- June 1, 2019: Vol. 6, Number 6

Crowdfunding for infrastructure: Getting financial and community buy-in is the future of the art

by Kate Gasparro

Successful infrastructure delivery requires community buy-in. That’s why governments and developers pour resources into public meetings and marketing material for new construction projects. When there is no buy-in, new projects can get delayed or stop all together from community opposition. And, with a growing gap between available funding and infrastructure needs, these outcomes are risky for any budget. To address this problem, project sponsors in the United States and around the world are tapping into crowdfunding to get literal buy-in, both social and financial, from residents and end-users.


While donation crowdfunding has a longer history, regulation crowdfunding has recently taken off. Enabled by the 2012 Jumpstart Our Business Startups (JOBS) Act, regulation crowdfunding allows project sponsors to work with crowdfunding platforms to issue debt and equity to the crowd. Project sponsors come to these sites seeking nontraditional financing, often times because their projects are traditionally perceived as unbankable (Meyskens & Bird, 2015). Regulation crowdfunding has been most successful for projects with strong and predictable revenue sources, such as real estate and energy infrastructure projects. As a result, regulation crowdfunding platforms seek patient crowdfunders who can choose between debt, common equity and preferred equity investment opportunities for real estate and energy infrastructure projects.

While there are opportunities to allow unrestricted access to regulation crowdfunding, the Securities and Exchange Commission rulings on crowdfunding make it very difficult for crowdfunding platforms to cater to unaccredited investors. With a focus on accredited investors, regulation crowdfunding platforms attract more financing to these projects, often expanding the radius of crowdfunding beyond a project’s footprint. is one regulation crowdfunding platform that is bringing a local perspective to investors. The projects on this platform are assigned a mobility, community and economic vitality evaluation score, which appeals to project sponsors who want to quantify the financial and social support for projects. This approach is well aligned with the implementation of the Economic Opportunity Zone initiative, allowing interested investors to understand local communities. Crowdfunding platforms such as are making waves because of their focus on local communities and a democratized investment structure that brings place-based projects to neighborhoods in need.


Building on the success in the real estate and energy sectors, there has been a lot of interest in bringing regulation crowdfunding to public infrastructure, in particular transportation projects. But public agencies have been hesitant to take on crowdfunding. Part of this hesitation comes from increased transaction costs of democratizing investments for the crowd. This has been combated to some extent by crowdfunding platforms that use economies of scale to reduce transaction costs. One approach has been to allow crowdfunders to purchase equity shares in project portfolios, reducing transaction costs for project sponsors and mitigating risks to investors. offers a $500 minimum investment in a portfolio of diversified real estate holding. Similar benefits can occur with a bundle of revenue-backed public infrastructure projects.

With this in mind, public agencies are taking small steps toward crowdfunding. Recently, the Colorado Department of Transportation included a clause in the Central 70 proposal request that allows crowdfunding to be used for permitted equity transfer. Using crowdfunding for project refinancing reduces risk to investors because there is clearer understanding of demand for the project. At the same time, it allows residents to take ownership in an asset they have benefitted from and see benefit in. Special purpose vehicles (SPV) are also ripe for crowdfunding innovation. Leveraging project finance structures, SPV partners can choose to allocate a portion of the capital stack to crowdfunded investments. This becomes a strategic decision for projects that have high social impact.


Crowdfunding is not a perfect fit for all projects. Skeptics often bring up the perceived inequalities that come from allowing individuals to give financially to projects. Does this mean that some projects will not be pursued or that only those that have the means will be able to participate? Case-based research has shown crowdfunding campaigns are a component of a larger community engagement and project marketing strategy, and the amount of dollars raised through these campaigns only represents a portion of project costs. This means while we cannot say for certain crowdfunding is (or is not) perpetuating these inequalities, it is only a small component of a larger engagement and financial strategy.

Considering all that, public agencies sit in a prime position to leverage the social and financial support that comes from crowdfunding infrastructure projects. And, to allow that to happen at scale, (1) transaction costs must be reduced, or quantified through the benefit of community engagement, and (2) forward-thinking government agencies need to include crowdfunding as an option in proposal requests; or, SPVs, who see the benefit of early community engagement, should consider using crowdfunding to finance a portion of the project. Crowdfunding is not a panacea for resolving all community tension or funding the entire infrastructure gap. Instead, it is a tool for marketing projects, aligning stakeholders and getting much-needed community buy-in.

Kate Gasparro is researcher at Stanford University.

For reprint and licensing requests for this article, Click Here.

Forgot your username or password?