In the last two decades crowdfunding has increasingly become one of many tools used by artists and some cultural organizations to fundraise, with it even being described as an ‘alternative disruptive instrument’. In this article, we will be unpacking what crowdfunding is and how web3 is reimagining this current digital fundraising practice.
The term crowdfunding draws from the idea of crowdsourcing, an approach often used within web 2.0 practices which uses the ‘wisdom of the crowds’ to gather content and ideas from different users. Wikipedia is a classic example of crowdsourced content; since anyone online can edit and add to its pages, it uses ‘the crowd’ to create and maintain its content.
However, the idea of using ‘the crowd’ to source income is by no means new. Like community fundraising in which organizations draw from their local, physical networks to raise income through community-based events and fundraisers, crowdfunding is similarly dependent upon social networks. By digitizing this process of community fundraising, crowdfunding enables organizations to have a potentially global reach to raise income for a project that might otherwise be limited by geography.
One of the earliest examples of crowdfunding for the cultural sector is the ArtistShare platform which offers artists a way to connect with fans to facilitate community around and raise money for their projects. ArtistShare paved the way for the now, more commonly used platforms like Indiegogo and Kickstarter, which raise money via a campaign around a single product. More recently still, we find platforms such as Patreon which uses a membership model to allow fans to give a monthly income to their favorite artists and therefore provide a more long-term solution to crowdfunding.
The financing models to crowdfunding vary. In some circumstances projects take a ‘Keep-It-All’ method, so if the project fails to meet its target sum it still gets to keep the money it raised. Others use an ‘All-or-Nothing’ approach, meaning that if the project fails then it must return the raised funds to supporters. This latter approach is riskier but also creates a sense of urgency that can be used to encourage potential donors to give.
Many crowdfunded projects use a reward-based scheme where those who support the project gain certain rewards depending on the amount they gave. But equity-based funding can also be common. Similar to traditional investment models, backers in equity based funding receive a financial return on their investment
Meanwhile, newer platforms such as Patreon offer an adapted version to this approach. Patreon’s goal is not to provide income for one project but to support the artist in their ongoing artistic practice. Jon Sword describes this as ‘crowd-patronage’ where the subscription based model offers a way to build relationships between an artist and their network of patrons.
This idea of ‘crowd-patronage’ is an interesting development of the crowdfunding model because it outlines how to create a more sustainable model to fundraising through the crowd. That is to say, it explores how crowdfunding can create a community that continuously supports an artist throughout their artistic career. It is also an idea that relates to the way we might use NFTs in a crowdfunding campaign.
The use of web3 in crowdfunding is not an immediately new concept. For example, one recent study reflected on the use of initial coin offerings (ICOs) as an extension of reward-based crowdfunding. Similarly, the use of NFTs as a fundraising tool has been explored by a wide array of cultural organizations including The Whitworth, The Hermitage Museum, and the Uffizi Galleries. But these museum projects lack the long-term effect that Web3 ‘crowd-patronage’ could offer.
Our collaboration with the Women's Suffrage National Monument Foundation also explores the use of NFTs as a fundraising tool. In this project, we have developed the ‘Modern Rebels’ campaign, the profits of which will support the building of a monument in Washington D.C. to commemorate and celebrate the women’s rights movement.
Our model in this campaign aims to extend NFT fundraising approaches with this idea of ‘crowd-patronage’. As noted earlier, ‘crowd-patronage’ explores how crowdfunding can be used to harness a relationship between artist and fan which in doing so creates a longer-term and more sustainable approach to raising funds.
Here at Iconic Moments, we believe that this model could be valuable for cultural institutions as it enables institutions to create different kinds of values from the project including financial, educational, social, and community based. And being able to create a variety of unique campaigns with NFTs enables cultural institutions to raise funds and do so in a way that is reflective of their mission and values. Web3 crowd-patronage could be the next economic model for exploring NFTs.
Our ‘Modern Rebels’ campaign reflects such an approach by cultivating a community of patrons founded on the idea of equality. Members of the community learn about the women behind the suffrage movement, and consequently become part of the conversation about why the suffrage movement is still relevant today. The ‘crowd’ we’re sourcing from doesn’t just financially invest, they become part of making history.