medialab Prado

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Hacktivism + crowdfunding + wide social collaboration

= the building of new commons

Each of these activities has always existed separately, of course, but it was the vision of Goteo to integrate them into a single open network that is helping commoners build a new Commons Sector in society. With more than 50,000 users and more than 2 million euros raised since 2012, Goteo has helped launch more than 400 projects that support the commons, open code and free knowledge. The projects span a rich variety of fields – education, the environment, technology, culture, entrepreneurial startups, journalism and more.¹ Among them:

The Smart Citizen kit, an open source environmental monitoring platform and hardware for citizens to open and share their own environmental data;²

Quién Manda, a collaborative mapping project that depicts political and economic power relations in Spain;³

Open source gasifier, a renewable electricity generator using residual biomass gasification in the Republic of Chad;⁴

Nodo Móvil, a replicable, travelling wifi connection unit for communities, social movements and public spaces;⁵

Spain in Flames, an open data website to allow the visualization of forest fires, their causes and solutions, enhanced with data from investigative reporting;⁶

Foldarapa, a compact, foldable 3D printer made by a community using a P2P distributed production model that helps its users expand production while sharing the profit with others;⁷ and

The Social Market, a cooperative project by the Spanish Alternative and Solidarity Network linking more than 230 companies and others committed to solidarity economy values.⁸

Goteo is more than a platform for crowdfunding. It serves as a focal point for distributed collaboration among strangers, each of whom may have something special – physical resources, expertise, infrastructure tools, personal time – to contribute to a particular project. Goteo doesn’t just engage individuals; it has become a network of local, independent communities throughout Spain. These range from one in the Spanish region of the Basque country, supported by the Basque government, to others in Andalusia and Barcelona.

The people who belong to the Goteo network tend to play different roles at various times. They may introduce a new project that needs support, contribute funds to help launch a project, or collaborate on it so that it can grow.

Goteo had its origins in the Platoniq collective⁹ – a Barcelona-based group that was a pioneer in the production and distribution of copyleft culture.¹⁰  The hackers of Platoniq (including me) were passionate about designing tools for citizen empowerment and social innovation. We mostly used open source, peer-to-peer technologies that can be easily adapted and reproduced.

Some of Platoniq’s projects became quite famous. Burn Station (2004) was a mobile, self-service system for searching, listening to and copying music and audio files with no charge – all of it legally under a Creative Commons license.¹¹This “taking the Internet to the streets” initiative gained worldwide attention. Another project, The Bank of Common Knowledge, was a series of gatherings in different cities that provided open workshops and manuals.¹² Thanks to hundreds of volunteers, people could learn how to install and use a wiki, how to repair domestic technologies, how to set up a free wifi network, how to set up a local consumer group.¹³

In these and other hackathon-like events Platoniq also served a “process medium” or “masters of ceremonies” for technology-based projects. It helped developers and entrepreneurs recruit new collaborators, clarify the problems to be solved, choose the superior body of source code for projects, and develop alliances in moving them forward.

Despite the success of Platoniq’s work, it became painfully clear after several years that there was a serious lack of resources to incubate innovative and experimental projects. This need was especially acute for projects based on open source and commons-based principles. Neither public nor private institutions are generally eager to support such projects, and certainly conventional market players see little gain in helping produce innovations that are designed to be copied and shared.

The rise of crowdfunding in 2009 as a new model of digital collaboration began to open up a new field of possibilities, however. It became evident from such early platforms like Kickstarter that distributed funding from hundreds and even thousands of people could be a feasible base of support. The standard crowdfunding process at the time consisted of a specific fundraising goal, a deadline for pledges, an “all or nothing” scheme (sufficient pledges to meet the goal or no funding), and a system of individual rewards or perks for backers.

Some of the participants in Platoniq, especially Susana Noguero and Olivier Schulbaum, decided to investigate the possibilities. They found that backers of open source projects were on average more generous than backers of other projects, and that they also contributed more regularly. Platoniq also explored the subtleties of other distributed systems for raising money online – the microcredits approach used by Kiva and platforms for lending money to entrepreneurs – as well as alliances with local organizations in smaller countries. In the end, we decided that it was time to invent a new platform for funding innovations that contribute to open knowledge and the commons.

Since we couldn’t identify any single project or tool designed to support the logic of sharing, collaborating and social impact, we decided to invent one – Goteo. From the start it was a collaborative endeavor. Before programming a single line of code, we entered into a lengthy period of codesign in which we consulted with communities of practice, cultural agitators, open source practitioners, designers, academics and others. We asked the potential users to help visualize the new crowdfunding platform and suggest features that could better meet their own needs and experiences.

Goteo was launched at the end of 2011 as the first crowdfunding platform expressly for open and commons-oriented projects. Its design embodied the following values, in order of importance:

Collective return: Aside from individual rewards for backers, the final outputs of any initiative using Goteo must contribute to the commons. For example, projects must use licenses that allow copying, sharing, modification and free use of part or the whole of each created work.

Trustworthy management model: The legal organization that manages Goteo is a nonprofit foundation, Fundación Fuentes Abiertas, which is officially recognized as a public-interest organization. This management model offers tax-deductible benefits for both cofinancers and promoters.

Fostering transparency: Each project must give specific details about where the money collected will go. Coupled with a two-round scheme of fundraising, this requirement means that even very successful campaigns disclose the actual use of money obtained, including extra money beyond the stated goal. Furthermore, Goteo and project promoters both sign a legal agreement that guarantees that the work described in the crowdfunding campaigns – products, services, activities, archives, etc. – are actually produced.

Distributed collaboration: Beyond monetary contributions to projects via Goteo, people are invited to collaborate in the development of projects by offering services, material resources and infrastructure. They can also participate in specific microtasks.

Training: Goteo has advised and trained more than 2,000 people from many domains through dozens of workshops – a commitment that both disseminates our knowledge while building Goteo’s social following and economic stability.

Community of local nodes: Goteo is not a centralized hub, but more of a community of communities – a network of local, independent nodes that serve to localize projects and give them context. The first one started in the Spanish region of the Basque country, supported by Basque government, and a second later began in Andalusia. New ones will soon be launched in Barcelona and in Nantes, France.

Public/private match-funding: Goteo is a pioneer in recruiting public/private capital investors to help develop open culture projects through a bottom-up process in a “cloudfunding capital” process: each euro a project receives from a person is matched by another euro from institutions belonging to a social investment fund.

Open source: The core software code of the Goteo website is freely available under a General Public License 3.0 via GitHub, which ensures that it can be used and improved via open source principles.

Goteo’s organizational design principles and values mean that its crowdfunding processes are more rule-based than others. It takes more work to ensure that proposed projects comply with basic criteria of openness and commons principles; that projects are actually produced as promised; and that the collective rewards are delivered and made accessible.

But with tens of thousands of users and a 70 percent rate of success for all proposed projects (the majority of crowdfunding platforms rarely reach a 40 percent), we are convinced that Goteo is headed in the right direction. Its success has validated new standards of openness in crowdfunding, and it has attracted some of the most compelling innovators in the field. Although it is difficult to measure, Goteo has also contributed significantly to projects in free culture, open source code and the commons that might otherwise never materialize.

Goteo aspires to somehow “close the circle” with its previous experiences with Platoniq by developing new forms of peer-to-peer creation, crowd incubation and development for projects in the stages before and after crowdfunding. That will have to wait for a while as we concentrate on Goteo’s first priority, to finance and consolidate the Commons Sector.

Enric Senabre Hidalgo (Spain) is currently a member of Dimmons Research Group (Internet Interdisciplinary Institute – UOC), and a visiting Fellow at the CECAN research centre (University of Surrey). He’s a researcher working on co-design methodologies and Agile frameworks for research processes and the development of digital Commons. Previously, he was member of the Platoniq collective, co-founder and project manager of the platform Goteo.org for civic crowdfunding. He is also vice president of the Observatory for CyberSociety and teaches Software Studies and the History of Digital Culture at the Open University of Catalonia, where he holds a Master’s Degree in the Information and Knowledge Society.

Patterns of Commoning, edited by Silke Helfrich and David Bollier, is being serialized in the P2P Foundation blog. Visit the Patterns of Commoning and Commons Strategies Group websites for more resources.

Photo by Medialab Prado

Photo by Ars Electronica

The post Patterns of Commoning: Goteo – Crowdfunding to Build New Commons appeared first on P2P Foundation.

So we keep pondering community investing as a capital-raising strategy for farmers, ag. co-ops, and other food and farm enterprises, especially beginning farmers who often strive to implement sustainable agricultural and fair labor practices.

Although “direct public offerings” and other community investment campaigns have successfully raised capital for many community-based food enterprises including grocery co-ops, restaurants, artisan breweries and creameries, they are less common among farm enterprises. These strategies work well for local food businesses because, for one, people who don’t  think much about investing often feel a strong personal connection to their local cafe, eatery, or grocery store and will invest in a local owner’s business because of that connection. Most people have less connection with their local farm.

We don’t actually know of many agricultural enterprises that have successfully raised money directly (not through a national or global exchange) from the public in California recently. One example is Farm Fresh to You, a multi-farm community supported agriculture (CSA) business that operates multiple farms, and aggregates produce from many more farms, to deliver organic produce boxes to consumers throughout California.

So why aren’t farmers and agricultural cooperatives using community financing options more? We’re not really sure but we have a few guesses. One is that farming is a ton of work even and crowd-financing campaigns are also laborious. It might just be too much for one or a few beginning farmers to do both simultaneously. Another guess is that it may be more difficult to raise capital from the community in rural areas where people are more spread out. Another issue is likely rural poverty. There may be other reasons. In any case, we’d like to find out if community investment campaigns have the potential to transform financing for the beginning farmers of today and tomorrow.

What types of agricultural enterprises or farmers might be good candidates for community investment campaigns? Here’s a list of indicators:

• Farm enterprises seeking to raise roughly between $200,000 and $1 million for purchasing land, equipment, supplies, or for working capital;
• Farmers with experience in farming who can instill a sense of confidence in prospective investors;
• Farmers committed to organic, diversified, pasture-grazing, and/or other sustainable farming practices;
• Farmers who are active in the community and well-connected to their customers (i.e., through sales at farmers’ markets, CSAs, or on-farm tours and events);
• Farmers who are enthusiastic about the idea of asking their customers and community to become investors in their farm business;
• Farmers who can develop a clear and concise business plan, either working alone or with a business advisor;
• Farm enterprises seeking growth capital over a 2 to 3 year period (because community investment campaigns take some time to plan and execute they are not suitable for urgent funding needs);
• Farmers with strong communication skills. English fluency is not essential, but farm enterprises need at least one one person who can communicate, orally and in writing, in a compelling way about the business); and
• Farmers dedicated to the farming enterprise for a long period of time.

Like what you read here? See our Grassroots Finance page for more about what we’re up to and sign up for our newsletter here to get updates in your inbox. Also, coming up September 10 through 13 is the annual ComCap Conference in Monterey, California where members of the Law Center’s staff will be speaking along with other thought leaders, movers, and shakers in the community capital movement.

Photo by gmtbillings

The post Can Community Capital Finance the Next Generation of Farmers? appeared first on P2P Foundation.

Neal Gorenflo: When I began writing about the sharing economy in 2009, the eclectic array of struggling, communitarian-minded tech start-ups in San Francisco, California, were just one small part of a vast number of sharing innovations that made up what we at Shareable saw as an era-defining transformation in how people create value. This included open-source software, all the open X movements inspired by open source, Creative Commons, the resurgence of an economy based on solidarity, the rise of carsharing, bikesharing, coworking, cohousing, open government, participatory budgeting, crowdsourcing, crowdfunding, hackerspaces, and more. We were in the midst of a sharing transformation.

Soon, however, money began to pour into a handful of these tech start-ups, most notably Airbnb, Lyft, and Uber. The media quickly shifted its attention to them, and they became synonymous with the sharing economy. However, as the money rolled in, the communitarian element rolled out. Exploiting peer providers, purposely breaking regulations, strong-arming local governments, and unethical competitive tactics became the norm. The very thing that earned these start-ups traction in the first place — how they recast relationships between strangers in radically constructive terms — was sacrificed to growth. Instead, they became a particularly aggressive extension of business as usual.

Despite this, the real sharing economy did not disappear. We at Shareable helped catalyse two related movements to help draw resources to this real sharing economy. In 2011, we hosted Share San Francisco, the first event framing cities as platforms for sharing. The city of San Francisco incorporated our thinking into their Sharing Economy Working Group, which then inspired a former social justice activist and human rights lawyer, Mayor Park Won-soon of Seoul, South Korea, to launch Sharing Cities Seoul in 2012. Sharing City Seoul’s comprehensive package of regulations and programmes supported a localized version of the sharing economy where the commons, government, and market work together to promote sharing and the common good. Many cities have followed suit, including Amsterdam, London, Milan, Lisbon, Warsaw, five cities in Japan, and at least six other cities in South Korea. Last year, Mayor Park won the Gothenburg Award for Sustainable Development for his sharing cities work.

In late 2014, we published a feature story by Nathan Schneider, “Owning is the New Sharing,” which reported on an emerging trend — tech start-ups organizing themselves as cooperatives. This, together with a conference about platform cooperatives, proved the stimulus for a new movement. One of the cornerstone examples of this movement is Stocksy United, a growing online stock photo marketplace where the photographers own and control the business. In other words, Stocksy is a 21st-century worker cooperative. Another example is Fairmondo, a German eBay-like site for ethical products owned and controlled by sellers. It’s expanding by recruiting cooperatives in other countries to a federation of cooperatives that, together, will maintain local control of each country’s market through a single technology platform. Fairmondo exemplifies an approach to impact that philanthropists ignore because, too often, they are as obsessed with scale as any Silicon Valley venture capitalist and don’t see the virtue of impact through replication instead.

In this regard, philanthropists today should follow the instructive example of Edward Filene. Filene played a leading role in developing an institution that allowed ordinary people to build their own wealth — credit unions, a high-impact model that could be and has been replicated. Philanthropists should use their resources to help do the same across a whole range of new institutions including sharing cities, platform cooperatives, and much more. This will help ordinary people build and access wealth, reduce resource consumption, and reweave the social fabric. Now, that’s what I’d call a real sharing economy.

This piece was originally published on Alliance Magazine.

Photo by Avariel Falcon

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This is an excerpt from the upcoming book Funding the Cooperative City: Community finance and the economy of civic spaces.

In the past decade, with the economic crisis and the transformation of welfare societies, NGOs, community organisations and civic developers – City Makers – established some of the most important services and spaces in formerly vacant buildings, underused areas and neglected neighbourhoods. Consolidating their presence in the regenerated spaces, these initiatives are increasingly looking into the power of the local community, the dispersed crowd and new financial actors to invest in their activities.

Two years ago, the cultural centre La Casa Invisible collected over 20.000 euros for the partial renovation of the building including the installation of fire doors and electric equipments to assure the safety of their revitalized 19th century building in the centre of Málaga. A few months later, East London’s Shuffle Festival, operating in a cemetery park at Mile End, collected 60.000 pounds for the renovation and community use of The Lodge, an abandoned building at the corner of the cemetery. In order to implement their campaigns, both initiatives used the online platforms Goteo and Spacehive that specialise in the financing of specific community projects. The fact that many of the hundreds of projects supported by civic crowdfunding platforms are community spaces, underlines two phenomena: the void left behind by a state that gradually withdrew from certain community services, and the urban impact of community capital created through the aggregation of individual resources.

The question if community capital can really cure the voids left behind by the welfare state has generated fierce debates in the past years. This discussion was partly launched by Brickstarter, the beta platform specialised in architectural crowdfunding, when it introduced to the public the idea of crowdfunded urban infrastructures. Those who opposed Brickstarter, did in fact protest against the Conservative agenda of the “Big Society”, the downsizing of welfare society and the “double taxation” of citizens: “Why should we spend on public services when our taxes should pay for them?”

Nevertheless, in the course of the economic crisis, many European cities witnessed the emergence of a parallel welfare infrastructure: the volunteer-run hospitals and social kitchens in Athens, the occupied schools, gyms and theatres of Rome or the community-run public squares of Madrid are only a few examples of this phenomenon. European municipalities responded to this challenge in a variety of ways. Some cities like Athens began to examine how to adjust their regulations to enable the functioning of community organisations, others created new legal frameworks to share public duties with community organisations in contractual ways, like Bologna with the Regulation of the Commons. In several other cities, administrations began experimenting with crowdfunding public infrastructures, like in Ghent or Rotterdam, where municipalities offer match-funding to support successful campaigns, or with participatory budgeting, like in Paris, Lisbon or Tartu. Yet other public administrations in the UK, the Netherlands or Austria invited the private sphere to invest in social services in the form of Social Impact Bonds, where the work of NGOs or social enterprises is pre-financed by private actors who are paid back with a return on their investment in case the evaluation of the delivered service is positive.

Largo Residencias, Lisbon. Photo (cc) Eutropian

Alternatively, some cities chose to support local economy and create more resilient neighbourhoods with self-sustaining social services through grant systems. The City of Lisbon, for instance, after identifying a number of “priority neighbourhoods” that need specific investments to help social inclusion and ameliorate local employment opportunities, launched the BIP/ZIP program that grants selected civic initiatives with up to 40.000 euros. The granted projects, chosen through an open call, have to prove their economic sustainability and have to spend the full amount in one year. The BIP/ZIP project, operating since 2010, gave birth to a number of self-sustaining civic initiatives, including social kitchens that offer affordable food and employment for locals or cooperative hotels that use their income from tourism to support social and cultural projects. In 2015 the experience of the BIP/ZIP matured in a Community-Led Local Development Network, as identified by the European Union’s Cohesion Policy 2014-2020, which will grant the network access to part of the Structural Funds of the City of Lisbon. The CLLD is a unique framework for the democratic distribution of public funds: it foresees the management of the funding to be shared between administration, private and civic partners, with none of them having the majority of shares and votes.

While, as the previous cases demonstrate, the public sector plays an important role in strengthening civil society in some European cities, many others witnessed the emergence of new welfare services provided by the civic economy completely outside or without any help by the public sector. In some occasions, community contribution appears in the form of philanthropist donation to support the construction, renovation or acquisition of playgrounds, parks, stores, pubs or community spaces. In others, community members act as creditors or investors in an initiative that needs capital, in exchange for interest, shares or the community ownership of local assets, for instance, shops in economically challenged neighbourhoods. Crowdfunding platforms also help coordinating these processes: the French Bulb in Town platform, specialized in community investment, gathered over 1 million euros for the construction of a small hydroelectric plant in Ariège that brings investors a return of 7% per year.

ExRotaprint, Berlin. Photo (cc) Eutropian

Besides aggregating resources from individuals to support particular cases, community infrastructure projects are also helped by ethical investors. When two artists mobilised their fellow tenants to save the listed 10.000 m2 Rotaprint in the Berlin district of Wedding, they invited several organisations working on moving properties off the speculation market and eliminating the debts attached to land, to help them buy the buildings. While the complex was bought and is renovated with the help of an affordable loan by the CoOpera pension fund, the land was bought by the Edith Maryon and Trias Foundations and is rented (with a long-term lease, a “heritable building right”) to ExRotaprint, a non-profit company, making it impossible to resell the shared property. With its sustainable cooperative ownership model, ExRotaprint provides affordable working space for manufacturers as well as social and cultural initiatives whose rents cover the loans and the land’s rental fee.

Creating community ownership over local assets and keeping profits benefit local residents and services is a crucial component of resilient neighbourhoods. Challenging the concept of value and money, many local communities began to experiment with complementary currencies like the Brixton or Bristol Pounds. Specific organisational forms like Community Land Trusts or cooperatives have been instrumental in helping residents create inclusive economic ecosystems and sustainable development models.

Homebaked, Liverpool. Photo (cc) Eutropian

In Liverpool’s Anfield neighbourhood, a community bakery is the symbol of economic empowerment: renovated and run by the Homebaked Community Land Trust established in April 2012, the bakery – initially backed by the Liverpool Biennale – offers employment opportunities for locals, and it is the catalyst of local commerce and the centre of an affordable housing project that is developed in the adjacent parcels. Similarly, a few kilometres east, local residents established another CLT to save the Toxteth neighborhood from demolition. The Granby Four Streets Community Land Trust, with the help of social investors and a young collective of architects (winning the prestigious Turner prize), organised a scheme that includes affordable housing, community-run public facilities and shops.

The economic self-determination of a community has been explored at the scale of an entire neighbourhood by the Afrikaanderwijk Cooperative in Southern Rotterdam. The cooperative is an umbrella organisation that connects workspaces with shopkeepers, local makers, social foundations, and the local food market: they have developed an energy collective in cooperation with an energy supplier that realises substantial savings for businesses in the neighbourhood; a cleaning service that ensures that cleaning work is commissioned locally; and a food delivery service for elderly people in the neighbourhood.

With community organisations and City Makers acquiring significant skills to manage welfare services, urban infrastructures and inclusive urban development processes, it is time for their recognition by established actors in the public and private sectors. The EU’s Urban Agenda, developing guidelines for a more sustainable and inclusive development of European cities, can be a catalyst of this recognition: it can prompt the creation of new instruments and policies to enable such community-led initiatives. While the Cohesion Policy 2014-2020 has developed the CLLD framework, not many Member States chose to use this instrument. The Urban Agenda could therefore envision the adoption of more methods to be experimented by City Administrations, to allow for a more sustainable and inclusive allocation of resources. Whether through matchfunding, grant systems, or simply removing the legal barriers of cooperatives, land trusts and community investment, municipalities could join the civil society in developing a more resilient civic economy with accessible jobs, affordable housing, clean energy, and social integration.

Lead image from homebaked.org, Liverpool UK. All other images from Eutropian.

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