Most of us have heard of crowd funding by now, the trendy new way of raising funds by getting a large number of people to chip in whatever they are willing to invest. It has proven very successful in allowing entrepreneurs to raise start-up capital when a trip to the local bank goes south or is out of the question to begin with.
It has also helped generate significant money for social causes as demonstrated by (one of my favorites) the recent revival of Reading Rainbow that generated donations of $5.4 million on crowd funding site Kickstarter. It’s not just entrepreneurs and feel-good social causes benefitting from the movement, however. Communities and economic development organizations are discovering that crowd funding can help reach economic development goals.
Let’s take a look at the Michigan Economic Development Corporation (MEDC), which recently started a crowd funding effort (the first of its kind) for its Public Spaces Community Places Initiative. The initiative is designed to implement projects that help create vibrant communities and catalyze private investment like alley rehabilitation and public plazas.
One of the key components of the initiative is that it lets MEDC leverage its own resources by matching crowd-sourced funds with grants up to $100,000. The first project, a green alley in midtown Detroit exceeded its target of $50,000 and earned a 1-to-1 matching grant.
Crowd funding is also being used for more grass roots economic development efforts. The Mile High Business Alliance, a Denver nonprofit, started a crowd funding platform called Neighborhood Catalyst. Community members are able to contribute funding to specific projects in their neighborhoods. The platform also makes it easy for residents to donate time and materials to projects.
Crowd funding for economic development is still in its infancy but the growth potential is enormous. Crowd funding has increased 1,000% in the last 5 years according to Fundable, a crowd funding platform for businesses. Communities and organizations involved in economic development should be aware of this potential funding source when looking to implement future projects.