Political crowdfunding is a fundraising strategy where political candidates or organizations use online platforms to raise money from a large number of individual donors to support their campaign or political activities. It is a form of grassroots fundraising that enables politicians to bypass traditional methods of raising money, such as donations from wealthy individuals, corporations, or political action committees (PACs).
Through political crowdfunding, candidates or organizations can reach out to a wider audience and tap into the power of social media to promote their campaign and raise funds. Supporters can make small donations online, and in return, they may receive rewards, such as merchandise, tickets to events, or recognition on the candidate's website or social media pages.
Political crowdfunding has become increasingly popular in recent years, particularly in countries with strict campaign finance laws or where traditional sources of political funding are limited. It has also been used as a way for candidates to showcase their popular support and credibility, by demonstrating that they have a large base of grassroots supporters who are willing to donate small amounts of money to their campaign.
A prime example of how to hold a political fundraiser is Barack Obama's first campaign in 2008, which raised $137 million in small donations, and his reelection campaign, which raised over $214 million. Our next step is to explore political crowdfunding in terms of its purpose, regulation, and ethics.
Additionally to serving as a source of financing for political campaigns, crowdfunding can play a significant role in the following areas:
Limiting the influence of big donors. Due to the influence it confers on upper-class individuals and corporate elite, political party fundraising is often frowned upon, making the party play by their rules and taking away the nation's power. By limiting the amount of money a single individual can donate, political crowdfunding addresses this issue.
Increasing the number of supporters for a political party. Supporting politicians is more accessible to the masses as opposed to only high-income individuals, which encourages more people to vote for the party, promote it, and inspire others to do the same.
Building a sense of community and increasing commitment. Making it easier for people to join groups united by a common ideology improves the social environment and increases their commitment to the party, which makes them more likely to donate and vote.
Raising funds and promoting the party can be done in a shorter amount of time. Finding large-scale investors can be a tough task, but providing support to smaller donors improves the chances of raising funds and promotes it by word of mouth.
People with lower incomes have access to political activity. In spite of the fact that being politically active has traditionally been associated with high income, it's beneficial both for the party and society to allow working class people to freely express their opinions.
Improving campaigns. An online donation leaves a trace of information behind that can be used to create micro-targeted campaigns for specific social groups, improving the quality of the campaign and expanding its reach.
Managing large-scale political operations at a lower cost. Running a political crowdfunding website provides significant profits and is inexpensive compared to traditional ways of promoting a party.
“Crowdfunding is a powerful fundraising tool that democratizes access to capital and empowers individuals to invest in and support the causes and candidates they believe in.”
american political activist and former presidential candidate
Online crowdfunding campaigns in the US are regulated by FEC (Federal Election Commission), who state that “Campaign committees may solicit contributions over the internet as long as the solicitation includes the proper disclaimers”, referring to the need to state who is paying for the effort and if it has been publically endorsed by the candidate.
Rules and regulations for donating to political parties vary from nation to nation. Most governments set a maximum amount of money which can be donated unaccounted-for, like in the UK where £500 is the limit. Yet, loopholes are often created when large amounts are divided in order to bypass detection. In the UK, political crowdfunding is monitored by General Data Protection Regulation (GDPR) and Privacy and Electronic Communications Regulations (PECR).
“Crowdfunding allows for people to participate in the political process in a way they never have before. It's a way for people to give small amounts of money that can add up to make a big difference.”
american politician and former candidate for President of the United States
Two of the biggest concerns of political crowdfunding are cybersecurity and data protection. In order for the political party to improve their campaign, supporters are willing to give up some personal information when they donate online. Donors, however, are at risk when any type of data is stolen in a data breach.
It's important for fundraisers and donors to think about who their data is available to when the donation is made – for example, the crowdfunding service provider may own the data, so the party itself would not be able to use it for microtargeting and marketing purposes, or even lose access to it. In terms of service, you can usually find information about data ownership.
To prevent fraud and to provide valuable information in court, the party must keep a record of all significant donations made over a certain period of time.
“Crowdfunding has the potential to revolutionize the way political campaigns are funded. By enabling candidates to raise small donations from a large number of people, it allows them to build grassroots support and reduce their reliance on big donors and special interests.”
former US President
Political crowdfunding may both present a solution to some old ethical problems in finance and political campaigning, and present new challenges as well. As a result, the advantages increase the collective level of empowerment – they serve as a starting point for new forms of social organization and community.
Political crowdfunding provides a means for democratisation of financial resources. It dismantles the traditional reliance on political parties and financial institutions, relieving individuals and organisations from control and giving more power to the masses. This enables marginalised communities and groups that suffer especially from discrimination to communicate their political views, providing opportunities to reduce inequality in society. Moreover, by offering an unbarred platform for exchange of opinion and backing of politically motivated activities, it helps fill the void in public sector funding like healthcare, education or renewable energy that is frequently neglected by conventional financing.
It should be noted, however, that there are a number of significant drawbacks. Political crowdfunding, like other forms of crowdfunding, can be a source of manipulation for large groups of people who may act impulsively or behave in an irrational and hostile manner due to the “herd mentality”. There is fear that this could result in a “tyranny of the majority” which silences minorities and takes away their decision-making power. Additionally, its use by governments to finance public services such as healthcare and education may let them evade their direct responsibility and misappropriate public funds.
“Crowdfunding has the potential to democratize politics by enabling candidates who may not have access to traditional fundraising networks to raise money from a broad base of supporters.”
chief operating officer of Facebook
Crowdfunding for political campaigns is a powerful tool for democratizing fundraising, allowing marginalized communities and more people to express their political views. Although it has some ethical concerns, it remains a positive force in the world of politics and civic endeavor.
There aren't many crowdfunding platforms that specialize in political crowdfunding, which is unfortunate for such a promising area. Contact FinMV for a consultation on how we can help you start your own business in this field.