On April 16, 2015, Etsy launched its initial public offering, raising more than $300 million and pledging to emphasize social mission over profits in the years ahead. The commitment is very much part of the company’s mission, which has built a reputation to go along with its success as an online marketplace for people to buy and sell handmade or vintage art, supplies, or goods. There are many fellow travelers that are seeking to tie social impact to a sustainable for-profit or nonprofit model in the burgeoning civic technology sector, which seeks to connect citizens to services and one another.
This past week I attended a forum in New York City where government executives, entrepreneurs, technologists, and venture capitalists gathered to exchange insights about what civic tech is, what’s happening in the space, and what’s happening next. The event was convened by the Omidyar Network, the philanthropy cofounded by Pierre Omidyar, the founder of eBay.
I sat down with Stacy Donohue, who leads the Omidyar Network’s Governance & Citizen Engagement initiative in the US, to talk about how she sees civic tech and what’s coming around the bend.
“In an ideal world, in the long view, what we’d like to see is people feeling empowered, having a voice,” said Donohue, “feeling like their voice makes a difference in the way government interacts with them, and we’d like to see better, more efficient, more effective government service delivery that’s in-line with citizens’ expectations in a digital age.”
According to Donohue, the Omidyar Network views civic technology as “any technology that helps the relationship between residents and government, both to empower residents and give them a voice, and also to help facilitate more fair, effective, and efficient service delivery.” Platforms that the Omidyar Network has invested in include Change.org, SeeClickFix, and NationBuilder.
For the philanthropy, social impact is the primary criterion, as opposed to the returns that venture capitalists expect from investments (they do, however, go beyond grants to make commercial equity investments as well). This social impact is measured by reach, engagement, and influence. In general, they look for solutions and platforms that have the potential to touch millions of people and lead to sustained social change in the world.
Our short video interview is embedded below, followed by an extended conversation lightly edited for clarity. I’ll have more to say about what I learned about civic tech at the forum and the forces moving around it in a separate column.
How are you thinking about digital rights being protected in civic tech companies? For instance, would you not invest or divest if they didn’t protect user security, didn’t build in privacy by default, or were found to be selling user data without notice or consent?
Donohue: Any technology can be used for good or evil. That’s well known, and it’s something that we worry about or think about all the time. As I said earlier, we fundamentally believe that people are good. It would be hard to live in a world where you didn’t have that fundamental premise. At the same time, we want to be cautious.
There have been examples, and we’ve seen them, of civic tech being used problematically. Nextdoor recently had press about racial profiling: neighbors in certain neighborhoods were starting to communicate with each other about suspicious people walking in the neighborhood who just happened to be African-American. It’s a real concern, and something that we need to think about whenever we invest.
The fundamental premise is that we are enabling platforms for anyone to use. That still needs to be part of our mantra. We feel strongly about that. Like eBay, there are unexpected new and beneficial ways that platforms can be used for good, and that’s why we’re investing in them. I think you bring up an excellent point that any technology can be used in ways that are both unexpected and unintended. We need to be very cognizant of that.
Do you have principles for how platforms should work? Have you ever pulled investment support from a civic tech company because they’ve been over the line in some way?
Donohue: We definitely have a lot of experts at Omidyar Network who work extensively on privacy and trust issues at eBay. We’ve been able to leverage that learning onto the Omidyar Network side and work with organizations up front on their policies around privacy and beyond.
Change.org is a great example of that, where our investment team has worked closely with them and their team on thinking through all sort of policies as they’ve scaled tremendously from the ground up to almost 100 million users. Policies change, as you start to hit that incredible growth curve. We feel good about the fact that we’ve been able to use the learnings from a platform like eBay scaling and apply it in social sectors.
What worries you, as you look at the civic tech space? As you know, the government information tech, where there is some crossover, has issues with endemic failures of huge projects, of which HealthCare.gov was only the most prominent. There’s an issue with industry incumbents lobbying to use regulations and laws written a certain way and the procurement process to keep out innovative firms. When you look at people and organizations that you’ve invested in, when you look at the ways the civic tech space is evolving, what concerns you? What are the risks or dangers or pitfalls?
Donohue: Any time you are backing a bunch of startups to fight a set of incumbents, there’s a lot of risk there. I think the biggest risk is entrenched, incumbent IT players in this space. However, that said, this is a market that’s ripe for disruption. The civic tech market, as IDC recently defined, is a $6.4 billion dollar market and that’s going to attract a lot of very smart people to try to build businesses that can displace incumbents who are not providing the types of products and services that government needs and that citizens deserve.
While I think it is risky, and certainly not going to be easy to unseat those incumbents — and that’s the kind of thing that keeps all entrepreneurs up at night, in terms of how to beat their competition — I think it is a fight worth fighting. It is going to change.
At the end of today’s event, former DC Mayor Adrian Fenty brought up civic crowdfunding, which can get into some uncomfortable issues around economics, power, and class. Is there a time and place where civic tech will be fulfilling the role of government institutions that are underfunded or have sufficient resources to meet the needs and demands of growing populations in the digital services space or elsewhere? Is that one of the places where foundations can have the most impact? Traditionally, governments have met civic needs where the market would not. Today, if there are unmet needs, will foundations become key players in funding the next generation of civic infrastructure?
Donohue: I think one thing that Kathryn Finney, who was one of our speakers today, said that that really stuck with me is that “inclusion is a market, not a charity.” This notion that inclusion or diversity needs to be somehow funded to fill the place where markets don’t work I think is changing. I think you can apply that analogy in this instance, too, where over time philanthropy won’t need to fill gaps where “markets don’t work” because we’re going to broaden the definition of what a market is.
I think of it similarly to financial inclusion. Fifteen years ago, the nonprofit sector helped build the infrastructure for microfinance. Then, over time, it became a commercially viable sector. I think the same way about civic tech. As you know, we’ve supported some fantastic nonprofits in this space who have shown what’s possible. They have been funded with grant funding to seed the cultural ideas of what it means to be a functioning government technologically in the 21st century. Now that that idea is starting to take hold, and that culture is starting to proliferate, there’s an opportunity for market-based forces and for-profits to come participate in that piece of the ecosystem.
The Latin “civis” is the basis for “civic,” which once upon a time meant a person who lived in a city. Today, there’s clearly something interesting happening in civic tech in the cities that’s different than in state or national governments. Why is that? What’s driving it?
Donohue: I think, fundamentally, people care about things that are close to them. People care about their children’s school. People care about their neighborhood and their street. Where you may not agree with the politics of your neighbor, you both can agree when the sidewalk is cracked and broken and that it needs fixing.
We’ve observed over the last five years, and even longer than that, that as Congress continues to be more and more dysfunctional and less and less gets done at the federal level, simultaneously more and more is happening at the city level. That innovation happens both because city-level decision making is just easier but also because citizens engage at the city level in ways that they just don’t at the federal level. They engage every four years, at election time, but not on a continual basis. That was one of our early hypotheses in investing both in nonprofit and for-profit startups, and why we invested in Code for America in the first place.
Which organizations and individuals, given that they’re often tied together, are the most inspiring to you? What are the stories that people don’t know about that they should, beyond Jen Pahlka and Code for America?
Donohue: I agree with you that Code for America’s story is quite well known, and also inspiring. There are so many people in our portfolio that I really admire.
I think Ben Berkowitz at SeeClickFix is an unsung hero of the civic tech movement. He was doing this before pretty much anyone. He came from a community organizing background, so you would expect him to be focused on a nonprofit kind of model. He said from the beginning that I can make this be a for-profit company and have community engagement and work with government. It’s taken a long time, but we’ve been invested in them for five years. They have just worked hard to make that work, and they’re making it work.
Keya Dannenbaum, who you saw speak earlier today, has been a tirelessly impressive entrepreneur in trying to figure out how to make for-profit models work in this space. You may recall that she gave a really great talk at PDF two summers ago. She rode the wave of the elections to create ElectNext and worked with media companies. As she described today, she found that to be a short-term opportunity: great revenue, but then what?
She pivoted a couple more times because she had a strong commitment and passion to figuring out how to create an intersection of civic engagement and media and politics. As she described this morning, Versa was the latest incarnation of that, that was trying to educate people on different perspectives that were coming out of the media. It was basically native advertising with a civic twist. She realized that her talent and what she was trying to accomplish could be done on a much greater scale with Change.org, which used to be described as a small civic tech startup but all of a sudden has almost 100 million users.
That’s another story of thinking creatively about how to best have impact. Sometimes, that means not doing it just on your own as a startup but being willing to join up with someone who really has the mission to drive your mission forward.