How do you define the impact of crowdfunding?

Recently in class, Prof. Zak said: “when you spend money, you’re casting a vote for the kind of world you want to live in.” This stuck with me, and I think it ties into so many other intense theories I have about the constantly evolving conversation of what society deems valuable. 

It seems intuitive to me that social value has personal roots. Before the rise of social innovation and social entrepreneurship, the most practical avenue for “do-gooders” to make an impact was to seek out an organizations that touched upon what they personally valued, and volunteer their time or contribute financially. This is a very tangible way to invest in something they believed in.

But from my own experiences of non-profits, I know all too well that a great cause cannot sustain an organization. When reading Geoff Mulgan’s article, Measuring Social Value, I thought he made a number of excellent points about how to define what you’re actually measuring, and specifically, honing in on the issue of clarity as central to successfully defining the social need and the proposed solution.

His discussion of measurements was so on-point. Social ventures just don’t measure up in business models, because fundamentally they don’t just seek to collect on what value already exists, they actually seek to generate value for needs that haven’t been explored.  It s a new framework altogether, and it doesn’t make sense apply the same pre-existing models of measurement from different fields with entirely different value-structures. Social ventures ultimately have a unique value-structure, and Mulgan’s proposal offers a way to customize based on an issue and be consistent in measuring social value by being specific.

It’s interesting to think how the last 20 years and the advent of social media has changed the whole structure of resources.  Defining problems and solutions, composing traditional business plans—they’ve all taken on a new form.

Certainly it can be difficult to put together a completely defined landscape when launching a social venture—the landscape is constantly changing. And even so, with inconsistent metrics, funders and investors are likely to need more research before contributing large sums of money. 

I think that part of the reason that crowdfunding is such a trend is that minimizes the risk to single organizations or individuals, it spreads the cost among willing investors who may not be concerned with a return on investment. They care about the idea and the cause, and are willing to chip in to see if something happens. And even if they’d like something in return, there are options—endless options—for other ways to invest in something they care about. Sites like Kickstarter.com or Kiva.org are just two examples of sites with completely different models, but can provide an avenue for someone to invest in something they see value in and get something in return too.

As more sites emerge, it makes me wonder how the trends will shift. Will crowdsourcing diminish the need for well-informed market research? How can you measure impact when ideas a shared across the internet?  How do you calculate the return on investment for the satisfaction of millions of people donating a small sum of money to a community or cause outside of their own?

It just leaves me wondering: Are social platforms the newest form of direct investment? What are the socio-cultural implications? Will crowdfunding shift the way that we, as a society, cast our votes for shifts in social values and decide new social norms?  

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Citi Breaks Into The Social Enterprise Sector With First-Ever Loan (Social Enterprise Buzz, July 30, 2013); www.socialenterprisebuzz.com/2013/07/30/citi-breaks- into-the-social-enterprise-sector-with-first-ever-loan/

The Funding Gap (Chertok et. al., Stanford Social Innovation Review, Spring 2008); www.digitaldividedata.com/media/pdf/DDD-Stanford-Social-Innovation- Review_The-Funding-Gap-Spring-08.pdf

A Place in Society (The Economist, September 26, 2009); - www.economist.com/node/14493098

Measuring Social Value (Mulgan, Stanford Social Innovation Review, Summer 2010, pgs. 38-43); - www.ssireview.org/articles/entry/measuring_social_value

The $5.1 Billion Future of Crowdfunding Is More Than Kickstarter (Fast Company, April 19, 2013); www.fastcoexist.com/1681808/the-51-billion-future-of-crowdfunding-is- more-than-kickstarter