SCALING CIVIC TECH

Paths to a Sustainable Future

KNIGHT FOUNDATION Sustaining Civic Tech 1 TABLE OF CONTENTS

FOREWORD …………………………………………………………...... 3

SUMMARY ………………...………………………………………...... 5

“BUYER” REVENUE VS. “BUILDER” CAPITAL …………..…………...... 8

BUYER REVENUE ……………………………………………………...... 10 Revenue sources Landscape analysis

BUILDER CAPITAL ……………………………………………………...... 26 Philanthropic capital Venture capital

RECOMMENDATIONS ………………………………………………...... 33

CONCLUSION ………………………………………………………...... 41

KNIGHT FOUNDATION Sustaining Civic Tech 2 FOREWORD

How can we harness technology to promote civic engagement and more responsive government?

This foundational question lies at the heart “civic exploring ways to support civic engagement have struggled to translate prototypes, pilots tech,” a constellation of activity seeking to use and democracy either in conjunction with and products into full-fledged organizations technology to enhance how people interact with their existing strategies or as a standalone with business models that assure ongoing government and one another. What began as opportunity. This surge of interest and potential impact. Even the best-known organizations face a series of ad hoc efforts and hackathons has capital could be transformational for civic tech. very real challenges in sustaining and expanding developed over the past decade into a broader their work. Countless conversations with our civic tech community of for-profit and nonprofit As civic tech funders with a longstanding grant partners, peer funders, researchers organizations and investors. commitment to supporting informed and other practitioners have confirmed the communities and civic participation, we unfortunate reality that the lack of proven In many respects, there has never been a more at Knight Foundation and the Rita Allen business models has constrained the growth of exciting time for the civic tech community. The Foundation are eager to help the field use new civic tech. 2016 presidential election fanned the flames of resources and interest to capitalize on this citizen engagement and illustrated to many the moment in time. To do so, we need to examine Inspired by these conversations, we importance of investing in organizations serving a sobering reality: very few civic tech startups commissioned research to generate deeper to strengthen our democracy. Since the election, formed over the last decade have meaningfully insights about business models in the field a growing number of foundations, investors scaled or sustained their work. With a few and surface ways of overcoming challenges. and high-net-worth individuals have begun notable exceptions, civic tech organizations Today we are excited to share that research

3 in a new report, “Scaling Civic Tech: Paths to and fundraising, and evaluation. In addition a Sustainable Future.” The report captures to approaches for attracting more funders, sustainability challenges, bright spots and including impact investors, the research recommendations based on the perspectives suggests how funders can structure their of nearly 50 startup leaders (for-profits and funding to encourage longer-term success. nonprofits) and funders (foundations, venture capitalists and angel investors) interviewed As a field, we have spent considerable time by Catherine Bracy and Elana Berkowitz, two lamenting civic tech organizations’ struggles experienced practitioners in the field. The with sustainability. Our hope in presenting this Nonprofit Finance Fund also provided guidance report is to begin to change this narrative by based on their extensive experience promoting provoking a more consistent, collaborative and business models and business-minded rigorous field-wide conversation about not approaches across the social sector. just challenges but potential solutions. We look forward to working with others to pursue these This latest research builds on Knight’s report ideas into a resilient and impactful future for “The Emergence of Civic Tech” and New civic tech. Media Ventures’ recent “Making Money for Impact” report about revenue models. It Jon Sotsky confirms the hard truth that few civic tech Director, Strategy and Assessment startups have developed repeatable and reliable Knight Foundation revenue to cover their costs and grow their operations—indeed, many startups in the field Jonathan Kartt launch without an anticipated business model. Program and Evaluation That said, the research pointed to a number of Rita Allen Foundation different ways organizations are exploring to monetize efforts to promote open government, voting and other forms of civic engagement. It emphasized the need for organizations and funders to distinguish between “buyer” revenue, supporting core operations, and “builder” investments intended to fuel their long-term success. It also highlights a series of important skills that funders can help startups to develop, including business planning, sales

4 SUMMARY

KNIGHT FOUNDATION Sustaining Civic Tech 5 echnology has the potential to massively change the way citizens interact with government and one another, strengthening communities and governance. People, T organizations and government have begun to leverage technology to inform and encourage civic engagement, from simplifying voter registration to hosting virtual government town halls to launching crowdfunding campaigns supporting civic assets. This growing cluster of activity has become known as “civic tech.”

Despite the proliferation of activity in civic tech, policies and practices as well as social enterprise What are opportunities to few startups in the field have meaningfully business models and capitalization. The research increase and optimize the scaled and demonstrated sustainable business consisted of analysis and interviews with nearly effectiveness of philanthropic models capable of adapting to a rapidly 50 stakeholders, including founders of for- and private capital funding in changing operating landscape and set of needs. profit and nonprofit civic tech organizations, Civic tech for-profits and nonprofits alike have foundations, venture capital firms and other the field? struggled to identify business models to expand prominent stakeholders in the field. their reach and impact. The struggles with What lessons about growth and sustainability have been increasingly observed The research addressed the following key sustainability can be drawn from and lamented by startups, funders and others questions: other fields in the social sector? committed to leveraging technology to promote a vibrant civil society. What are emerging business How can civic tech practitioners models and earned revenue Knight Foundation and Rita Allen Foundation and funders support more sources, and how do they vary commissioned research to deepen sustainable growth among across segments of the civic understanding about emerging business individual organizations and the tech field? models and the dynamics of sustainability for field as a whole? civic tech organizations, including for-profits and nonprofits. The research was conducted What are notable examples of This report reflects insights, examples and by Catherine Bracy and Elana Berkowitz, two civic organizations that have lessons about the successes of and challenges individuals with deep sector knowledge, in to the sustainable growth of civic tech collaboration with Nonprofit Finance Fund, scaled and insights from their organizations. Key themes include: which brought significant expertise in funder work?

KNIGHT FOUNDATION Sustaining Civic Tech 6 Success stories lacking limited the ability of civic tech organizations to The research originally aimed to showcase a cohort attract funding. The lack of rigorous and consistent What exactly is of organizations that have achieved solid financial outcomes measurement, and of compelling footing, but found that even the organizations evidence of impact, poses a barrier to more “civic tech”? most often cited as success stories still struggle philanthropic funders supporting civic tech. Several reports have sought to provide greater with sustainability. The report discusses several clarity about the contours and growing field of civic leading practices and revenue sources, but few Underinvestment in core tech. Suffice to say, there is no universally accepted organizations can truly be described as sustainable capacities definition of the term. yet—which may be partly attributable to the relative While venture funding enables tech companies to youth of the field. invest in core capacities such as tech development For the purposes of this report, key terms are defined and sales staff, philanthropic funding for civic tech as follows: Revenue model variances startups has largely supported the implementation • Civic tech: Technology used to Sources of repeatable and reliable revenue and the of specific projects. Philanthropic funders should inform, engage and connect residents organizational capacities required to access them consider how they invest in civic tech startups to with government and one another to differ considerably across segments of the civic ensure that investments support their long-term advance civic outcomes. tech landscape (such as transparency, voting and growth and not just the short-term implementation resident-to-government interaction). Even within of specific projects and programs. • GovTech: Technology designed with government as the intended customer segments, organizations have approached business or user. models quite differently and represent a mix of for- The report findings and recommendations seek to profits and nonprofits. inform the strategies and operations of civic tech Whereas GovTech is defined by the intended user startups and funders. More broadly, the report (that is, government), civic tech is defined by the Growth paths aims to contribute to growing discussion about intended outcome. Thus, civic tech and GovTech are 2 The organizations that have grown the most have sustainability in the field. By lifting factors hampering neither mutually exclusive nor perfectly overlapping. As opposed to GovTech, which includes many largely been for-profit software companies that growth and providing recommendations, this study technologies government uses to increase the sell to government and enterprise clients. These aspires to provoke more conversation about how to efficiency of its internal operations, civic tech tools organizations have focused on developing their overcome barriers faced to date and help to scale largely include a citizen-facing component. sales capacity and often had founding teams organizations with potential to have the greatest with existing strong government networks. impact on government transparency, citizen This report focuses on civic tech organizations of Organizations have grown through other business engagement and effective local governance. which a subset would also be considered GovTech. Furthermore, the research concentrated on models, but generally not as quickly. organizations whose primary mission concerned 1 See Knight Foundation report “The Emergence of Civic Tech: Investments in a Growing Field”; Omidyar Network and Purpose civic tech rather than large tech companies whose Impact measurement report “Engines of Change: What Civic Tech Can Learn from Social “civic features” constitute only a fraction of their underdeveloped Movements”; and Civic Hall Labs and Microsoft resource “Civic Tech intended use (such as Facebook’s Town Hall). Field Guide.” Inability to assess and communicate impact has 2 This blog post by Ron Bouganim of Govtech Fund explains the difference between GovTech and civic tech.

KNIGHT FOUNDATION Sustaining Civic Tech 7 ‘BUYER’ REVENUE VS. ‘BUILDER’ CAPITAL

KNIGHT FOUNDATION Sustaining Civic Tech 8 he distinction between a company’s operating revenue and investment funding is well-understood among for-profit companies and investors. However, nonprofits T and their funders often don’t distinguish among different forms of capital. This imprecision has been an impediment to more sophisticated conversations about business models and sustainability in the social sector.

The civic tech space contains a mix of for-profits repeatable and reliable funding to deliver through several grants that provided capital and nonprofits, so establishing clear vocabulary programs and services. to the organization to launch and iterate its from the outset is even more important. TurboVote services. Meanwhile, Knight was a Adopting terminology used by the Nonprofit Builders buyer through a grant that allowed TurboVote to Finance Fund (NFF)3, this research explores Builders provide capital to fund startup costs, deliver services to three university partners. two distinct types of funding: “buyers” and growth and ongoing transformation and “builders.” innovation. Builder investments intentionally A sustainable and adaptable business model support the launch and expansion of social provides reliable and repeatable revenue that Buyers enterprises, including paying for deficits covers the full costs of operations. Achieving Buyers provide revenue to cover the ongoing incurred by social enterprise business lines until sustainability is a process, and organizations costs of social enterprises, whether for- or these efforts can be sustained by repeatable fall on a spectrum from total reliance on builder nonprofit, to deliver impactful programs. and reliable buyer revenues. Whereas buyer capital through operations based solely on Several sources of funding constitute buyer revenue supports the execution of services, repeatable and reliable earned revenue. revenue, including earned revenue for services, builder capital enables organizations to develop small donors and paying members, and their product/service offering as well as their The report findings are organized by these program-restricted grants. Though buyers core capacities and administrative capabilities. different forms of funding. A social enterprise often “purchase” program execution on behalf The injection of builder capital tends to be more that is both currently sustainable and able to of others (such as a donation for disaster relief episodic and considered to be riskier in that invest in growth and adaptation over time will efforts in a distant country), they may also be it intends to support long-term growth and have adequate access to both “buy” revenue the direct beneficiaries (for example, paying impact rather than the immediate execution of and “build” capital. When funders and social museum admission or donating to a local NPR programs. enterprises operate and communicate station). Buyers pay organizations to perform cognizant of the delineation between builders their existing work rather than to grow, adapt An example from Knight’s own grant-making and buyers, they are more likely to achieve their or innovate. In sum, buyer money is the lifeblood that illustrates the distinction is its funding to aspirations. for social enterprises and provides them with Democracy Works. Knight has acted as a builder 3 For more background about Nonprofit Finance Fund’s concept of build vs. buy, see its “2011 Portfolio Performance Report,” 2012.

KNIGHT FOUNDATION Sustaining Civic Tech 9 BUYER REVENUE: REPEATABLE AND RELIABLE INCOME SOURCES

KNIGHT FOUNDATION Sustaining Civic Tech 10 ivic tech organizations derive earned revenue from a variety of clients as well as from individual donations. While some organizations focus on a single form C of revenue and a single type of client (such as city government), others earn income through multiple revenue sources and types of clients. As a general rule, some diversification in sources of earned revenue can contribute to better sustainability and adaptability. However, these gains from diversification can quickly reach diminishing and negative returns as additional investment in capacity is required to manage and support these added revenue streams and relationships.

This research identified several sources of repeatable and reliable income for civic tech organizations. The most prevalent and promising revenue sources are noted below and discussed in the report.

• Enterprise • Corporate • Transaction software partnerships fees • Consulting • Advertising • Small donor • Government • Data dollars procurement monetization and sales

KNIGHT FOUNDATION Sustaining Civic Tech 11 Enterprise software natural buyer. Software sales and related services were the But there are trade-offs. Several CEOs said most common form of revenue discovered in Clients, particularly government, are often their teams and top product people found the research and among the organizations that seeking software that improves the efficiency consultative and customization work to have exhibited the most growth. Frequently, of workflows and processes. NextRequest, a be unsatisfying. Their top product people most revenue was derived by offering Software tool that streamlines the public record request wanted to focus on large product problems, as a Service (SaaS) to enterprise clients paying process, benefits the public by improving not bespoke tweaks and client management, monthly or annual license or subscription government transparency but earns revenue and they believed that making that team fees. Often though, companies earn additional because it addresses a pain point for its focus on consulting instead of challenging revenue associated with consulting and government clients. The tool makes fulfilling engineering problems was a recipe for losing customization of their software to meet the requests more efficient for government top performers. needs of clients. employees. By focusing on the request fulfiller Perhaps most important, supporting one- as a user, NextRequest offers a clear value off customizations can dilute the focus on Organizations sell software that meets a variety proposition to government clients that want producing a great product with the potential of needs to several types of enterprises. The software that minimizes the time and resources to scale. Civic Insight, a platform for analyzing biggest civic tech SaaS customer segment needed to perform mandated public functions. and visualizing government data sets (which is government clients that seek software for was acquired by Accela), earned revenue managing citizen engagement and open data Balancing level of customization early on through custom SaaS projects. These efforts. However, several large nonprofits and Government and other enterprises frequently companies phased out consulting because they advocacy organizations also purchase civic request additional support and customization perceived a far larger upside in profitability by tech SaaS to manage communications and from civic tech companies selling software. As scaling usage and driving down costs. engagement with their constituencies. one entrepreneur put it, “Government loves buying tech with hand-holding attached.” Solving a customer pain point Civic tech companies achieving the greatest Customized SaaS can certainly have advantages “We close deals by conveying the traction with software sales offer solutions that from the perspective of the startup. First off, “value proposition to the working- squarely address a clear and urgent client need. customizing software increases the chance of level government employees who However, many civic tech organizations design “lock-in” whereby customers will continue to be will use this and can do smaller software intended to serve a broad public/ committed to the software because of the high contracts. It’s about how much civic purpose but fail to address a need for any switching costs associated with implementation particular client that could actually pay for it. and transition. Moreover, ancillary revenues money you can save them or how This misalignment between the beneficiaries can prove valuable for younger companies still much time you can save them.” (for example, the public) and customers (often eagerly seeking money to support core product — Josh Goldstein, CEO, Department of Better government) often leads to software without a development. Technology (DOBT)

KNIGHT FOUNDATION Sustaining Civic Tech 12 Partial vs. end-to-end solution a budget builder and a data analytics platform. habits into actionable data for cities, has Few civic tech SaaS applications are “plug subcontracted with companies such as ARUP and play” solutions that government can buy that have contracts in place with government as stand-alone products. Government clients agencies such as the United States Department are often required to integrate new software “We had to do a major rewrite of Transportation (Placemeter was acquired by into complex and often aging workflows and of the application to serve both Netgear). software systems. Thus, selling a solution to “ government intended to solve for just one New Orleans and Palo Alto from Consulting component of a larger process or replace one the same application. Turning Consulting, advisory and training services are aspect of an existing software serving multiple the application into SaaS was a a frequent form of revenue in the field, though purposes can prove challenging. big gamble for us because it was few organizations concentrate solely on this not clear that the idea would revenue source. Most frequently, companies For example, a piece of software that allows the work—our alternative was to do earn consulting revenues for services delivered government to communicate with citizens about more contract work and custom in conjunction with implementing their sanitation issues would be insufficient to many software. Neighborland, a communications potential government customers. Instead, they implementations, which were platform that supports stakeholder would want the software to interface seamlessly less scalable, more complex and collaboration, provides advisory services to with a system that manages incoming requests, less interesting. Also, going SaaS organizations leveraging its software for civic tracks progress on those work orders and allowed us to lower our price and engagement. The Center for Technology allows for easy analytics of the performance of allowed us to avoid threshold that and Civic Life (CTCL), a nonprofit leveraging the department in responding to those initial required complex procurement technology to modernize engagement between pieces of citizen feedback. and RFP processes.” residents and local government, offers training and advising to local election boards adopting — Eddie Tejeda, Civic Insight Civic tech organizations have overcome this election toolkit software it offers on its site. limitation in a few ways. OpenGov, a software company that aims to advance government Subcontracting is another approach that Some organizations offer consulting based efficiency and accountability, has developed smaller civic tech organizations have on unique expertise they have developed. a full suite of products that solve pain points taken to selling to government clients. By Leveraging its extensive experience working adjacent to the initial product it offered. subcontracting, startups can focus on product with millennials, DoSomething.org, an OpenGov launched its first product, OpenGov development and service delivery while the organization activating young people to support Transparency, with a focus on making it easier primary contractor navigates larger processes social campaigns, launched a millennial for cities to provide citizens with transparency and complexities associated with selling to marketing consulting arm called TMI in 2013 into how tax dollars were spent but now also government. Placemeter, which converts that serves both brands and causes. mySociety, offers additional tools to government including video about pedestrian, bicycle and vehicle a U.K.-based social enterprise that builds

KNIGHT FOUNDATION Sustaining Civic Tech 13 civic engagement technologies, operates a willingness and ability of government to pay for commercial subsidiary providing digital services services. CTCL trainings on modern voting tools that complement a petition website it built; the and design principles for government officials subsidiary now accounts for 10 to 20 percent of are popular free offerings, but the company is the company’s revenue. still wrestling with strategies for coaxing clients to pay for training. Issues with scalability Consulting simply doesn’t scale very easily Staffing the right competencies compared with software revenue models; that Organizations aggressively pursuing consulting is, the marginal costs of expanding a consulting revenues have recruited staff and developed business, namely hiring more consultants, will competencies to deliver these services. be greater than expanding a software business. For instance, TMI hired someone with deep Nevertheless, consulting is still a worthwhile experience running client services for and underused form of revenue in the field. advertising agencies. Without the appropriate Several civic startups that have raised venture resources to dedicate to this, others have funding began by earning revenue through struggled. consulting and believed it created an “on-ramp” for both customer learning and revenue— without diluting equity or taking on demanding investors before they were ready. In particular, nonprofits that have founding teams with insights and experience with civic engagement and specific markets have an opportunity to further leverage this expertise and set of relationships to earn income from government and companies that value it.

Willingness to pay Organizations that offer consulting and training to government have discussed challenges attracting paying clients. This may partly stem from the lack of perceived benefit by clients, but also points to limited budgets in government and the importance of understanding the

KNIGHT FOUNDATION Sustaining Civic Tech 14 GOVERNMENT PROCUREMENT AND SALES

ivic tech founders enjoy trading battle stories about the challenges of government procurement. (For instance, sometimes getting the contract C signed means driving three hours to drop off a stack of three-ring binders and CD-ROMs with your documentation because that is what an agency requires.) The complexity and difficulties of government procurement are especially frustrating to founders in this space because many of them entered this segment precisely because they want to help government be more citizen-centered, transparent and effective but, in the short term, they need to play the game they had hoped to reinvent. Nevertheless, the importance of “hacking” came together during the rebuild of workflows, and what would truly make the day- government enterprise sales was the most HealthCare.gov. to-day work of public servants more efficient common issue raised by SaaS startups. • Civic Insight, NextRequest, Remix and and effective. Organizations have taken different approaches, Textizen were founded by Code for but a few keys to success for government sales America fellows, and SeamlessDocs Those with government experience possess a emerged during the conversations. went through the Code for America fluency in government procurement processes Accelerator program. and culture that provide them a sales edge. They Government expertise • Department of Better Technology was understand hierarchies within and between Successful companies usually had founding built by Presidential Innovation fellows. agencies, and know who actually has the budget teams with government experience (whether and procurement authority. Furthermore, they as an employee or as a Code for America This direct experience has been invaluable for respect informal cultural norms and know fellow) or quickly hired people who did. In fact, designing products that address true problems how to “speak the language” of government several companies grew directly out of products and opportunities. Teams with a government customers. their founders supported while working in background adopt a mentality of “we built the government: product for ourselves” and design solutions Embracing a sales mentality • The teams at Nava and Ad Hoc using their knowledge of existing needs and Civic tech organizations that have grown

KNIGHT FOUNDATION Sustaining Civic Tech 15 through SaaS revenue fully recognize they are identified among users of the initial free version Eric Gunderson. Since then it has formed a sales in the sales business. As one founder put it: “If of the product, who were already using Remix team of about 10 employees headed by a sales you don’t want to do government sales, it doesn’t day-to-day for transit planning. Paul Graham, professional. mean your business model fundamentally co-founder of Y Combinator, inspired them by requires philanthropic capital. It means you saying, “Enterprise software companies aren’t maybe don’t want to run a software business.” technology companies, they’re sales companies, The founders of Remix, all former Code for and sales depends mostly on effort.” America fellows with product, design and “We vet salespeople for fit and engineering backgrounds, understood the passion“ for our mission but, yes, importance of pairing sales efforts with product compared to the rest of our team, early on to achieve a sustainable business “People complain about not the sales people are kind of like model. getting“ funded, but it takes 20 Action Jack Barker in ‘Silicon minutes on pitch day to tell who is Valley.’ ” actually working on a project and — Startup CEO “Actually selling is hard. Few of who wants to build a business. the civic tech people want to do I don’t need to be confident that Many founders noted that sales hires were “ a bit of a “shock” to the civic hacker culture that part. They want to build a you know how to actually build of the original teams. Issues can stem great product and not do sales. a business the day you pitch me, from compensation since salespeople with That is what I realized as a Code but I want to see some intent and performance incentives can end up earning for America fellow. You need willingness to learn.” more than almost anyone in the company. But to feel comfortable doing your — Corey Ford, Matter CEOs reinforced the notion that moving up the pitch presentation 15 times in a ladder and landing larger contracts required CEOs and sales teams hiring dedicated sales staff, even if they looked week and convincing cities and Most companies did not bring on a full-time and acted differently from the early, scrappy organizations that your product salesperson until after they received significant product development team members. is going to solve their problem.” funding or experienced considerable growth. — Ariel Kennan, New York City Mayor’s Office The most successful companies generally Tracking sales funnel performance for Economic Opportunity had CEOs with a proclivity toward sales who Growing startups in this space are constantly During their three months at Y Combinator, shouldered most of the responsibility early on. trying to optimize their sales funnel and lower they went on to sign 20 government contracts At the time of their series A round of funding, cost of customer acquisition. They continuously under the guidance of other SaaS startup open-source mapping platform Mapbox had 30 experiment with different sales approaches (for founders and experts. They did this by talking employees but no sales team and was growing example, inside vs. outside) and contract sizes to to more than 100 potential customers largely primarily through the efforts of its founder/CEO, identify the most effective sales strategies.

KNIGHT FOUNDATION Sustaining Civic Tech 16 Corporate partnerships TurboVote software to get customers and sponsorship opportunities beyond only causes Several forms of corporate partnerships employees registered to vote. viewed to be progressive-leaning. On the other produce meaningful revenues for civic end of the spectrum, neighborhood-level tech organizations. For companies, these Startups also stressed the importance of social networks such as Nextdoor (which partnerships produce benefits ranging from defining in advance what makes an appropriate operates nationally) and Front Porch Forum brand marketing to employee engagement. corporate partner—and what that partner (based in Vermont) rely fairly considerably on While civic tech nonprofits say considerable can and cannot influence. Business goals and advertising revenue because the forum attracts time is needed to manage these partnerships impact goals should be kept as aligned as a geographically targeted set of users the effectively, many believe that corporate possible, and when they conflict this should be business can market to. partners’ processes and report requirements made explicit to avoid any situations where civic tend to be less stringent and onerous than those tech organizations believe these partnerships Civic engagement platforms have largely of foundations. could undermine or tarnish their effectiveness. struggled to reach and cultivate audiences. Brand partnerships can certainly generate buzz Even popular sites such as Change.org reaching The most common form of partnership involves and revenue, but civic startups need to know the several orders of magnitude larger audiences companies sponsoring campaigns to affiliate reputational risks that can accompany these than nearly all sites in the space still face their brand with certain causes. The most partnerships and approach them accordingly. challenges converting episodic traffic into lucrative opportunities exist where civic tech more frequent and sustained use. While people organizations reach very large or targeted Advertising may occasionally visit a civic platform and take audiences with whom companies want to A few platforms earn revenue from an action (sign a petition, donate to a cause), market. For eight years, DoSomething (with advertisements on their sites and group most people do not identify strongly enough nearly 5 million teen/young adult members) email lists. Generally, though, few civic tech with these platforms to engage daily as they do received sponsorship from Aeropostale for the organizations earn revenue this way, and many with Facebook and other social networks. The “Teens for Jeans” campaign, which collected feel bearish about the long-term prospects of relatively small user bases of most civic tech over 4 million pairs of jeans for homeless advertising as a meaningful revenue driver. products along with infrequent engagement children and drove foot traffic to Aeropostale by those users has limited the potential for stores, which served as drop-off points. Significant advertising revenue is feasible only advertising revenue. for platforms reaching a large or targeted Another set of services supports companies set of users that are considered valuable to Data Monetization with employee engagement and corporate advertisers. Change.org, a large online petition A few companies have monetized civic-related social responsibility offerings. An example is site, originally focused on earning revenue data sets. Democracy Works and CTCL generate Democracy Works, an organization building through sponsored campaigns (it recently a considerable portion of their revenue by tools to improve the voting experience began pivoting toward a different business licensing the electoral data they gather (local for voters and election officials, which model). It adopted a “neutral platform” policy ballot and candidate information) either to tech has partnered with Starbucks to adopt its to broaden the types of campaigns and related companies that provide it in the search results

KNIGHT FOUNDATION Sustaining Civic Tech 17 for their users or to initiatives such as the Voting Transaction fees Small-dollar donors Information Project. Organizations supporting fundraising and While all the previously mentioned revenue crowdfunding on their platforms often sources are considered to be “earned revenue” Companies also discussed the possibilities and generate revenue through these transactions because they come in exchange for goods and perils of selling user data. On the one hand, with multiple flavors of how the fees are services, small-donor revenue qualifies as this is a common and lucrative form of revenue implemented. Some use the “Kickstarter model” “contributed revenue” because it is gifted. Yet, among consumer tech companies, and some of taking a straight percentage of the total individual donors are often a critical revenue companies indicated that they were selling amount raised as the transaction fee. ioby, a source for nonprofits because this income is data about users to companies or nonprofits hyperlocal civic project-centric crowdfunding repeatable and reliable over time. who would like to market to or fundraise with site, charges a flat $35 fee per project that individuals who have expressed interest in meets a funding goal over $1,000. It also offers Individual donors constitute the largest revenue particular issues. But monetizing user data donors the option of providing a gratuity to ioby source for nonprofits throughout the social creates a moral hazard for many civic-minded on top of their donation, and over 60 percent of sector (such as NPR and Doctors Without organizations that believe selling access to a donors pay a gratuity. Similarly, three-fourths Borders). Though small-donor giving is a sizable user’s civic activity or political profile conflicts of DonorsChoose.org donors elect to pay source of income for those in the activist tech with their core values. an optional 15 percent gratuity charge of the community (MoveOn, SumOfUs), there are scant donation amount which the organization uses examples in civic tech of organizations raising to support overhead, teacher outreach and site significant money through small-dollar donors. maintenance (the fee is required for institutional And while the 2016 election fueled a surge in “Monetizing user data was the and corporate partners). small-donor giving for many organizations, “model suggested to us frequently it appears few civic tech nonprofits have by many VCs—selling user data Similar to advertising, meaningful revenue is capitalized on this fervent support. In fact, many or email addresses— but we predicated upon significantly scaling activity sites examined did not even prominently feature decided against it and prioritized on the site. Startups that are funding a few a “Donate” option anywhere. user privacy and user control of hundred projects a year might earn somewhere their own data, which is why we in the five figures from transaction fees, well Building a reliable base of small-dollar donors short of the income they need to sustain their requires organizations to invest in things such ended up pursuing an enterprise operations. Whether venture-backed like as donor prospecting, campaign development model.” Crowdpac or philanthropy supported like and outreach. Organizations also need to adopt — Marci Harris, PopVox ioby, civic crowdfunding startups are not yet a community-based mentality that prioritizes sustaining themselves based on transaction deeply engaging with audiences as a core fees from activity on their platforms. component of ultimately seeking their financial support to further the work.

KNIGHT FOUNDATION Sustaining Civic Tech 18 Few civic tech organizations have invested in small-donor development strategies and capacities. A notable example of an organization that has concentrated on small donors is the social campaign platform Avaaz, which invested resources early in the infrastructure needed to cultivate small-dollar donors. This included building a mailing list, investing in digital marketing capabilities and understanding how to run goal-driven campaigns to engage its community.

KNIGHT FOUNDATION Sustaining Civic Tech 19 LANDSCAPE ANALYSIS

KNIGHT FOUNDATION Sustaining Civic Tech 20 n addition to identifying prominent civic tech revenue sources, the research examined how revenue and business models varied among different segments of I activity within civic tech.4 This section outlines the unique dynamics, challenges and opportunities associated with a few key clusters of activity within civic tech along with a selection of organizations that illustrate key points. Indeed, revenue models and sustainability prospects vary quite a bit across segments of civic tech.

Open Data and Voting​ Government- Citizen Transparency and Elections Resident Interaction Mobilization

• Countable • BallotReady • Accela (Civic • Avaaz • Granicus • CTCL Insight) • Brigade Enterprises • Mapbox • Democracy Works • coUrbanize • Change.org (illustrative) • MapLight • Vote.org • mySociety • Crowdpac • NextRequest • Neighborland • Do Something • OpenGov • Peak Democracy • ioby • PopVox • SeeClickFix • Loomio • Socrata • Sunlight

• Software • Data licensing • Software • Corporate Buyer Revenue • Small donors • Corporate • Consulting partnerships Sources partnerships • Consulting • Consulting • Advertising • Software • Transaction fees • Software

4 Civic Hall and Microsoft developed and maintain the Civic Tech Field Guide, which offers a more comprehensive taxonomy and list of civic tech organizations. This blog post by Matt Stempeck at Microsoft provides an overview of the project.

KNIGHT FOUNDATION Sustaining Civic Tech 21 Open data and transparency easier to understand and streamlines the Several organizations promote more open process of directly contacting representatives and transparent government operations, and “When you look at cities using about these bills. It also earns revenue from advocacy organizations using the tool to inform increase the availability and accessibility of open data, it’s a tax on people government data. Some companies come at “ and mobilize their bases concerning pending this work from an accountability lens and see working there. They often see it legislation. themselves as an extension of journalists and as a cost center because it is so watchdog organizations. Meanwhile, other separate and distinct from the Transparency-focused nonprofits were some businesses take a more collaborative posture rest of their job. You need to build of the few nonprofits in civic tech that have and seek to partner with government to openly a suite of products that deliver pursued or considered cultivating a small-dollar publish data and increase its utility. Though value to civil servants.” donor base. For organizations such as Sunlight Foundation, Center for Responsive Politics the collaborative approach certainly has — Josh Goldstein, DOBT limits when it comes to driving transparency, (which operates OpenSecrets.org) and National organizations serving government as a client Contrarily, organizations primarily focused Institute on Money in State Politics (which can still generate important public value on holding government accountable have operates FollowtheMoney.org), this has yielded through advancing government openness. established fewer reliable sources of revenue. limited success; a review of their 990 forms in Because of the critical watchdog role they recent years shows donations accounting for The collaborative approach is typified by SaaS serve, they inherently face greater challenges 5 to 25 percent of their total revenues. Sunlight companies providing tools to government that forming revenue-generating partnerships with Foundation and MapLight considered bringing enable citizens to access, analyze and visualize government clients and instead tend to rely on consultants to support donor development public data sets. These organizations have heavily on philanthropic funding. consultation and decided the likely returns could garnered more significant earned revenue not justify the costs. They see more funding streams and scaled more significantly. An A promising source of revenue for some of potential among foundations and major donors, example is Socrata, which exclusively focuses these organizations has come from advocacy who they believe are better fits for the type of on government clients and whose products organizations that want to use open data to large-scale tech projects they support, and have include a general open data solution and inform and engage their members around focused most of their fundraising development specific modules for public finance and safety important issues. PopVox, a site that fosters resources in this direction. data. Granicus also offers a few different SaaS more transparency and citizen participation in solutions designed explicitly for government, policymaking, earns money from large nonprofits Though not prominent, a few other examples including tools to make government data that use its tools for advocacy (PopVox explored of revenue sources were notable. MapLight and meetings more transparent and advertising and individual subscriptions as has licensed its data set on company campaign communications software for citizen sources of revenue but found they weren’t viable). contributions to media companies (such as engagement Similarly, Countable is a website and popular app Bloomberg and LexisNexis) and perhaps shows that makes bills being considered by Congress that others could pursue licensing revenue

KNIGHT FOUNDATION Sustaining Civic Tech 22 for government data they can make more for tens of thousands of state and local electoral and initiatives providing voting information transparent. The National Institute on Money candidates, launched through grant funding but (such as local polling place, logistics and ballot in State Politics has earned fees by providing now operates as a for-profit. They earn revenue information) to people seeking it. expert witness testimony for legal cases, by selling access to their elections API and making demonstrating an interesting way organizations white-label SaaS products for civic organizations, Another key revenue source comes from in this area could commoditize the expertise advocacy groups, and PACs. organizations leveraging these tools for voter they have developed. registration campaigns. TurboVote and Vote.org While most other prominent organizations earn revenue in this way; Vote.org charges an Voting and elections reviewed were nonprofits with individual and installation fee and a monthly rate for the use of A variety of new tools, platforms and sites institutional donors, they have developed several its tool, which has been used by organizations seeks to improve the process of voting and revenue-generating business lines including such as MoveOn and 18MR. information about voting and elections (such SaaS, data licensing, consulting and corporate as registration, election dates and polling sponsorships. Democracy Works offers a SaaS Though slower to materialize, these locations, and candidate and ballot information). product called TurboVote that simplifies the organizations have begun seeing traction from This research report focused on nonpartisan processes of registering to vote. In the last two services targeting government as a client. organizations and tools seeking to increase presidential election years, it earned a third Democracy Works has formed partnerships democratic participation rather than tech for of its total revenue through partnerships with with two states for its Ballot Scout service to running political campaigns or advancing a universities and other institutions that adopt streamline the tracking of mail-in ballots: In partisan agenda. TurboVote to make voting easier for their Virginia it has a direct contract with the state, students, employees and other constituencies while in New Jersey it has contracted with a A few dynamics make the voting and election (this revenue source constitutes a lower share vendor that the state uses. It has also partnered segment unique. First, people respect of revenue in nonpresidential election years). with the state of Iowa to support the adoption the sanctity of the civic right and duty of Democracy Works also recently launched a of its TurboVote tool by local businesses voting, so perceptions of this process being brand marketing partnership program with and universities. CTCL has sought to grow commercialized could damage user trust in these businesses including Starbucks and Target— government training services on the backs of tools and ultimately their impact. Furthermore, featuring a corporate campaign to get employees its election toolkit and experience supporting since voting is such an episodic behavior, it does registered—which both generates revenue and work with local election offices. Democracy not lend itself to business models that require massively expands their reach. Works and CTCL have discussed the challenges consistent and frequent user engagement. of selling to individual governments and Voting and elections organizations led the jurisdictions one-by-one and wanting to pilot Though these dynamics likely explain why most way when it came to data licensing revenue. cooperatives, cohorts or convening approaches organizations in this space are nonprofits, a Democracy Works, CTCL and Vote.org either to reach many election officials and accelerate few have pursued for-profit business models. currently or at one point licensed electoral adoption and sales of their government BallotReady, which offers free online voter guides information to big technology companies services; Democracy Works is developing

KNIGHT FOUNDATION Sustaining Civic Tech 23 an “Election Technology Cooperative” of Democracy provides valuable knowledge to elections officials and intends to charge an government clients about effective citizen annual membership fee that covers their use “When we started in New Orleans engagement approaches that transcend the of products (such as Ballot Scout or others the functionality provided by its software. we thought ‘The City will pay for group decides it wants). “ ethnographic data.’ We built the Meanwhile, other companies pursue a “mixed Government-resident first prototype of Neighborland market” approach that sells to industries interaction based on this assumption. beyond government. For example, coUrbanize Several organizations are using technology When we shared it with the offers an online engagement platform to enhance how residents interact with city, they weren’t interested in specifically concerning real estate development government officials. The nature of these feedback that wasn’t addressing projects. In addition to municipal housing and tools varies from those focused on more development authorities, their clients include transactional correspondence (such as their top priorities – blight, private real estate developers soliciting resident reporting a downed wire) to others promoting water management, and the input in the development process. more sustained and widespread deliberative murder rate. We shifted our democracy processes (participatory budgeting). product strategy to helping Citizen mobilization civic organizations engage with A final group of companies examined connect Many companies in this segment derive all or residents on specific projects in citizens with one another to discuss, fund nearly all of their revenue from government an accessible, collaborative, fun and engage with civic causes and issues. clients. Accela, one of the largest and longest- Organizations include online petition sites and tenured companies in civic tech, offers a suite new way. This experience taught civic crowdfunding platforms. This segment of productivity and engagement software us a great deal about how city exhibits perhaps the greatest diversity of exclusively to government clients. It earns government thinks about wicked business models, signaling the lack of a clear revenue from licensing its software and through social problems. It was very “slam dunk” and complex dynamics facing customization and implementation of initial humbling.” citizen mobilization tools. deployments. It has raised considerable capital — Dan Parham, CEO, Neighborland and acquired other civic startups (such as Civic Compared with other segments analyzed, Insight). SeeClickFix, a tool for residents to Government-serving companies not only tailor citizen mobilization tools infrequently earn report service problems (such as a pothole or their software to meet idiosyncratic government B2B and enterprise sales revenues. Rather, the a water line break), has historically earned all needs but also provide valuable expertise to most common revenue models in this space revenue from city government clients, although government clients. Peak Democracy offers tend to be predicated upon the volume of it has recently contracted with a few university its Open Town Hall tool to city governments activity supported, such as crowdfunding and partners that direct their student bodies to seeking a more productive approach to citizen advertising. Few civic tech organizations at this download and use the tool to report issues. participation and trust development. Peak point have garnered considerable and sustained

KNIGHT FOUNDATION Sustaining Civic Tech 24 use, and the long-term prospects of doing so remain questionable for reasons discussed earlier. Furthermore, whereas companies in “Google might say they won’t “Once you have a lot of users, mainstream consumer tech industries have build anything that people how do you directly monetize the luxury of venture investment that enables “ “ them to pursue user growth without prioritizing won’t use as frequently as their them in a way that is mission profitability in early years, companies in civic toothbrush, but I don’t know aligned and user aligned? We are tech generally have not had enough capital to anyone who is involved in their still working toward creative, relegate profitability to a distant worry. civic life that much of the day— mission-aligned solutions to unless they are in the midst of the turning on that spigot in a A few companies have developed SaaS models Civil War.” way that balances revenue for citizen mobilization. Loomio, a collaborative — Tom Steinberg, mySociety founder decision-making tool, was launched by a group with impact. We want to find of progressive activists as a free tool. While the ways where we can increase product is still free for individuals and offered pro chances of our users winning bono to community groups, Loomio now earns their campaigns while creating money from monthly subscriptions to enterprises. monetization opportunities that help us grow sustainably.” Finally, a few organizations in this segment — Matthew Slutsky, Change.org have begun to cultivate small-dollar donors. The leading example by far is Avaaz, a tool for mobilizing social campaigns that supports 100 percent of its operations through member donations. It attracts members (whom it calls “sustainers”) to fund general operations in addition to raising donations for important campaign priorities through one-off fundraisers.

KNIGHT FOUNDATION Sustaining Civic Tech 25 BUILDER CAPITAL: INVESTING IN GROWTH AND TRANSFORMATION

KNIGHT FOUNDATION Sustaining Civic Tech 26 efore startups develop reliable and repeatable “buyer” revenue streams to cover their full ongoing costs, they need “builder” capital to fund ongoing operating deficits B as they develop the capacities to grow. Currently, there is a paucity of growth capital options suiting the unique (financial and impact) return profiles of civic startups.

This section covers lessons about challenges and organization or program funded develops flowing into the space, many civic startups opportunities concerning two primary forms of enough buyer revenue to no longer need have calculated that there is simply much builder capital: philanthropic growth investments (until need for more potential capital to be raised from build capital arises for another growth effort or tech-focused venture capital firms than from transformation). Capital campaign investments philanthropy right now. Accordingly, many • Philanthropic capital are one familiar example of philanthropic decided at the outset to structure themselves • Venture capital growth capital. Other examples include Omidyar as for-profit enterprises, rather than nonprofit Network’s 2006 investment of $6 million in organizations, to attract venture capital. Philanthropic capital DonorsChoose.org, an online marketplace that This decision, in turn, makes it difficult to Philanthropic growth capital consists of connects teachers in high-need communities near impossible for many foundations, which investments from institutional foundations with donors who want to help, and its 2007 are typically ill-equipped to make for-profit and very high net worth individuals (greater investment of $4 million in GlobalGiving, investments, to support those organizations than $500 million in net worth) to support an online marketplace that allows donors to except in rare cases. However, it is possible that the development and transformation of an support nonprofits and projects around the recent anecdotal funder interest in supporting organization. These investments may provide world.5 democracy-related programs and organizations unrestricted support for general operations since the 2016 elections might change this or be restricted grants that support capacity Philanthropic capital has been limited calculus. building (for example, technology, leadership Compared with other investment areas (for development or fundraising) or other costs example, K-12 and higher education, health), necessary to grow and innovate. Conversely, there is thus far relatively little philanthropic foundations that provide restricted funding on a capital in the civic tech space. Whereas the 5 For more examples of innovative build capital investments in long-term, year-over-year basis act like buyers Foundation Center approximated philanthropic the social sector, see NFF Capital Partners’ 2012 SEGUE Portfolio and should be considered revenue sources funding for education sector nonprofits in 2014 Performance Report, http://www.nonprofitfinancefund.org/sites/ default/files/paragraphs/file/download/capital_partners_2012_ rather than capital investors. at $5 billion, 6 previous research showed a performance_report_0.pdf. 6 http://foundationcenter.org/gainknowledge/research/keyfacts2014/ relatively minuscule amount of philanthropic grant-focus-priorities.html. These investments are intended to be episodic funding for civic tech.7 7 Knight Foundation, “The Emergence of Civic Tech: Investments in a Growing Field,” https://www.knightfoundation.org/media/uploads/ and are ultimately proven successful if the Because of this lack of philanthropic capital publication_pdfs/knight-civic-tech.pdf.

KNIGHT FOUNDATION Sustaining Civic Tech 27 Challenges with funding nonprofit experience and can advise and support building technology startups internal expertise and capacity. For example, New Many civic tech nonprofits identify more closely Media Ventures typically includes readers with “Many [institutional] funders with the consumer tech sector than they do with tech experience as part of its selection process have processes and norms the social sector when it comes to their vision for open grant calls. The Ford Foundation “ for launching and growing an organization. recently began a Technology Fellows program that can undermine product However, the way philanthropic foundations in which the fellows provide foundation staff with development. There is little support civic tech startups differs quite a bit strategic and programmatic advice concerning institutional knowledge or shared from how venture capital supports for-profit issues at the intersection of technology and understanding about what is tech startups. social justice. As a general matter, however, the required for a sales or product lack of technology investment knowledge serves push. I try to tell them what it Whereas venture funding provides consumer as a barrier to foundation entry into the civic tech tech companies with a runway for product sector. costs, and they say, ‘This is what development and growth (builder capital), the I can give,’ so you are forced to vast majority of philanthropic funding tends to Need for more impact measurement agree that you can do something be restricted to the implementation of specific Challenges with impact measurement in the civic for less than you can do it for programmatic activities (buyer capital). Despite tech field have precluded more philanthropic because that is what is on offer. I a growing recognition of the importance investment. Funders interviewed pointed to the get it done by cobbling together of multiyear unrestricted funding, most relative lack of civic tech nonprofits that can all sorts of grants of the angel foundations fund short-term program delivery clearly articulate their impact in a compelling causing nonprofits to chronically underinvest way. Funders who have already invested in civic round size—about $100,000 to in core capacities, a phenomenon dubbed the technology as part of their theory of change 200,000—doing things that no nonprofit starvation cycle. This challenge may be willing to invest in nonprofits in their for-profit entrepreneur would is experienced even more acutely among earliest stages before they have clear evidence of consider sane. I am literally civic tech nonprofits that desperately need to impact—or may be willing to invest in nonprofits’ constantly fundraising.” invest in core capacities including technology abilities to gather that evidence as part of — Seth Flaxman, Democracy Works development and sales. capacity-building efforts. However, foundations that invest in civic participation through more Furthermore, foundations often lack the staff traditional means—such as turn-out-the-vote and expertise needed to fully support technology efforts, government watchdog groups, civic startups. Some funders have sought to overcome engagement programs and the like—are these limitations by supplementing traditional seeking clearer evidence of impact to consider grant-making skillsets with external advisers complementing or shifting funding strategies for who have product development increasing civic participation.

KNIGHT FOUNDATION Sustaining Civic Tech 28 Measurement and evaluation—building a theory and the program’s focus on a specific target the runway that organizations need to get on of change, determining success metrics and population enabled CTL to demonstrate the path to sustainability, particularly for tech collecting outcomes data—require upfront compelling data about its impact on a very organizations that may need time to develop a investment on the part of social enterprises. tangible outcome (helping at-risk teens). It took product before they can sell it or raise money to However, very little philanthropic funding has CTL many years to build relationships and trust distribute it. Finding individual champions who been deployed to gather and communicate among the high net worth individuals (including can provide flexible general operating support evidence about impact. It is also true that a slavish Reid Hoffman, co-founder of LinkedIn) who with low reporting requirements has shown to commitment to measuring “vanity metrics” ultimately funded its round. be an important ingredient for growth, allowing such as raw page views or number of email startups to build a strong organizational subscribers—measures that look good when Though cultivating relationships and networking foundation, creating entrees to other donors presented to funders and boards but do not with funders do not come naturally to all and important stakeholders, and signaling a provide insight into the effectiveness of program technology startup founders, it’s vital that level of support and prestige. operations—can stand in the way of meaningful startups pursue these activities to position performance measurement that can generate themselves down the line for the potential to Especially in the early stages, founders who insight for leaders to improve their programs. raise larger sums of capital. Code for America were most successful in raising angel money, leveraged its board members’ and founders’ whether in the form of equity or grants, were Raising capital “rounds” connections to hold several small dinners to highly charismatic, talented at telling their Some civic tech nonprofits, borrowing from introduce high net worth individuals to Code stories, radically inspiring and often well- the venture capital startup space, have started for America’s work and lay the groundwork for connected. Leadership of sector standouts thinking about fundraising for growth capital in future requests. Change.org, Code for America and Democracy terms of “rounds.” The prospect of raising large Works possessed all of these characteristics to amounts of capital from multiple donors at a Thinking of fundraising in terms of a “round” varying degrees and, consequently, benefited single juncture is appealing to organizations that can produce benefits, even if the target isn’t from early, flexible funding from an angel constantly scramble for shorter-term restricted reached. Democracy Works tried to raise a investor that served as a validating signal to program funding. While results have been mixed, $5 million round and though it fell short, it did other investors and allowed them to build examples of organizations experimenting with receive commitments from institutional funders systems required to thrive. this approach are proliferating. and believed that describing fundraising efforts using the premise of a round was a useful Unfortunately, these founders’ stories undoubtedly Crisis Text Line, which offers counseling and marketing technique. have elements of both luck and access—it’s not support to young people in crisis, recently easy for a founder to conjure a rich, influential closed a $25.5 million funding round with Reliance on high net worth donors and investor without already having that personal investors that included traditional funders and angel investors for flexible funding relationship. Dependence on angels, whose high net worth individual donors. The company’s Beyond foundation grants, individual donors access and privilege put them out of reach of early investments in impact measurement and angels play an important role in providing many founders, unnecessarily limits the diversity

KNIGHT FOUNDATION Sustaining Civic Tech 29 of the field and narrows the type of founder who Venture capital for these agile, iterative, product-centric can access capital to scale their work. Significant growth and scale are certainly not the organizations that move at internet speed. aspiration of all civic tech organizations. Many set out to solve a very specific problem (such as The “zebra” initiative, a nascent movement to map property vacancies) or work in a specific started by Jennifer Brandel of Hearken and city. Such organizations still face sustainability Mara Zepeda of Switchboard, aims to create “The funding world is still challenges, particularly those related to finding a network of and make the argument for the driven by relationships, and ongoing streams of revenue to support their work value of profit-earning companies that don’t “ necessarily emphasize exponential growth at all too often success seems The venture capital mindset will always make the expense of social impact. While early, this determined by who you know. growth a priority; that is what provides the initiative offers promise to build a sector of civic Pitch practice, charisma, and returns investors expect. But, in civic tech, tech and other startups that balance growth dogged networking can help many organizations may not have scale as their and impact considerations. level the playing field, but access ultimate measure of impact. They might prefer to remains a persistent problem. optimize for depth of impact on one community Civic tech companies that desire not just First-time entrepreneurs or focus deeply on the needs of communities and sustainability but also scale need to determine governments involved in one specific issue. how to attract meaningful growth capital. should seek out champions that Early-stage companies still testing product/ explicitly value emerging and This distinction creates significant challenges market fit have seen accelerator programs and diverse voices. Accelerators can for civic tech startups as they think about how to prize competitions (such as Big Apps NYC) as a be great options, as are open create sustainable, growing organizations and, good “step one” option for building a prototype funding calls like those for the in particular, to decide whether to structure as and landing initial users, and friends and family Knight Prototype Fund and NMV’s for-profit or nonprofit organizations in pursuit of networks have been viable for raising angel Innovation Fund. As funders, their civic missions. Many feel caught between funding. But to scale meaningfully, for-profit civic tech companies have and will continue to it’s also our responsibility to be two worlds. On the one hand, they are comparing themselves to a cohort of companies they view as turn to venture capital for funding. (Mapbox aware of our biases and look for peers—agile, lean, venture-backed tech startups is one of the only examples of a company that ways to move beyond the ‘usual that are also building and shipping products. was able to “bootstrap” in this space to over $1 suspects.’ ” million in revenue and a 30-person team before — Seth Flaxman, Democracy Works On the other hand, institutional foundations— raising significant venture funding.) the primary source of philanthropic funding— are organized to support more traditional Founders attract venture investors by charities and often lack the capacity, technical showcasing their vision, team, early product/ expertise and funding mechanisms that work market fit and a market that is large enough

KNIGHT FOUNDATION Sustaining Civic Tech 30 to hold the potential for venture size returns; cadre of private investors has begun to invest in network” and “CRM” because they were more this last piece is especially crucial and largely GovTech and civic tech. In addition to investors understandable categories to investors. requires founders to forecast a plan for such as Govtech Fund and Omidyar Network expansively scaling their work. that explicitly focus on this field, investments have Growth paths for companies pursuing come from a number of blue chip venture funds venture capital such as Andreessen Horowitz, Greylock Partners Venture investors get their return when there is and Spark Capital. Government Technology’s 2017 a liquidity event such as an initial public offering “So maybe growing civic tech GovTech 100 profile noted that companies in the or an acquisition. Though civic tech mergers isn’t a VC mentality, but it isn’t a space cumulatively raised $185 million in fresh and acquisitions have increased (Accela “ funding in 2016 and a total of $949 million over acquired PublicStuff and Civic Insight in 2015, philanthropy mentality either. Instead of grand slams, I think their lifetimes Granicus and GovDelivery merged in 2016), civic this space can produce a bunch startups need to be realistic about whether they of singles and doubles, and that is Venture capital firms interviewed largely viewed might be able to achieve a liquidity event and if what investors should look for. So this work through the prism of GovTech defined they are willing to make the sacrifices needed to as companies serving government clients. get there. investors can make some money GovTech companies have a clear customer that but not venture returns. This can pay and, as enterprise SaaS companies, Achieving the kind of 10x returns that venture- just will not exist as a credible VCs have relatively defined benchmark metrics backed companies aim for is difficult if you have possibility for a lot of these to look for when conducting diligence on an one narrow product intended to be sold to only companies. But this is a very investment (for example, customer lifetime one customer base. Raising venture capital for necessary part of the civic space. value, cost of acquisition). Meanwhile, investors civic tech companies often means showing a It takes people who are serious largely believed “civic tech” was more nebulous total addressable market much larger than, about experimentation and long- as an investment category, and the diverse set say, a focus on one community or narrower term viability at the same time.” of companies it pertains to complicates the problem—regardless of how impactful solving — Corey Ford, Matter development of cogent investment theses for those problems might be. Venture-backed the space. civic tech companies tended to chart growth potential through either a) going deeper by GovTech coheres as an investment To be clear, some civic tech companies that do providing additional government enterprise category while “civic tech” remains not have government as a customer, such as software or b) going broader by offering murky NationBuilder, NextDoor and Change.org, have the product to enterprises beyond the civic/ Venture investors have a long-standing aversion raised significant venture capital. But these government sector. toward companies with government sales models, companies said they did not use the term “civic since lengthy and complicated sales cycles tech” to describe what they do and instead used diminish growth trajectories. However, a growing terms such as “marketing platform,” “social

KNIGHT FOUNDATION Sustaining Civic Tech 31 • Go deeper: Some companies initially ultimately delivers more value to civic clients. developed software to solve a relatively Mapbox, which sells its mapping software narrow pain point but expanded their product to companies in transportation, travel, real “We never use the phrase ‘civic offerings to address adjacent customer pain estate and more, has 35 full-time developers tech’ with potential customers points. Building additional products that solve working on its open source mapping layer, “ pain points adjacent to the initial product can Open Street Maps—which represents more and investors. We only use add value for government users and leverage people than could work full time on this ‘GovTech,’ even though we see the set of relationships and hard-won insights product if the company didn’t have such a ourselves as part of both worlds. about selling to governments acquired varied base of paying enterprise clients. A lot of old-school investors over time. For example, SeeClickFix began barely want to touch GovTech, as a tool for residents to report issues with Accepting the pivot so why make our lives harder as government services to government clients. It Civic tech funders noted that entrepreneurs in a startup? The thing that allows has since expanded the capabilities to enable the field who struggle to raise venture funding GovTech to be comprehensible to a system that manages incoming requests, and grow often seem unable or unwilling to investors is that it is just another tracks progress on those work orders and pivot from their initial target focus and market. enterprise SaaS sector. Civic allows for easy analytics of the performance Though adapting the vision can be challenging tech is riddled with definitional of the department in responding to those to mission-driven entrepreneurs, especially problems, and if we have 10 initial pieces of citizen feedback that kicked off when it means shifting energies beyond the minutes with an investor, it the process. public and social sectors, civic startups that take venture funding must accept that it often comes shouldn’t be on us to unravel that • Go broader: Other companies have looked with an expectation that growth will be pursued problem.” beyond government and targeted additional in whatever form presents itself. Conversely, - Software CEO sectors as an approach to scaling their entrepreneurs also noted that not all funders are organizations. Long government sales cycles comfortable with grantees’ pivots; in some cases, and procurement hurdles make enterprise rigid grant agreement terms and perceived software sales to other industries more funder expectations can make entrepreneurs attractive. Additionally, obtaining revenue wary that philanthropic funders may not follow from other industries can occasionally them through their pivots. cross-subsidize impactful civic work. With a larger base of paying customers, companies sometimes gain the ability to offer their software to civic clients either at lower rates or free of charge while leveraging engineering resources to offer a product that

KNIGHT FOUNDATION Sustaining Civic Tech 32 RECOMMENDATIONS

KNIGHT FOUNDATION Sustaining Civic Tech 33 his section outlines a series of recommendations for advancing the sustainability and effectiveness of individual civic startups as well as the broader civic tech field. They T address needs and opportunities that frequently surfaced during conversations with founders and funders. The recommendations are grouped into three areas:

• Competencies: Strengthening business modeling at the outset. Yet, the research bono professionals to support financial skills and capacities. establishes the importance of clearly identifying planning and forecasting. • Capital: Attracting more and revenue sources and targets as well as capital o Catchafire, Taproot Foundation different types of funding and requirements from the outset. funders. Sales • Collaboration: Promoting field- For starters, New Media Ventures’ recent white Despite several business models relying on wide infrastructure and collective paper, “Making Money for Impact,” provides a sales to government and enterprise clients, action. good primer on potential revenue models and best startups in this space often launch without any practices for cultivating them. dedicated sales staff. This “if we build it, they will Competencies come” mantra simply is not working. Complex The research illuminated the variety of skills Furthermore, founding teams with neither and cumbersome government procurement and experiences needed by organizations in this financial experience nor the budget to hire a processes make sales to government clients that space to survive and thrive. The founding teams chief financial officer or staff with a business much more daunting. of the enterprises that have grown the most have background should pursue—and funders should paired technology skills with valuable experience support—alternative approaches for developing Hiring sales staff with relevant sector experience, in government or the social sector. However, business planning and financial management particularly for organizations selling to the research identified a clear skills gap at many capacity. Viable approaches include: government, is imperative for startups with organizations in the field. A few discrete areas for • Business planning resources (such as SaaS and enterprise sales business models. founders and funders to invest in skill development toolkits and webinars) to guide the process Sales experience should be considered as vital include: and develop skills. as technology expertise when launching, rather o Business Model Canvas, Bridgespan than a trailing need to be addressed down the Business planning Group financial analysis toolkit road. Funders meanwhile can serve a valuable Several civic tech organizations, especially and business planning resources, role by “de-risking” the sales process, by funding nonprofits, have launched without a meaningful Nonprofit Finance Fund Real Cost pilot engagements with government and other business plan or earned revenue strategy. They Project clients disinclined to pay for services they view as often focus exclusively on the technology and the • Skilled volunteerism organizations could risky in the short term but open to funding future challenge it will address but do not emphasize be a great way for nonprofits to enlist pro work on the basis of a successful trial run. Knight

KNIGHT FOUNDATION Sustaining Civic Tech 34 of city governments to work with Citymart, a More broadly, public and nonprofit journalism has funded organizations doing similar company helping to reform and improve the way fundraising could prove an instructive model for work or addressing similar themes. cities conduct the procurement process. Another civic nonprofits. NPR stations have a long track • Attending industry events and example of this practice is Dodge Foundation record of appealing to donors through the utility conferences frequented by people on the funding for nonprofit newsrooms to use audience- they provide (that is, donors are listeners) and list. Leverage networks for introductions engagement platform Hearken. through a common identity as members of the in advance to speakers and attendees, community. Civic tech organizations offer very and inquire with conference organizers Fundraising similar value propositions in terms of providing about speaking opportunities to build Small-dollar donations have been an overlooked, a valuable utility and associating their work with awareness about the organization. likely underused revenue source among civic- a specific community (especially those with a • Applying to pitch competitions minded nonprofits. Though launching and geographic focus) that they could use to make the and open calls for funding. Though maintaining small-donor campaigns require effort case to donors. Local News Lab’s Crowdfunding these usually offer only limited amounts of and resources, civic nonprofits and their funders Guide covers several lessons and examples from funding, they help organizations hone should explore ways to experiment with the journalism crowdfunding campaigns that are their pitch, form new funding relationships cultivation of individual donors as nonprofits have quite applicable to civic tech. and validate their organizations in done in many other parts of the social sector. the eyes of future funders. Finally, though previously discussed issues of Most immediately, civic nonprofits are incredibly access and privilege present challenges to Measuring and communicating impact well-positioned to tap into a sizable group of founders seeking to access highly flexible angel Civic tech organizations largely need to improve individuals and funders looking for ways to capital, successful founders have dedicated time, their ability to tell compelling and comprehensible channel their support since the 2016 election. effort and capital to position themselves to receive stories about their impact. On a more cosmetic Journalism organizations have capitalized on funding from angel investors and high net worth level, organizations can do more to frame their this opportunity with many reporting a surge in donors. Key tactics that founders should adopt work and outcomes in a way that resonates with donors and members in the months following the include: beneficiaries and current and potential funders. election. Knight Foundation sought to multiply the • Crafting a compelling and tight elevator The research suggested that descriptions of the surge of donor interest in journalism through the pitch about the organization’s vision, work as addressing key civic infrastructure can Knight News Match, which offered matching work and potential for impact. (This First come off as esoteric or amorphous, and that some funds to journalism nonprofits that broadened Round blog post synthesizes an excellent organizations may be better served discussing their donor base, and Knight and the Democracy set of insights and recommendations how they can have impact in specific issue areas. Fund recently expanded this initiative. Funders about pitching to venture funders.) While not every organization will be able to pitch could instigate donor development and broaden • Building a list of people that includes its impact in terms of attributable, plausible, the pool of capital for civic tech through matching potential funders as well as nonfunder concrete outcomes, this is an underused tactic in funds and incentive-based approaches. allies who can validate your work. To the civic tech sector. identify potential funders, find out who

KNIGHT FOUNDATION Sustaining Civic Tech 35 The crux of the challenge, though, lies in the limited Conference) each year and curates incarceration for low-level offenders. Civic tech ability of civic tech organizations to measure their related research tools that serve as solutions are still very much at the heart of what impact. A study conducted by ethnographer useful resources. the organization supports, but by framing its and strategist Kate Krontiris on behalf • Many online resources and tools outcome on issue areas, Code has attracted of Omidyar Network effectively chronicled support nonprofit impact measurement capital from funders supporting specific issues dynamics relating to impact measurement in the and evaluation capacity, such as The areas, such as California Health Care Foundation space. Successful organizations concentrated Bridgespan Group’s Intended Impact/ and Molina Foundation. Similarly, Civic Hall Labs is early on building measurement and evaluation Theory of Change Toolkit and working with Robert Wood Johnson Foundation approaches that generated data, which in Root Cause’s “Building a Performance on a “lab” focused on public health. turn enabled them to increase effectiveness Measurement System: A How-To internally and communicate results externally. For Guide.” nonprofits, clear evidence of impact is crucial over Entice traditional democracy funders time for attracting follow-on growth funding from Capital Only a small portion of traditional democracy philanthropic and impact investors. But proven Very few philanthropic and venture funders funders currently supports technological results are equally important for for-profits invest in the field. Founders report that they approaches to civic engagement. Civic tech that are often selling services to enterprise and quickly exhaust the pool of existing funders, and funders should reach out to traditional democracy government clients skeptical of new entrants and competition for available resources is high. The funders (including members of the Democracy seeking validation from previous engagements. space needs to attract more funding and promote Funders group) to identify opportunities where greater coordination among funders. civic tech funding could advance their strategies. Civic startups and their funders need to invest in strengthening measurement and evaluation Attracting Investors Build networks of angel investors and capabilities. Potential resources for organizations high net worth donors looking to enhance their impact measurement Appeal to issue area philanthropic Angel investors could provide highly valuable approach include: funders unrestricted capital for the civic tech space yet have • Knight Foundation partnered with A limited number of funders will ever self-identify been an infrequent source of funding (many of the Network Impact to produce a series of as “civic tech funders,” so organizations should more financially successful nonprofits in this space products (“Assessing Civic Tech,” “How cultivate support from funders of specific issue attracted support from wealthy donors in their to Measure Success,” “Assessing Civic areas (such as economic development and early stages). Funders should consider supporting Tech: Additional Tools & Resources”). education) whose interests are advanced by networks, convenings and programs that increase • Civic Hall’s “A Lever and a Place to their work. For instance, Code for America has the visibility and connectedness of civic tech startups Stand,” funded by Rita Allen Foundation, created focus areas in health, safety and justice, to angel investors and high net worth donors, includes case studies of civic tech impact. and economic development with targeted particularly those in Silicon Valley and those working • MySociety convenes TICTeC outcomes that include increasing enrollment in in the technology industry. New Media Ventures (The Impacts of Civic Technology California’s food assistance program and reducing (NMV) has grown a network of progressive angel

KNIGHT FOUNDATION Sustaining Civic Tech 36 investors supporting for-profit and nonprofit media However, there has not been much impact Increasing Funding Effectiveness startups; its network has supported some of the investment so far in civic tech. Some foundations fastest-growing startups in the online engagement have also made limited impact style for-profit Collaborate on investments space, including Upworthy and CrowdTangle, which investments (as in Knight Foundation’s investments Civic tech funders often invest in isolation but should was recently acquired by Facebook. in Change.org, and PublicStuff and the Omidyar seek opportunities to coordinate their support. One To facilitate connections, funders might also Network’s support of SeeClickFix and Citymart). opportunity is to develop a pooled fund to invest consider organizing “road shows” to shop growth capital into high-potential civic startups investments in their portfolios among potential Civic tech founders and funders should consider (for example, Latin American Alliance for Civic investors, as well as incorporating angel investors targeting the impact investing community through Technology). Alternatively, funders could explicitly and high net worth donors into collaborative rounds events and forums, particularly SOCAP and its co-fund grant-making initiatives, with a recent as described in the “Collaborate on investments” annual impact investing conference, which offers example being New Media Ventures’ recent open recommendation below. a social entrepreneurs scholarship, as well as call, which has attracted additional investment from events curated by the Global Impact Investing Omidyar Network, Open Society Foundations and a Make inroads to the impact investing Network. network of impact angel investors. community Increasingly, a segment of the investing community De-risk venture investments Meanwhile, the field may be able to pursue more is describing itself as engaging in impact investing, Foundation funding, including grants and program- of a “round” mentality for funding civic startups. or investing in companies, organizations and related investments (PRI), could more intentionally Similar to venture capital rounds, foundations could funds with the intention to generate a measurable, fund experimentation with for-profit companies co-invest in civic nonprofits in order to synch their beneficial social or environmental impact in addition in the field that could ultimately receive funding infusions of build capital and avoid all-too-common to a more traditional financial return. Individual, from private investors. Philanthropic investments patterns of funders driving misaligned priorities and venture capital and institutional investors can all in the earliest phases of the education technology requirements through their individual investments. consider themselves impact investors. market were instrumental and helped fertilize the At the same time, more founders should further sector’s readiness for an influx of venture money. For consider pitching the round concept to their existing Given the growing importance and influence of example, Knight Foundation’s PRI funded Citimart core funders. this emerging field in the broader social sector, to work with several cities on transforming their it is interesting to note that little funding for civic procurement processes, both offering an immediate Funders might also consider thematic funds focused tech to date has come from the impact investing social value and demonstrating the market potential on a particular population served, a type of business community. One notable exception is for its services (Citimart has gone on to raise private model, geography or other strategic factor. Change.org; its investor group includes impact capital). Because philanthropic funders have limited investors such as Omidyar Network, Obvious capital and tend to shift their resources over time, it’s Provide growth capital Ventures and Rethink Impact, along with traditional vital they fund opportunities with an eye toward their Philanthropic foundations should consider adapting angel investors such as LinkedIn’s Reid Hoffman, ability to encourage more sustainable sources of their funding approaches to account for the Yahoo’s Jerry Yang, and Twitter’s Ev Williams. funding beyond their own investment. needs of tech startups. For starters, foundations

KNIGHT FOUNDATION Sustaining Civic Tech 37 should provide more “build” capital to civic tech of this recommendation and continues to evolve). on pay-for-success can be found on Nonprofit nonprofits that enable them to develop the skills Foundations should also consider ways of co-funding Finance Fund’s website, www.payforsuccess.org. and abilities outlined among the Competencies and sharing these resources. recommendations. Small amounts of flexible Debt financing investment in the early stages, in lieu of restricted Exploring alternative finance Debt products have not been explored extensively program-specific grants, may result in longer-term mechanisms in the civic tech sector but could provide a sustainability, adaptability, and greater overall social Foundations in other fields have pushed beyond diversity of funding options for more sophisticated and financial return on investment. This would align traditional grant-making and PRIs and begun to organizations. One example is a revolving loan fund, with the growing cadre of philanthropy experts deploy new methods of funding that inject their which can help small and midsized grantees bridge calling for “pay-what-it-takes philanthropy,” which grantees with needed growth capital. Though gaps in funding, weather financial setbacks and removes traditional limits to overhead rates and most civic tech organizations have yet to reach implement new strategies. Repaid loans then fund institutes more accurate methods for determining the maturity needed to use these new financing loans to other groups, meaning that the original the true full costs of successful organizations. In mechanisms, funders may still be interested in capital in the fund can be re-lent several times increasing build capital, foundations are also in a further exploring their viability as their grantees and over. For example, the Nonprofit Finance Fund- position to provide funding to more a diverse pool of the broader field matures. designed and -managed Mellon Loan Fund, which founders than the privileged constituencies currently supports arts and cultural heritage organizations, supported by angels. Outcomes-based financing has leveraged its initial loan capital 3.5 times since Pay-for-performance contracts and pay-for- its inception in 2009. For earlier stage investments, Develop tech investment expertise success vehicles such as social impact bonds are a mixed grant and loan fund might be appropriate. Foundations should also consider ways to future potential sources of capital for civic tech. In such an arrangement, grant funding might be strengthen their own technological know-how to Continued government budget pressures and devoted to technical assistance to assess and build effectively fund in this field. Several interviewees focus on meaningful and measurable impact in the investment readiness of recipient early stage noted that low levels of technological awareness the social sector are leading to heightened focus organizations; loan capital could then be deployed had led their funders to inadvertently encourage on outcomes as requirements for funding. As this to organizations that have demonstrated sufficient poor decisions about program design (for trend continues, it is plausible that the ability to track readiness. Other debt products, including loan example, programming languages and database and capture outcomes and impact data, to use that guarantees (a promise to repay an investee’s debt in architecture), with lasting negative impacts. Short data for continuous improvement and to provide the case of default) and subordinated debt (a type of of hiring program staff with deeper technical transparent reporting will become more important loan repaid after all other types of loans and debts knowledge, foundations can take steps such as in accessing funding and investment. While pay-for- are paid), can allow an investee to secure additional funding part-time technologists, fellows or informal success efforts in civic tech may be several years funding from other lenders that might otherwise code reviews that enhance their technological off, investments today in building outcomes capacity charge higher interest rates or not be willing to lend acumen for investing in and supporting more and infrastructure of individual organizations and at all. successful grantees (the Ford Foundation the field can help the sector prepare to accept these Technology Fellows program some components potential capital sources. More detailed information

KNIGHT FOUNDATION Sustaining Civic Tech 38 Collaboration The maturation of civic tech as a field users. (The Civic User Testing Groups such as Shared sales and fundraising services will depend on greater collaboration those in Chicago and Miami could serve as a Perhaps the most unifying challenge experienced and coordination. Thankfully, a number model.) by civic startups relates to sales processes of organizations (for example Civic Hall, and capacities. All organizations selling to Code for America, Data and Society, and Meanwhile, incubator and accelerator programs government, not just civic tech startups, can speak mySociety) provide vital infrastructure for could catalyze more, and more effective, funding to the problems with government procurement the civic tech sector. Nevertheless, several for civic tech (see Capital recommendations processes and the frustrations caused. Several needs in the field present opportunities for above). By developing and showcasing a pipeline initiatives are underway to encourage reforms to funders to support existing and new field- of promising early-stage companies, these government procurement. building organizations and approaches that programs could recruit new investors to the enhance coordination, collaboration and space. Additionally, these programs could serve Tactically, though, funders and practitioners in competencies in civic tech. as valuable forums for connecting and bridging civic tech can begin overcoming sales challenges funders across the venture and philanthropic in a few ways. First, startups often lack insights Incubators and accelerators funding spectrum. about government procurement processes and There is a promising opportunity to form or the networks needed to connect to government partner with incubators and accelerators The focus of several programs overlaps with decision-makers. Funders could be playing a focused on civic tech startups. Incubators and the civic tech space. Startup incubator 1776, greater role demystifying procurement processes accelerators have played a crucial role in the which has a Cities track, seeks out scalable social and facilitating introductions to potential nascent stages of other fields and serve several enterprises and offers a mix of nonmonetary government users. This could take the form of important functions. supports and seed stage investments. Urban Us building crosscutting entities that bridge civic provides venture funding to companies seeking startups with potential government clients. First, incubators and accelerators could help early to make cities better and operates the Urban-X civic tech startups with prototyping and assessing accelerator. The Tumml startup hub provides Another reason that civic startups, especially market fit. Many civic tech startups have launched resources to early stage entrepreneurs tackling nonprofits, struggle with sales is that they lack the with an orientation toward developing a solution major urban challenges. Fast Forward, a nonprofit capital to hire full-time sales staff, let alone a sales but without a firm grasp of the need and size of technology accelerator in Silicon Valley, recently team experienced in selling to government clients. the intended market. Incubators and accelerators began accepting civic technology startups; its The founder tends to be the person overseeing the would enable startups to create and launch latest demo day was double-oversubscribed, and company, managing tech development and selling products while building their skills and networks. participants in the 2016 class raised $5.7 million the product. Funders could invest in outsourced Furthermore, these programs could support in follow-on funding in the first three months after sales teams that support sales functions across product design processes that enable startups to the accelerator. several civic startups. gather meaningful feedback from advisers in the field, technologists and, perhaps most important,

KNIGHT FOUNDATION Sustaining Civic Tech 39 Similarly, nonprofit selling to individual donors (fundraising) may also benefit from outsourcing this capacity and considering a shared-service model; for example, several public broadcasting organizations partner on fundraising through the Contributor Development Partnership, which helps with reducing their overhead and promotes benchmarking and learning about effective tactics across organizations.

KNIGHT FOUNDATION Sustaining Civic Tech 40 CONCLUSION

KNIGHT FOUNDATION Sustaining Civic Tech 41 he 2016 election catalyzed a surge of interest and consciousness about the importance of a strong civil society and active citizen engagement. This has T cast a spotlight on the work of organizations promoting informed and engaged citizens, including members of the civic tech community. And though few funders historically have explicitly focused on civic engagement, a growing cadre of donors and investors is seeking opportunities to support organizations contributing to well- functioning democracy.

This could mark a sea-change moment for civic Advancing civic tech will require more discussions among civic enterprises and tech. As captured in this report, a shortage of collaboration and coordination between funders funders about business and impact models capital and funders in the civic tech space has and founders in the field. The recommendations will be vital for learning from one another, limited the ability of organizations to invest in core outline ways to overcome consistent obstacles benchmarking results, increasing effectiveness capacities and meaningfully scale their operations. that have constrained the growth of the startups and ultimately attracting other funders by clearly Civic tech organizations are primed to benefit from in this space including deficiencies in business, communicating impact. As companies such as this growing interest, especially among high net sales, measurement and communications skills. Facebook, Google and Snapchat continue to worth donors and funders from the tech industry. Founders and funders must work together to integrate tech features into their platforms, it recognize these barriers to growth and then will become all the more urgent to discern the Though an infusion of capital is sorely needed, so capitalize organizations to build these foundational business viability and impact generated by stand- are long-term business models for sustaining the capabilities. Closer cooperation is also needed alone civic companies. work of civic tech organizations. The research among funders, who often approach their work identified several revenue sources and strategies in isolation. Bridging private and philanthropic Above all, this research intended to build a more that organizations have pursued to develop funders offers enormous potential for advancing nuanced understanding and sophisticated repeatable and reliable income; yet hardly any this field. conversation about business models in the civic organizations with sustainable and adaptable tech landscape. Through shared insights and business models were uncovered. Building Meanwhile, additional data and discourse about shared actions, there is enormous potential to financially sustainable business models is ultimately civic startup business models will play a crucial overcome this fundamental challenge that has what will take civic tech from a collection of role in promoting sustainable organizations. The plagued civic tech since its infancy. After all, activity and initiatives to a cohort of organizations lack of transparent and accessible reporting the success of civic tech has never been more advancing greater and more long-lasting impact. of financial and impact data became quite urgently needed. apparent during this research; more open

KNIGHT FOUNDATION Sustaining Civic Tech 42