Preface: Some basics about crowdfunding
The idea of crowdfunding as an alternative finance mechanism is to collect small amounts of money from a large group of people in order to reach the required budget amount which is needed for the realisation of a concrete project. Each of the crowd-investors or so-called backers is willing to contribute a small share for the realisation of the concrete project and the team behind it because he or she believes in the project idea and wants to see the project happen.
Crowdfunding campaigns are normally launched on digital crowdfunding platforms that provide different types of crowdfunding mechanisms for their target groups of crowd campaigners, typically innovative start-ups and SMEs. Platforms can offer a range of crowdfunding mechanisms from donation-based or reward-based crowdfunding up to so called financial crowdfunding mechanisms, like lending- and equity-based mechanisms which require specific legal regulatories.
Each crowdfunding campaign needs to be based on an elaborated project implementation plan (often displayed in a pitching video) and a dedicated marketing concept. For this reason, a clear understanding of the concrete target groups (= crowd) and the way of addressing this crowd is crucial.
Besides its mere financing aspect, crowdfunding can become a valuable instrument to build up networks of motivated followers ready to support a project beyond the campaigning phase.
Project motivation - the reasons behind the project
Even today, for several reasons, not every well-prepared project idea that is presented to a local LEADER board can be funded within the LEADER programme. For future periods, there are already signals indicating that public funding for local projects will become less available and more difficult to achieve. At the same time, many bottom-up ideas from local actors and communities, especially socially motivated initiatives, demand for new financial solutions that can deliver faster and more efficient results with a focus on providing power, knowledge and opportunities to the local community. In this context, crowdfunding could be an alternative to public funding or a complementary source of money (and other contributions) coming from local people, i.e. local crowds, that are motivated to contribute to the realisation of project ideas or initiatives that will directly impact their communities.
Based on the LEADER approach and given the wide experience gained through day-to-day collaboration with local action groups and stakeholder networks, LEADER managements and other project initiators per se are in a favourable position to initiate and support local crowdfunding activities. As a main contact point for any local actor that wants to implement a project idea or initiative at community level they are in touch with the relevant regional networks and own the skills to involve citizens and stakeholders in local project activities.
To make crowdfunding a promising opportunity for local project promoters and social entrepreneurs from LEADER action groups and local networks, there is an urgent need for LEADER managements and related local project initiators to dive deeper into this topic in order to understand the prerequisites to set up local crowdfunding instruments, foster the adaptation of existing crowdfunding services to the needs of local communities, and to establish cooperation relationships with platforms or other potential financing partners.
Further, experience exchange between LEADER partner regions will be needed to keep track with ongoing developments in local crowdfunding applications and in other fields of alternative finance (e.g., how to link regional currency initiatives with crowdfunding) and to enlarge the knowledge basis concerning the practical integration of different financing instruments in local environments in order to get a larger number of promising bottom-up projects from local communities started and running.
Project goals - What is the project going to achieve
The general project objective of the transnational Crowd4Region cooperation is to build up the capacities of LEADER action groups and local actors concerning the implementation of crowdfunding mechanisms in order to enlarge the scope and volume of different types of complementary funding sources for local projects and bottom-up social/community initiatives by integrating and supporting different funding instruments and sources of finance. Thus, Crowd4Region will secure and increase the growth and employment rate of smaller companies, local start-ups and non-profit organisations and create opportunities for bottom-up and social entrepreneurial initiatives to evolve and develop local solutions to deal with global challenges, like e.g. increased unemployment rates, segregation and need for societal integration.
Based on this overarching project goal, the partnership will implement a comprehensive workplan in a transnational approach based on the demand of the participating LEADER regions and their local action groups following the specific project goals as listed below:
- To explore and share experience about existing crowdfunding models and platform options as well as approaches for the integration of different types of new finance mechanisms with view to their applicability in the context of LEADER regions
- To explore and share experience about the prerequisites and applicable models for matching monetary and non-monetary contributions within an integrated crowdfunding model acc. to the demand of LEADER regions
- To create a common vision of the required performance of crowdfunding platforms/services acc. to the demand of LEADER regions, their local actors, project promoters and bottom-up social/community initiatives
- To develop and test a toolbox of practical instruments and tools available for LEADER managements and related local actors to support local project promoters and bottom-up social initiatives in their crowdfunding activities
- To implement locally coordinated pilot actions and share at a transnational level the learnings from these piloting activities in different local environments of the participating LEADER regions
Planned pilot activities
- Looking for a crowdfunding platform that is able and willing to provide the managing partner with its platform or to adapt its platform (as a white-label) for the managing partner (see below) and for the interface for funding with regional currency (see below)
- Looking for a national partner being able to manage and finance a crowdfunding platform (f.ex. white labeled existing platform)
- Realizing an interface with crowdfunding platform for funding with regional currency “Beki” of Atert-Wark region (www.beki.lu)
- Training stakeholders (project owners and project funders) for crowdfunding possibilities
- Initiating a helpdesk for these stakeholders through responsible platform management and regional currency management
- Promote the platform through local marketing campaign
Target groups of the project
- Local/regional project funders
- Local/regional project owners seeking for fund possibilities
Involved stakeholders and implementation partners
- Members of Regional Currency association de Kaer asbl
- Enterprises of our region and dealing with regional currency “Beki”
- Banks involved in regional currency change
- University of Luxembourg with Interdisciplinary Centre for Security, Reliability and Trust (SnT) (or other payment system operator)
Expected learnings
- Experiences with regional currency in crowdfunding approach
- Get local projects benefit through regional currency
- Experience aging money rule versus no reduction when crowdfunding local projects
