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Abstract
We examine the rise of crowdfunding platforms in the wake of the global financial crisis, particularly the claim that they offer an alternative to established methods of raising capital for real estate investment, enterprise development, and civic projects. We interrogate how these novel methods of aggregating users and their money in digital space produce different collective subjectivities. Drawing from an industry study of civic crowdfunding portals in the United States and legal research into the regulatory apparatus governing them, we put forth a two-part typology to help make sense of the varied business models of crowdfunding platforms and the ways in which those models invoke and harness crowds as concrete social formations. The first distinguishes crowdfunding platforms based on what is being circulated—the substance of the payment and the economic relations it embodies and creates. The second focuses on the legal dimension of these relations, both within the transaction and in the way sites constitute the crowd through the inherited financial-regulatory vocabularies governing the issuance of securities.
Acknowledgements
The authors would like to thank the participants in The Crowd, Cloud, and Urban Governance workshop, held in April 2015 at the Department of Urban Planning and Policy at the University of Illinois Chicago, for their feedback and encouragement. Caroline Rendon provided excellent research assistance along the way. We are also grateful to Ludovic Halbert at the Laboratoire Techniques Territoires et Sociétés (LATTS) in Paris and Marc Pradel Miquel and Marisol Garcia at the University of Barcelona for organizing seminars where versions of this paper were presented. Ramon Ribera Fumaz and Enric Senabre Hidalgo also provided helpful commentary.
Disclosure statement
No potential conflict of interest was reported by the author(s).
No funding was reported by the authors.
Notes
4 The actual business models may be more complex, with different planks of the platform divided among third party vendors; for instance, Amazon formerly processed payments for Kickstarter (now the platform builder, Stripe, provides this functionality).
5 For example, Fundrise has started offering shares in “eREITs,” a trademarked term referring to a real estate investment trust (REIT) that buys and sells diversified real estate holdings. The eREIT differentiates itself in terms of fee structures and redemption requirements but the basic capital and legal structure, including the need to file the offering with the SEC, is identical to a conventional REIT.
6 Notes Langley (Citation2016b): “It remains problematic, however, to reduce the diverse relations between crowdfunding and cities to two contrasting and somewhat oppositional modes: a formal financial mode of lending and investment relations that attach to the urban economy and enclose the built environment, on the one hand; and, an informal monetary mode of pledging and gifting relations that connects to the pragmatic and innovative projects of the urban commons, on the other.”
7 Some sites, like Kickstarter, treat donations as a legally binding contract, which gives backers standing to sue for cases of outright fraud.
8 Other regulatory frameworks similarly date from the mid-20th century, including those regulating the offering of interest-bearing loans (the Federal Trade Commission and the Securities and Exchange Commission), philanthropic donations and tax exemption (IRS), and interstate commerce and fraud (FTC). Given limited space we do not discuss these.
9 For instance, KICKSTARTER, INC. v. ARTISTSHARE, INC., No. 11 Civ. 6909 (PAC) (S.D.N.Y. Apr. 10, 2012). This case focused on intellectual property claims arising out of the defendant’s patent for “Methods and Apparatuses for Financing and Marketing a Creative Work.”
10 For instance, at the time of writing, Spacehive had “hives” of projects in Camden, Ealing, Liverpool, Manchester, Tottenham, and the London Borough of Hackney. Langley (Citation2016b) points out that certain districts are likely to host more crowdfunding opportunities than others, potentially deepening the already polarized access to capital.
11 However Kickstarter’s main rival, Indiegogo, operates along a different model, releasing all funds raised to the sponsor regardless of whether the funding goal is met.
Additional information
Notes on contributors
Philip Ashton
Philip Ashton is Associate Professor of Urban Planning and Policy in the Department of Urban Planning and Policy at the University of Illinois at Chicago. Email: [email protected]
Rachel Weber
Rachel Weber is a Professor of Urban Planning and Policy in the Department of Urban Planning and Policy at the University of Illinois at Chicago. Email: [email protected]