The limits of crowdfunding

Off the Beat: Bruce Byfield's Blog

Sep 19, 2012 GMT
Bruce Byfield

Suddenly, everyone has discovered crowdfunding. The idea of user-funding is far from new, but in the last six months, every free culture and software project seems to be attempting it. In theory, I'm all for the experiment, but in practice I'm starting to worry about how long requests for funding can be made before indifference sets in.

I understand why crowdfunding sounds promising. If you haven't a corporate sponsor, then your ability to earn a living while doing what you love is limited. A few projects can fund themselves by offering services; for instance, the ebook manager Calibre derives some of its income from a portal for DRM-free books. However, many are not so lucky as to have other potential sources of income, no matter how ingenious they are.

I suspect, too, whether developers are turning to crowdfunding as they grow older and look for ways to reconcile their avocations with the need to earn a living and contribute to the family income.

Superficially, crowdfunding sounds like a magic solution. Ask the people who benefit to contribute, and, even if only a few percent actually do so, then at least the lead project contributors might be able to afford to work on the project full time. If you are truly innovative, you might even have contributors vote on priorities and features. Assuming that everything works as plans, what's not to like?

The danger of reaction
The potential problem that I see is one faced by non-profit groups all the time. Most charities keep lists of people who have supported them in the past. However, those with any sense are cautious about asking those people to donate too often or too much. The more the charities ask, the more they run the risk of alienating their allies, and, in the long-run, reducing their own income. The general rule with most charities, I've found, is not to ask anyone for donations more than once a year unless some very special cause emerges. But all the charities with which I've been involved, are haunted by such considerations, and their organizers regularly discuss how often their main supporters can be asked to donate again.

As a sort of charity with enlightened self-interest, any crowdfunding effort runs the same risk. The first time or two, the average donor gives gladly. But let them get the idea that they are taken for granted as an impersonal source of cash, and often the resentment can grow.
Donor relations can be touchy enough when a single non-profit is involved. But when there is a host of similar causes -- for instance, various pieces of free software -- all drawing on the same basic pool of donors, then the problem becomes even greater.

Since the fundraising is not coordinated, the danger of placing too many demands on the donors becomes even likelier than with a single non-profit. Faced with dozens of potential projects to sponsor, most donors will have to pick and choose, meaning that some projects won't receive what they need -- not because they are any less worthwhile, but for no better reason than they happened to be the tenth request for funds than a particular donor receives. 

Even worse, the constant array of possibilities could make some donors simply decide to make their lives simple again and fund nothing.
Ironically, such reactions might be most common among the most enthusiastic supporters of crowdfunding. The more conscientious a giver is, and the more they have to give, the more they don't simply respond to requests. Instead, they are more likely to investigate the organization making the request. They want to look at what the organization has done in the past, and to learn details such as how much money is spent on administration rather than on actual work.

For such donors, a request is much more than a decision to give. Instead, it becomes a considerable demand on their time -- which in turn makes a reaction all the more likely.

Such reactions are not inevitable. However, they become all the more likely if they are not anticipated -- and, so far, I hear very few of those involved with crowdfunding thinking about the possibilities.

Avoiding the reaction
These possibilities can be avoided. Many conventional charities, as I've suggested, have successfully done so. But, considering all the potentially good causes, crowdfunding may have a harder time in avoiding the risk of milking the cow dry.

Perhaps that won't happen. As crowdfunding and free software continue to gain popularity, perhaps the pool of potential donors can grow faster than the reaction can set in. Or perhaps the requests can be better spaced if a number of projects look for funding as a single foundation rather than separately.

However, I hope projects considering crowdfunding will begin to think about such possibilities before they become serious problems. Otherwise, if everyone thinks of the potential income from crowdfunding as limitless, then the experiment may become an obsolete fad instead of creating a new culture of personal involvement.


  • Yes!

    I've ben thinking about this too, and the problem I see is that there's not much an open source project can give contributors that they wouldn't get anyway if the project is successful. This contrasts with a closed project like a video game, where backers can be offered preferential access to the game. If we could find a way to offer backers a benefit without compromising the open nature of the software, then I think we could open up a lot of crowd funding avenues.
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