Why Candidates Should Consider Crowdfunding

Chris Rabb didn't know if he could win an election. In late 2015, he was an adjunct professor at Temple University in Philadelphia, a city famous for its machine politics. But after he was nominated to run for a seat in the Pennsylvania House of Representatives on Crowdpac and received more than $8,000 in pledges from his Facebook friends, he decided to jump in the race – beating an incumbent by 6.5 percent and astonishing Pennsylvania’s political establishment. 

Crowdfunding sites like Kickstarter and Indigogo have demonstrated how setting conditions on financial support can help incentivize collective action. By striking an all-or-nothing agreement that backers will only be charged when a goal is reached, they offer a more meaningful value proposition for a supporter – not just to be a donor, but an investor. And while we’ve seen this concept upend how new projects, products and festivals can be funded, we’ve only scratched the surface on how it can help new candidates, like Rabb, explore running for office. 

Crowdfunding offers a technological hack to a barrier nearly every campaign faces – raising early money. When campaigns begin, they’re immediately in a race to establish credibility with impressive fundraising numbers. This period often serves as a reality check when consultants realize that their good candidates are terrible fundraisers (causing them to re-think the former), and candidates discover that running for office is, frankly, harder than they first envisioned. When fundraising proves difficult early on, it only becomes more challenging to get donors off the sidelines. The problem is compounded by inevitable start-up costs a campaign faces, which can often leave a campaign broke before it even begins. 

But crowdfunding offers a way to test the waters and formalize pledges of support before establishing a campaign. Further, it can offer a tool for drafting quality candidates who do have support into deciding to run. And contrary to the common misconception that crowdfunding requires millions of followers on social media to be successful, Rabb’s example shows that it only takes one message to a network of close friends and supporters to get the ball rolling and demonstrate you’ve got what it takes to win.

I’ve mentioned Crowdpac, the startup I founded in 2013, because it’s currently the only platform that applies the principles of crowdfunding to politics in a way that complies with the regulatory framework of campaign finance laws. Our Start Running tool provides a simple interface for campaign creators to begin raising pledges and customize the conditions under which they will convert to donations – such as establishing a committee or raising a designated amount – giving candidates the flexibility they need to decide whether or not to enter the race. 

Working with a bipartisan team of experts in campaign law, Ben Ginsberg and Marc Elias, we secured a unanimous opinion in 2014 by the Federal Election Commission which helped established a precedent for this model of 21st century political fundraising. Aside from a handful of local jurisdictions with laws that prohibit this kind of solicitation, it’s a tool that’s available for almost any candidate seeking political office in the country. 

But the possibilities for this hack extend beyond candidates. Ballot measures, PACs and charities can also benefit. 

In 2016, Peter Kiernan, a U.S. Marine Corps veteran and former scout sniper, created a viral campaign to challenge Donald Trump. It promised that every dollar crowdfunded would go to veterans’ organizations if Trump released his tax returns. In fact, it raised more than $6.2 million dollars in pledges from some 11,000 donors. Although Trump ultimately didn’t release his returns, more than 3,200 donors opted to follow through with their pledge, raising over $130,000 for veterans’ charities.

Just as crowdfunding has helped businesses raise capital for new ventures, it’s helped usher in a new type of casual investor willing to give small amounts to causes that compel and interest them. And while there’s no question that technology has allowed campaigns to recruit more small-dollar donors into the democratic process, still less than 1 percent of the eligible population has ever contributed to a candidate or political cause. Even a tiny change in this dismal level of participation has the potential to upend the way we fund campaigns and the new candidates who will be able to run for office as a result. 

By eliminating the frictional barriers associated with running for office and raising support, crowdfunding is making it possible for a new generation of candidates to emerge. And even if your candidates aren’t taking advantage of this hack, there’s a good chance your opponents will.

Steve Hilton is the CEO of Crowdpac and former director of strategy for UK Prime Minister David Cameron.