Here’s why city governments should do more to support crowdfunding

Plymouth, unlikely centre of the UK crowdfunding scene. Image: Mark Murphy/Wikimedia Commons.

Say “investment crowdfunding” or “buying shares”, and most people will think you are talking about taking a punt on a startup with the aim of making a good financial return if they become a success. However, investment crowdfunding, which involves a large number of individuals each making a relatively small debt or equity investment in a project, can also be about communities coming together to save a much-loved local pub from closure, or creating a new community arts space. In these situations investors are driven by motivations that are more about making their local area a better place to live, work and play, than making a financial return.

Over the last 9 months at Nesta, we have been working to understand how investment-based crowdfunding models – such as community shares and bonds – can be used to create projects which are owned and run by the communities they serve, and the benefits and challenges that come along with this. 

It’s easy to find inspiring examples of community-initiatives all over the country that have crowdfunded investment in this way. These include, but are not limited to, those running pubs, shops football clubs, workspaces, renewable energy projects and even broadband services.

From these examples we have learnt that investment crowdfunding helps to fund socially-beneficial projects that would otherwise struggle to find the money they need through grants or bank loans. Fundraising in this way can also lead to greater use of these assets, alongside increased offers of volunteering and other forms of support by the community they serve. In addition, by bringing communities together to improve their local area, these crowdfunding models can strengthen social cohesion and empower individuals with increased self-determination over the future of their local area.

However, raising money in this way is not all plain sailing, and community organisations often face difficulties in gaining access to assets or transitioning from grassroots fundraising to running a community business with a large number of investors to keep happy. Further to this, there are potential challenges around ensuring the diversity of those investing in and governing these assets are representative of the communities in which they belong.


City authorities have a crucial role to play in creating an environment in which strong community projects are able to thrive, and there are clear social benefits in them doing so. Cities can support local groups in overcoming some of the challenges, for example, by providing small grants to cover legal and advisor fees or by helping them access unused space, whether through the transfer of public sector assets or by acting as a matchmaker between private owners of unused spaces and community groups.

Plymouth City Council is one authority that understands the potential of crowdfunded community investment to improve how community development and regeneration is done. Plymouth residents’ interest in a new type of economy combined with the need for urban regeneration and the council’s desire to do things differently with shrinking local authority budgets provided the drive for Plymouth to brand itself the UK’s first “Social Enterprise City”.

Contributing to this has been the council’s commitment to provide match funding to over 200 crowdfunded projects up to £20,000 each, from Community Infrastructure Levy funds and the designated £2.5m Social Enterprise Investment Fund, which offers a combination of grant and loan funding to get projects up and running. The Clipper Inn, a project to bring a dilapidated pub back to life as a community market and work space, is one project which has benefited from this fund, which has enabled the purchase of their building.

While cities are starting to see the power of investment crowdfunding to help community-led projects transform local areas socially, economically and environmentally, there remains potential for authorities to make supporting groups to use these tools a larger part of their regeneration and development strategies.

Jonathan Bone is a senior researcher in new technology at innovation charity NESTA.

You can read more about this work in our new report, Taking ownership: Community empowerment through crowdfunded investment. This research was conducted with funding from funded by the Greater London Authority through the London Economic Action Partnership (LEAP).

 
 
 
 

What Citymapper’s business plan tells us about the future of Smart Cities

Some buses. Image: David Howard/Wikimedia Commons.

In late September, transport planning app Citymapper announced that it had accumulated £22m in losses, nearly doubling its total loss since the start of 2019. 

Like Uber and Lyft, Citymapper survives on investment funding rounds, hoping to stay around long enough to secure a monopoly. Since the start of 2019, the firm’s main tool for establishing that monopoly has been the “Citymapper Pass”, an attempt to undercut Transport for London’s Oyster Card. 

The Pass was teased early in the year and then rolled out in the spring, promising unlimited travel in zones 1-2 for £31 a week – cheaper than the TfL rate of £35.10. In effect, that means Citymapper itself is paying the difference for users to ride in zones 1-2. The firm is basically subsidising its customers’ travel on TfL in the hopes of getting people hooked on its app. 

So what's the company’s gameplan? After a painful, two-year long attempt at a joint minibus and taxi service – known variously as Smartbus, SmartRide, and Ride – Citymapper killed off its plans at a bus fleet in July. Instead of brick and mortar, it’s taken a gamble on their mobile mapping service with Pass. It operates as a subscription-based prepaid mobile wallet, which is used in the app (or as a contactless card) and operates as a financial service through MasterCard. Crucially, the service offers fully integrated, unlimited travel, which gives the company vital information about how people are actually moving and travelling in the city.

“What Citymapper is doing is offering a door-to-door view of commuter journeys,” says King’s College London lecturer Jonathan Reades, who researches smart cities and the Oyster card. 

TfL can only glean so much data from your taps in and out, a fact which has been frustrating for smart city researchers studying transit data, as well as companies trying to make use of that data. “Neither Uber nor TfL know what you do once you leave their system. But Citymapper does, because it’s not tied to any one system and – because of geolocation and your search – it knows your real origin and destination.” 

In other words, linking ticketing directly with a mapping service means the company can get data not only about where riders hop on and off the tube, but also how they're planning their route, whether they follow that plan, and what their final destination is. The app is paying to discount users’ fares in order to gain more data.

Door-to-door destinations gives a lot more detailed information about a rider’s profile as well: “Citymapper can see that you’re also looking at high-profile restaurant as destinations, live in an address on a swanky street in Hammersmith, and regularly travel to the City.” Citymapper can gain insights into what kind of people are travelling, where they hang out, and how they cluster in transit systems. 

And on top of finding out data about how users move in a city, Citymapper is also gaining financial data about users through ticketing, which reflects a wider trend of tech companies entering into the financial services market – like Apple’s recent foray into the credit card business with Apple Card. Citymapper is willing to take a massive hit because the data related to how people actually travel, and how they spend their money, can do a lot more for them than help the company run a minibus service: by financialising its mapping service, it’s getting actual ticketing data that Google Maps doesn’t have, while simultaneously helping to build a routing platform that users never really have to leave


The integrated transit app, complete with ticket data, lets Citymapper get a sense of flows and transit corridors. As the Guardian points out, this gives Citymapper a lot of leverage to negotiate with smaller transit providers – scooter services, for example – who want to partner with it down the line. 

“You can start to look at ‘up-sell’ and ‘cross-sell’ opportunities,” explain Reades. “If they see that a particular journey or modal mix is attractive then they are in a position to act on that with their various mobility offerings or to sell that knowledge to others. 

“They might sell locational insights to retailers or network operators,” he goes on. “If you put a scooter bay here then we think that will be well-used since our data indicates X; or if you put a store here then you’ll be capturing more of that desirable scooter demographic.” With the rise of electric rideables, Citymapper can position itself as a platform operator that holds the key to user data – acting a lot like TfL, but for startup scooter companies and car-sharing companies.

The app’s origins tell us a lot about the direction of its monetisation strategy. Originally conceived as “Busmapper”, the app used publicly available transit data as the base for its own datasets, privileging transit data over Google Maps’ focus on walking and driving.  From there it was able to hone in on user data and extract that information to build a more efficient picture of the transit system. By collecting more data, it has better grounds for selling that for urban planning purposes, whether to government or elsewhere.

This kind of data-centred planning is what makes smart cities possible. It’s only become appealing to civic governments, Reades explains, since civic government has become more constrained by funding. “The reason its gaining traction with policy-makers is because the constraints of austerity mean that they’re trying to do more with less. They use data to measure more efficient services.”  

The question now is whether Citymapper’s plan to lure riders away from the Oyster card will be successful in the long term. Consolidated routing and ticketing data is likely only the first step. It may be too early to tell how it will affect public agencies like TfL – but right now Citymapper is establishing itself as a ticketing service - gaining valuable urban data, financialising its app, and running up those losses in the process.

When approached for comment, Citymapper claimed that Pass is not losing money but that it is a “growth startup which is developing its revenue streams”. The company stated that they have never sold data, but “regularly engage with transport authorities around the world to help improve open data and their systems”

Josh Gabert-Doyon tweets as @JoshGD.