• Finance source: Typically many private investors, each providing a relatively small amount of the total funding

• Funded project phase: In principle all, though crowdfunding platforms are likely to prefer projects already at a relatively developed stage; it is unlikely they would support very early stage, speculative opportunities

• Typical project size: Up to £10 million

• Match funding: Depending on cases

• Security: May be required, though not in all cases

• Speed of accessing finance: Low – time needed to build awareness and allow investors to make their own assessment of the opportunity can make this a relatively slow form of fundraising

It can also be a way of cultivating a community around the project offering. This may be particularly relevant, therefore, to projects where the local community would feel a strong sense of involvement and ‘ownership’ of the project as a local asset.

Debt, equity, donation-based crowdfunding and Community Municipal Bonds (CMBs) are all forms of crowdfunding that a local authority can use to finance Net Zero projects.

Private citizens and local organisations provide funding using a web-based platform, creating a tighter connection between the local community and the green energy infrastructure. The project Financing for Society provides more details on these options (Davis, Cartwright and The Bauman Institute, 2019).

Advantages of crowdfunding

✅ Pitching a project through crowdfunding can be a valuable form of marketing and result in media attention and wider community attention

✅ Crowdfunding can foster a greater sense of involvement and ‘ownership’ among the local community

Disadvantages of crowdfunding

❌ It can be a harder process to go through compared to more traditional ways of raising finance

❌ Significant resources (money and/or time) may be required to build up interest in the project

❌ If you don't reach your funding target, any finance that has been pledged will usually be returned to your investors and you will receive nothing

❌ Failed projects may risk damage to the reputation of the project or local authority

Main types of crowdfunding

Peer-to-peer lending

The ‘crowd’ lends money to a borrower with the understanding that the money will be repaid with interest. It is very similar to traditional borrowing from a bank, except that that the loan comes from lots of investors.

Equity crowdfunding

Sale of a stake in a business to a number of investors in return for investment. The idea is similar to how common stock is bought or sold on a stock exchange, or to venture capital. This is less likely to be relevant for local authorities.

Rewards-based crowdfunding

Individuals donate to a project or business with expectations of receiving in return a non-financial reward, such as goods or services, at a later stage in exchange of their contribution. This might not be relevant directly to local authority led projects, but may be to community energy projects that the local authority is involved in.

Donation-based crowdfunding

Individuals donate small amounts to meet the larger funding aim of a specific charitable project while receiving no financial or material return. The recent bonds for West Berkshire and Warrington are innovative since they offer investors the opportunity to donate some or all of their interest payments towards the projects.

Profit-sharing/revenue-sharing

Borrowers can share future profits or revenues with the crowd in return for funding now.

Debt-securities crowdfunding

Individuals invest in a debt security issued by the borrower, such as a bond.

Hybrid models

Offer businesses the opportunity to combine elements of more than one crowdfunding type.

Case studies

Some case studies are available on the platform Abundance Investments, which has supported West Berkshire District Council and Warrington Borough Council to issue CMBs

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