The Equity Factor

Who’ll Win the Battle for Crowdfunding’s Soul? The Selfish or the Selfless?

Or will it be somewhere in between?

Profits from the sale of Rooster Soup Co.‘s “Pastramen” soup will go toward supporting hungry Philadelphians. (Photo by CookNSolo)

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The word “crowdfunding” was added to the dictionary early this year, and the Internet-fueled investment approach just keeps building steam. In August, Denver sparked a civic crowdfunding fever with its municipal mini-bond sale. Last month, neighborhood crowdfunding platform Ioby launched a competition to solicit ideas for fixing little public transit problems. The power of playing the role of funder can be heady — and even prompt a warm and fuzzy feeling for community-minded investors.

Things get trickier when the crowd’s dollars are going toward private, brick-and-mortar businesses. Adding the tint of community by asking for charitable support for a business can raise sometimes uncomfortable questions of how the business will, in the end, benefit its community. When an Ann Arbor-area microbrewery launched an Indiegogo campaign to build a new kitchen, the owner was accused of trying to “panhandle the community, while real people sit and work for money.”

Last year, a Brooklyn bar asked for funds online with the explanation, “Bed-Stuy is [in] need of a cool, beautiful, comfortable, and cozy watering hole.” I wonder if there’s an actual consensus among all of Bed-Stuy’s demographics about the need for a bar with “delicious snacks, super good cocktails, [and] groovy records playing all the time,” or whether that desire was limited to a recent wave of residents. Meanwhile, the opening of establishments with class-comforting indicators (craft beers, pour-over coffee, vegan treats) can lead to rent increases and the decline of a neighborhood’s affordability. (A few recent Craigslist posts advertise the bar along with other trendy spots as “all close by on foot.”)

As a carrot, a free beer was offered for a pledge of $25 to the Bed-Stuy bar. Not only is that a pricey pint, but it starkly contrasts with terms offered by banks or other established private investors who are aware of how risky opening a new bar or restaurant can be.

In Philadelphia, The Yachtsman bar sparked annoyance earlier this year when its founders launched a Kickstarter campaign to fund their dream of bringing “an authentic, and authentically fun, tiki bar to our hometown.” With a location in gentrifying Fishtown already in mind, The Yachtsman launched a funding page that hit a sweet spot between smug and entitlement. A pledge of $950 would ensure a funder’s name on a barstool, “giving you the right to ALWAYS be able to claim your bar stool at any time of day or night.” What a perfect encapsulation of why gentrifiers are so despised — the presumption that you can buy your right to a shared urban space.

These examples demonstrate a wielding of social capital that may resonate with potential funders, but this pseudo-inclusivity is just a smoke-and-mirrors sales pitch, with very little to offer in return.

“Restaurants are notoriously risky endeavors. In most cases, you don’t have any idea how it’s going to do until you open your doors,” notes Steve Cook, a Philadelphia restaurateur and co-founder of the popular chicken-and-donuts chain Federal Donuts.

He and his partner’s new venture, Rooster Soup Company, recently used Kickstarter to successfully raise funds for a non-profit restaurant with a true social benefit. Rooster Soup would use the byproducts of Federal Donuts’ chickens (which would otherwise go to waste) to create the main ingredient for the new restaurant’s broth. After covering overhead, Cook would give profits to Broad Street Ministry’s Hospitality Collaborative, which provides free meals to around 1,200 Philadelphians a week.

(Credit: Tim Moyer)

“I think their approach is pretty similar to the approach of hospitality in our restaurants,” says Cook, who is currently looking for locations in Center City Philadelphia to be able to capture both lunch and dinner crowds.

Cook explains that not only is crowdfunding a way to raise funds, but it also serves as a promotional tool. “Because we were asking people for money without the promise of giving it back to them, we really wanted to mitigate that risk,” he says. “We felt Kickstarter would be a good proxy for whether or not we were going to be successful.”

Their backers got the usual thrill of taking an investment risk, and the altruistic feelings that come from contributing to a self-sustaining charitable cause that benefits vulnerable Philadelphians.

Cook says that he’s a “capitalist at heart,” so he doesn’t have anything bad to say about less humanitarian crowdfunded projects, but that, “Personally, I would never be comfortable asking people for money to fund my for-profit venture. We were comfortable going to Kickstarter to ask people to open their wallets, because we believe that [Rooster Soup] was not going to line our pockets.”

The Equity Factor is made possible with the support of the Surdna Foundation.

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Alexis Stephens was Next City’s 2014-2015 equitable cities fellow. She’s written about housing, pop culture, global music subcultures, and more for publications like Shelterforce, Rolling Stone, SPIN, and MTV Iggy. She has a B.A. in urban studies from Barnard College and an M.S. in historic preservation from the University of Pennsylvania.

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Tags: gentrificationcrowdfunding

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