Crowdfunding for Community Development
Crowdfunding, the concept of raising small amounts of money from many people, has existed for centuries—passing around the hat has long been a way to raise funds for individual or community needs. Now, two factors are driving rapid change and growth in crowdfunding: technology and regulation. Social media and the Internet allow those seeking to raise funds to reach thousands, if not millions, of prospective investors with relative ease. Last October, the U.S. Securities and Exchange Commission (SEC) released a proposed rule that will permit companies to offer and sell securities through crowdfunding. Combined, these two factors suggest that the power and scale of crowdfunding will grow significantly in the near future.
To the extent that you've heard of crowdfunding at all, you probably think about an artist raising money to produce an independent film or an entrepreneur seeking funds for a tech start-up. However, crowdfunding, which takes many forms, can be used to raise funds for almost anything or anyone. To that end, the community development function at the Federal Reserve Board and the Federal Reserve Banks of New York and San Francisco explored the concept of crowdfunding for community development finance. On March 24, a small group of community development and technology thought leaders gathered at the Board of Governors in Washington, D.C., for a discussion on the challenges and opportunities crowdfunding investment may provide to the community development community. The event, the Crowdfunding for Community Development Finance Conference, was also live-streamed on the Board's website.
The event began with welcoming remarks from Jeremy Stein, a member of the Board of Governors. Following Stein's appearance, the event transitioned into a conversation with industry leaders John Hamilton of City First Enterprises and Chance Barnett of Crowdfunder. Hamilton and Barnett discussed the potential for crowdfunding in the community development field. Hamilton spoke of the field's shrinking resources and crowdfunding's potential to fill some of those gaps. Barnett talked about the importance of the community development field's ability to tell its story and attract both investors from inside and outside of the community.
The panel "The Existing Landscape: A Discussion of Current Crowdfunding Models" was moderated by the Board's Amanda Sheldon Roberts. All five of the panelists run existing crowdfunding platforms, only some of which are mission focused. Panelists were Justin Conway of Calvert Foundation, Jeannine Jacokes of Partners for the Common Good, Ben Miller of Fundrise, Ron Suber of Prosper, and Jase Wilson of Neighbor.ly. Their platforms demonstrate the breadth and diversity of the existing crowdfunding industry.
The second half of the conference engaged all the participants through facilitated small-group discussions. In a lively exchange, participants discussed data gaps, technical assistance needs, regulatory issues, and how better to accommodate the existing tech infrastructure to community development needs. The challenge now is for the two seemingly divergent fields, community development and technology, to continue the dialogue to facilitate a functional, fair, and prosperous crowdfunding market for community development.