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Report: Civic Tech Struggles with Sustainable Funding Despite Gains

A recent increase in public desire to strengthen democracy has not yet translated into more funding for civic tech, but the authors of a new report see it as a reason for hope.

by / October 31, 2017

A new report has found that while civic tech is a growth industry, it is one largely filled with organizations struggling to create sustainable business models.

The report, dubbed Scaling Civic Tech: Paths to a Sustainable Future, was released by the John S. and James L. Knight Foundation with the Rita Allen Foundation Oct. 31. This is the Knight Foundation’s first major report on civic tech since a detailed study in 2013 took a broad look at the investment landscape. The newer work is a closer examination of “why startups in the field are struggling to grow and sustain themselves,” said Jon Sotsky, the Knight Foundation’s director for learning and assessment.

What the report found is that technology has opened new paths for citizens to contribute to democracy, and that interest in doing so surged after the 2016 presidential election. While organizations in the civic tech space are experimenting with revenue sources and business models, few have found reliable financing that fully covers costs. A shortage of capital and funders is also limiting civic tech's ability to scale.

For this reality to change, Sotsky said a few things need to happen. Organizations must get better at how they invest by moving away from thinking in terms of specific goals and toward considering the needs of a civic tech startup. Investors need to also stop benchmarking themselves against for-profit companies.

Sotsky also stressed the importance of making a few distinctions, namely that the civic tech companies that have grown the most are the ones that overlap with gov tech proper and are thus able to sell products to government clients. Organizations in watchdog roles or seeking to serve the social good without a clear buyer for projects face more inherent funding obstacles.

“That’s been a fundamental challenge,” Sotsky said. “How do organizations that are really focused on a social good think about who would pay for that, especially when it’s not a pain point for government.”

Companies that work in civic crowdfunding are one example. They seek to partner with government, working to advance a goal that government is supportive of but not in a position to purchase. Such products lack the elegant simplicity of being able to define themselves as tech for government, rather than tech that improves government in an abstract sense.

While civic tech companies with sustainable funding are scarce, there are exceptions. Democracy Works, a nonprofit and nonpartisan group that aspires to increase voter participation, has found sustainability with TurboVote, a product that makes it easy for citizens to register to vote and to track elections.

Brandon Naylor, a spokesman for Democracy Works, said TurboVote, which launched in 2010, has the benefit of experience in the space. It started by selling to universities at cost before honing a mixed-income model that now includes philanthropic giving.

Democracy Works has also made inroads into the corporate sector through the TurboVote Challenge. They have challenged more than 55 major companies (think Starbucks, Google, Facebook and Univision, among others) to get their employees and audiences registered to vote in service of meeting a goal of 80 percent national voter turnout by 2024. Posing this to the companies has resulted in many of them using the TurboVote product.

“We’ve tried to diversify a little bit,” Naylor said. “So, instead of solely relying on philanthropic giving, we’ve sought ways to help bolster reinvestment back into the product. We grew into this strategy.”

Another lesson that Democracy Works has learned is that closely collaborating with stakeholders to identify what they need is crucial. In their case, that meant reaching out to and spending time with elections officials and authorities. Their challenge was to create a lasting product that would outlive major election cycles and also facilitate participation in other elections, like mosquito abatement races in Florida. To do it right, Naylor said they had to ask many, many questions.

“That’s something we’ve taken a lot of care to do, making sure we’re putting in the time and the commitment to create tools we know they actually need,” he said.

The Knight Foundation report places the responsibility for financial sustainability on both civic tech companies and those who fund them, saying they need to work harder to drive collaboration in the field, coordinating efforts through incubators and accelerators while sharing in fundraising and sales services. Overall, more philanthropic support is also needed. Whereas education and health are magnets for charity, the relatively obscure nature of civic tech has kept it from similar donations.

In the wake of the most recent presidential election, there has been a seemingly unprecedented demand for causes that will bolster the strength of democracy, but this demand hasn’t translated into big bucks for civic tech, which has more to do with awareness than with funders not wanting to help.

“The challenge right now is they don’t know how to [help],” Sotsky said. “They’re spiritually aligned, but they’ve never heard of something called civic tech. They’re going to give $1 million to the ACLU and think about how to encourage more people to run for office.”

This untapped but greater interest in the core philosophies, however, is a promising development. 

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Zack Quaintance Assistant News Editor

Zack Quaintance is the assistant news editor for Government Technology. His background includes writing for daily newspapers across the country and developing content for a software company in Austin, Texas. He is now based in Washington, D.C. He can be reached via email.

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