Collaborative Funding: dissolve authority, empower everyone, and crowdsource a smarter, transparent budget
Enspiral is a network of professionals and companies on a mission to make the world a better place. We emphasize empowerment, collaboration, and innovation. One by one, we are disrupting every core organizational process. Then we open-source our solutions and create apps so others can do the same. This is the story of collaborative funding.
The story of Enspiral is the evolution of a transformative idea: we need to drastically increase the capacity of people doing meaningful work in order to solve our biggest problems. There is a trickle of human energy going toward the biggest challenges of our times, and we exist to turn it into a river.
Enspiral began in 2008, when founder Joshua Vial realized he could earn enough to live on by contracting as a computer programmer part time, leaving the rest of the time to work on social good projects. Then he realized that if he could support others to do the same, the total impact would vastly increase.
By 2011, Enspiral had become a collective of passionate professionals - people who could have been freelancing independently, but instead chose to collaborate and work together to allow them the resources and flexibility to pursue charity and social impact projects.
What happens when you get a bunch of ambitious, talented, values-driven people together in a vibrant coworking space and empower them to think big about positive impact? They launch social enterprise startups, of course. Enspiral grew from a collective of individuals to a collective of more than a dozen social enterprise ventures.
There are no bosses at Enspiral. There is no management hierarchy. The way we work is inspired by the internet, a network of interconnected nodes and free-flowing information.
We started dreaming about what the company of the future would look like and adopted a core approach of radically distributing money, information, and control, and using information systems, culture, and purpose to create an environment where people and teams self-organize.
We innovate through an agile process: hear a user need, develop a fast ‘mvp’ solution, measure the result, iterate, improve, repeat. One by one, Enspiral is collectively taking on every core organizational process and disrupting it by throwing out the old, hierarchical, top-down way of doing things and coming up with new collaborative processes.
After several years, a pattern is emerging: we have a problem we need to solve in order to work the way we want to work, so we start experimenting until we find a good process (usually after several failures), then we test, iterate, and improve. Once we feel we’ve honed in on the solution, we systematize the process and open-source it.
It starts with scratching our own itch, but the real goal is changing the world by helping all kinds of other organizations move toward more human, inclusive, empowering ways of working. Many organizations can’t experiment the way Enspiral can - so we do the groundwork to make it possible for these new paradigm processes to scale and spread.
The first example of this process was the development of Loomio (the story of which was named winner of the "Digital Freedom Challenge" M-Prize), a tool for collaborative decision-making that Enspiral developed with activists from the Occupy movement, now being used by thousands of people around the world (see how it works in this video).
Another core process ripe for disruption is governance - we are in the middle of developing a process for collaborative strategy-setting to address this (if the pattern holds, watch out for an app a year from now).
Now we're disrupting budgeting, with something we call collaborative funding.
By late 2012, the Support Crew was exhausted. All five of us have been running ourselves ragged trying to solve all the problems of a complex, unruly beast called Enspiral. This was never how it was supposed to be. The idea was that, as a collective, everyone would share coordination responsibilities, and we wouldn’t centralize management into just a few roles. But as we’d scaled up, we’d lost our way.
As the collective grew from just Joshua to a a couple dozen people, Alanna came on board to help herd cats. Then the network grew even more, to nearly 150 people, and the Crew expanded to include Rebeka, Anthony, and Richard.
Everyone was so busy trying to do their daily work that we’d stopped stepping back to look at the big picture.
Almost before we knew it, this small group had been tasked with all the traditional responsibilities of management - setting the strategy, managing the budget, making decisions - but without any of the resources, leverage, or authority of a traditional structure. Instead of consciously designing collaborative processes, we’d just been bringing in more people to help get the work done because it seemed like the most expedient thing to do.
We all believed deeply in Enspiral - but Enspiral as it was meant to be, not this. None of us had signed up to be anyone’s manager or boss.
We looked at each other around the room. When had supporting the people and the network we loved become so frustrating and depressing? Only a few people were running things behind the scenes, while everyone else was disconnected from the core work. And now those few people were fed up.
So we quit.
Or rather, we collectively fired ourselves. We couldn’t crew this massive boat with only a few people, so we stopped trying to do the impossible.
Running a large collective actually requires collective commitment and engagement, not just from a few people, but from everyone. So we let go of the rudder, stepped back, and looked at everyone else riding the SS Enspiral with us and said “OK, now what?”
Either we’d collectively figure out how to steer the boat together, or we’d sink. It was the scariest and best decision we ever made.
When the Support Crew - the management team that had accidentally formed in our network that wasn’t supposed to have managers - made itself redundant, Enspiral had to figure out how to self-organize.
It was time. The Support Crew sensed that our years spent building up a robust collaborative culture and a track record of innovative solutions meant that quitting was not an act of abandonment, but of tough love. It was less like and mutiny and more like a mother bird gently nudging a fledgling out of the nest. We didn’t know where it would go, but we knew it would fly.
Everyone in the Crew moved in to focus on other projects within Enspiral - Rich on Loomio, the collaborative decision-making platform, Rebeka on Enspiral Space, a co-working hub for social enterprise, Joshua on Enspiral Dev Academy, teaching skills to new coders, and Anthony to Live the Dream, a social enterprise accelerator.
We were left with just a skeleton crew with a mandate not to do anything directly, but instead facilitate collaborative processes for the entire network to manage itself.
Immediately, Alanna needed a way for the collective to decide the monthly budget.
Enspiral’s budget is made up of contributions from all the Enspiral companies. They can set whatever level of contribution makes sense for their business (typically around a 5% revenue share).
This is not a tax or a requirement - it’s a voluntary contribution that serves as a regular recommitment to the idea that we share a set of values and we can achieve more by collaborating together than we could working in isolation, while preserving the autonomy of individual people and companies to work on whatever and in whatever manner they choose.
The benefits of becoming an Enspiral Venture are informal but powerful, and come down to one core driver: trust. At its heart, Enspiral is an altruistic network based on trust, with a vibrant gift economy. When a person or company participates actively in the network, they have a whole lot of amazing people and ventures who are in their corner and actively helping them succeed. We share leads and connections with each other generously.
We lend each other money and invest in each others’ ventures. We promote each others’ projects at every opportunity. We share our learnings and hone our skills together. We grow a shared brand together to build a reputation greater than the sum of its parts. We help ventures find great staff and people to find great roles. (More details about the process of becoming an Enspiral Venture, expectations, and benefits here.)
In the past, the Support Crew had done their best to spend the budget to benefit all the companies, build up the network as a whole, and help Enspiral achieve its overall social mission: more people working on stuff that matters.
The companies, who were putting the funds into the collective pool, generally trusted the support crew to manage the budget, and in fact gratefully abdicated responsibility for managing it to save having to worry about it. But in practice, this meant they were very disconnected from actual decision-making and it wasn’t good in the long run.
Now that a small group wasn’t going to do the financial decision-making for everyone, we needed a way to coordinate.
Bootstrapping a dozen startups is not a walk in the park - everyone was already very busy with their own work and no one had time for inefficiency. It was not feasible to expect everyone at Enspiral to engage with profit and loss statements. Financial reports were left gathering digital dust unopened in people’s inboxes. Trying to force that method would not work.
We needed an accessible, engaging process that allowed everyone to meaningfully engage with the budget regularly, and have real control over the funds they were contributing, without overtaxing their valuable time and energy. Getting 120 people together for meetings every time we needed to spend money was out of the question.
If we could all think together, we’d gain the huge benefits of collective wisdom. But with no authoritarian leverage or bosses to exert it in the network, if the process wasn’t actually fun, interesting, and gamified, people wouldn’t opt to participate.
At the same time, Enspiral itself as a company has regular expenses and obligations that need to be covered (paying the accountant, legal costs, insurance, taxes, software and hosting, and paying the skeleton crew of part time employees). We had to ensure solvency and legal compliance, while creating a space for decisions about taking risks and supporting new projects and growth.
Budget decisions are about priorities - they make no sense out of context. If we say yes to one thing, we have to say no to something else. It’s very easy for people to love the idea of their pet project, but unless they can see that part of the budget in the the context of everything else the organization needs to accomplish with limited resources, it’s not a meaningful preference.
So we came up with Collaborative Funding. Here’s how it works.
Each month, all the contributions to collective funds are listed on a spreadsheet. Core expenses to keep the company going at the leanest level (previously collectively agreed on Loomio) are subtracted out. What’s left is the discretionary budget. Each person or company retains the right to allocate their part of discretionary funds, in proportion to what they contributed that month.
Anyone at Enspiral, regardless of if they have contributed funds, can start a “bucket” - a proposal to do work for Enspiral that requires funding. They write up a proposal making their case for why the work they want to do will benefit everyone, help Enspiral achieve its strategic goals, further the social mission, and why they, the proposer, are the right person to deliver the project.
This process was, from day one, explicitly an experiement. Everyone understood it wouldn't be pretty and polished until we actually all engaged with and and worked together to improve it. Here's the rudimentary form people use to submit bucket proposals.
People use a form on the website to submit bucket proposals. Anyone at Enspiral can propose a bucket.
Everyone with allocation rights in the round - the people who contributed funds - considers the buckets and decides which ones to “fill” with their portion of the discretionary budget. If people collectively feel like a project is a good use of resources, it will get funded. If there are critical budgeting priorities taking precedence, “nice to have” projects won’t get any funds that round. Funders can split up their allocations as they like, or put it all in one bucket.
In aggregate, the result is a budget that reflects the collective priorities of the group, determined in proportion to real stakeholding, in the context of the big picture goals. The entire process takes place transparently.
A big reason we can run this transparent, collaborative process with minimal administrative overhead is because we use Loomio, an open-source app developed at Enspiral to solve the key question of how distributed groups can make fast, effective, inclusive decisions together, without resorting to a small group of people holding all the power. (Read the story of how Loomio grew our a meeting between Enspiral and the Occupy movement in this winning M-Prize entry).
Everyone at Enspiral, even if they neither have allocation rights over funds or have proposed a bucket for funding, can see exactly what’s happening with the budget. Since we run the process on Loomio, everyone is invited to make comments and share their thoughts about what should be funded, although ultimately it’s up to those with allocation rights to make the decision about how to spend their portion.
We ran the first round of collaborative funding in April 2013, and every month since. The process has been run as an MVP experiment using spreadsheets and Loomio.
Now we’ve taken all our learnings from a year of collaborative funding and we’re developing Cobudget, an app that will make the process visually engaging, intuitive, and flexible - and easy to use by other organizations.
When we first began Collaborative Funding, no one had ever heard of such a process before. So the first challenge was helping everyone understand what it was about. Luckily, we have a strong culture of experimentation, so we were able to transparently say exactly that: this is an experiment, so please just give it a try. Honesty about the process being new and untested meant people were willing to put up with it being unpolished, and we consistently asked for and reacted to user feedback to improve it.
Sometimes it can be hard to get people to engage with a new process, but because we were giving them direct control over funds in a way that was easy for them to understand and act on, each participant was motivated to make their choices. And because we essentially opened up an internal crowdfunding platform where anyone could pitch for a slice of the collective pie to do the work they were most interested in, people were motivated to propose buckets. Meaningful empowerment overcomes resistance to process change.
The thinking behind the process is complex, but interacting with it is simple.Find your name on a spreadsheet and see how much money you have to allocate. Look at a few choices of buckets you can fill. Decide where you want your money to go. You can easily see the rest of the budget and the big picture to give context. If funders want to hold something back for a rainy day, or they aren't impressed with the bucket options this round, they can put their funds in reserves.
To propose a bucket, you just go to to a page on our intranet and fill out a simple form explaining your idea, and it will either get funded or it won’t. It’s very much like earning points. Gamification and making the process engaging overcomes resistance to “boring” budgeting.
Here's an example of how the spread sheet version of Collaborative Funding works at Enspiral (using some made up example numbers and buckets).
Below: actual results from Enspiral's first year of collaborative funding. Running a transparent collaborative process means we can do meaningful reporting that people feel a personal connection to - they see their direct contribution to how we steered the ship together throughout the year.
Debugging the Process - we began with a rough MVP and continuously improved it.
One challenge we identified was the need for keeping the bigger strategic picture in mind. We’d succeeded at providing much needed context at the level of a monthly budget. But we still had questions about whether the choices we were making around funding were going to achieve our larger goals. Sometimes what seems most important one month actually isn’t when you zoom out to the level of a quarter, or a year.
After completing a collaborative strategy-setting process called Mastermind (a story for another time!) we had four key pillars of a 2014 strategy. We decided to add a requirement to bucket proposals to speak to which of the four pillars a project related to, and why it was the best use of funds to achieve the larger outcomes we’d set for ourselves for the whole year. We’ll report on collaborative funding outcomes against these goals, and hope to develop metrics over time for measuring our return on investment of the funds we put in buckets.
One thing we’re still finding challenging with the collaborative funding process is forward planning. In order to make sure we weren’t spending money we don’t have, we designed the process to operate on a cash basis, only allocating funds we’ve already received. This makes it difficult when an enticing opportunity arises that would need to be funded over several monthly rounds in the future. As a first step, we’ve developed several bucket types.
Zero or Hero - must be fully funded to target amount or the project is cancelled
Scale to Fit - the project will scale up or down to fit the budget
Savings - the bucket will be proposed in future rounds until the target is hit
This way, people proposing buckets can determine for themselves how they’ll deal with possible funding outcomes, and people allocating funds can make decisions accordingly. For projects that need funding over multiple rounds, the proposer can start a savings bucket, which will be included in future rounds. We have successfully funded several major projects this way, such as a major redesign of the Enspiral website, and sponsoring an Enspiral member as the "designer in residence" at a social enterprise accelerator.
The biggest limiting factor of our manual MVP (the process run on spreadsheets) was that the administrative practicalities required us to run a formal monthly process. Bucket proposals and allocations are announced on the 1st of the month and allocations are closed after 5 days. Any unallocated funds are decided by the Board. Once it’s all set, the funds are disbursed to the people and teams who proposed the funded buckets. We wait until the next month to run the process again.
Now we're building Cobudget, an app to make the collaborative funding process smoother, more engaging, flexible, and beautiful.
The first challenge we faced was resourcing the product team to build the app. We didn’t have the finances to fund the project internally, so we used an internal process called Fairy Gold to pay for the team (yet another story for another day!). Essentially, it is a way for people to earn a percentage of future revenue generated by a project - something like earning equity, but for internal projects. This was an empowering and enticing offer that allowed us to recruit the approximately 400 hours of design and development work required to build the first version of Cobudget.
Switching to the Cobudget app is allowing us to follow a much more fluid process where people can propose a bucket at any time and have it funded on a rolling basis. It also lets people put their allocations into the ‘reserves’ bucket (i.e. not spend them right away, and save them instead) and still retain control over those funds for future projects. This substantially changes the dynamic away from ‘use it or lose it’ to longer term planning.
See Charlie, a developer working on Cobudget, introduce the current alpha stage of the software in this 3 minute video.
Another challenge in the collaborative funding process that Cobudget will help address is that of reporting. We found it difficult to find the right process, incentives, and triggers to get bucket proposers to report back on how their project went - simply telling people they have to report back "just because" won't go far at Enspiral. Once a project is funded, people are focused on doing the work, not reporting on it. We manually generate 6-monthly reports about raw numbers, such as where income came from and where it was spent, but generating these reports is time intensive, and the results are quatitative not qualitative.
We’re designing some exciting features in Cobudget that will make reporting a natural part of the process. You will be able to visually explore reporting information like income and expenditure flows, measures of how well a project went after being funded, how results relate to the overall strategy pillars, and data on the different ways individuals, teams, and companies are contributing to and interacting with the system. This will have profound positive effects on Enspiral’s overall ability to create engaging and transparent global reports about what the network is doing and how well it’s accomplishing its collective goals.
Management time has been greatly reduced and the cognitive load of deciding what to do and where to spend our energy is spread across the whole network. Collaborative Funding has been the primary driver behind reducing our fixed staff costs by close to 80%.
The number of people engaging in decision-making around the budget has gone from just a few to over 50 in some rounds, with up to another 100 involved in observing and commenting, while at the same time reducing the total cost in terms of time and stress of the overall funding process. We collectively engage, and then collectively hold the outcomes and consequences.
Transparency is vastly increased. Whereas before, any Enspiral member could technically look at the financial reports generated by the accountant, the truth is that people didn’t. Real transparency isn’t about the numbers being technically available - it’s about proactively making the information accessible in a way people can understand and engage with meaningfully. Now everyone can see exactly where Enspiral spends its money each month, regardless of whether they are part of allocating or being allocated funds. This is a major boost to trust.
People actually have their heads around the numbers now. If someone is advocating for their favorite project, there’s no behind the scenes politicking or quid pro quo - if you want something funded, you raise a bucket to the whole group, and it will either get backing or not during the transparent process of funding. Supporting one thing means saying no to something else, and the process has led everyone to think not in terms of their personal perspective, but in terms of how they can support the collective goals by their individual choices and contributions.
We have been able to connect our budgeting and funding process directly to our strategy, considering how each and every bucket fits in with our larger goals. This makes the strategy real on a very practical level for everyone doing work and funding work in the network, and allows us to consistently reflect on our progress and our collective choices.
Collaborative funding has allowed us to really “walk the talk” of collective ownership combined with empowerment and autonomy. Enspiral is literally owned by its members (each has one share representing decision-making stakeholding, and no dividends or profits are taken out). Collaborative funding lets all members act like business owners, making the hard choices about where to allocate limited resources, and what we want to achieve as an organization.
At the same time, people contributing funds retain control over where those funds are directed. People know their money isn’t going to just disappear, and they will have meaningful input to direct it to projects that align with their top business and social impact priorities, so they are willing to be very generous and open. Financial contributions aren’t a tax - they represent voluntary and meaningful participation in a collective process.
One result of collaborative funding has been amazing generosity. On several occasions, various Enspiral ventures have decided to increase their contribution to collective funds beyond what they initally commited for a given period. If people see that a proposed bucket will help them better achieve the social and business objectives of their venture, they opt to put in more funds voluntarily. This only happens because collaborative funding gives them meaningful say over how collective funds are spent.
We actually give our accountant headaches because companies insist on just giving each other money to support various initiatives, which apparently isn't something you normally see in the tax code! (Don't worry, Enspiral Accounting is used to our crazy schemes at this point and has made sure it's all above board).
For instance, this year Enspiral Space is expanding into a bigger office, a project requiring an investment of resources to pull off. We've been running Enspiral Space very lean, in order to keep desk rent affordable for the bootstrapping social enterprise startups and charities in the office, so the company itself had limited extra capital. But since the Enspiral Space is the physical heart of the network and creates immeasurable value for all the Enspiral Ventures through hosting events, creating space for collaboartion, and facilitating deeper personal bonds through people working together, many ventures have invested in the expansion above and beyond their normal contribution to the Foundation.
Another example was the Loomio Crowdfunding Campaign, which rasied over $125,000 internationally to bring a major update of the open-source decision-making app to the world. Not only is Loomio a project everyone at Enspiral intrinsically understands the value of (since we use it every day), but the campaign received international media attention and new strategic relationships that had positive ripple effects right across the network. So it makes sense that the ventures would dig deep and give extra support financially through collaborative funding.
The end result is a total win-win: because we're collaborating, what's good for Enspiral as a whole and what's good for its member organizatons comes into alignment, and collective and individual needs complement one another powerfully.
Collaborative technology creates transformative possibilites for structuring an organization, specifically when it comes to deciding how money, information and control are distributed. By intentionally using rich information systems to build decentralised, network-based organizations, we can create a work environment that is substantially better for people. We can also dramatically reduce core costs and build faster, smarter and more resilient organizations.
Experiment Yourself, Right now
At the most practical level, implementing collaborative funding inside an organisation is actually quite straightforward. It can be run with spreadsheets and an online forum (we used Loomio) or even email. Simply take the budget, figure out a fair way of distributing allocation rights and proposing buckets, and report the results transparently. To make it ever easier for others to try, we will be releasing the Cobudget app after sufficient user testing. Our current plans are to make it free and open source.
You can do this right now - you don't have to wait for us to release the Cobudget app. All you need is a small discretionary budget to play with, and proportinal stakeholding shared among a group of people to allocate that budget to a list of potential projects. Appoach it as an experiment. It's about so much more than just the money - transparency, collabortion, big picture thinking. But it's important that, even if it's a small amount, it's real money so people can see the tangible effect their input is having.
A lot of companies struggle to increase cross-departmental or cross-team collaboration. If that's something you want to improve, try creating a small discretionary budget made up of funds from several teams or departments. Involve a representative from each in the allocation process, with decision-making stakeholding in proportion to their contribution. Make the projects your allocating funds to things that will benefit the organization as a whole. You will be amazed at everyone's ability to raise their thinking up to the big picture level, recognize necessary tradeoffs, and work together to use resources in the most effective way.
Another important lesson is the value of manually prototyping imperfect solutions. At the beginning, we had confidence in the concept, but knew we’d only learn about execution through real-world experience. While monthly rounds are limited in some ways, they gave us clear iteration points to reflect on what was working and what needed to be improved. We only began automation (building software) once we saw the benefits we wanted from the process, and had a relatively stable model.
Collaborative Funding is not a budgeting panacea. All the problems every organization faces are still right there. The difference is they are transparent, and collectively owned.
For example, right now, Enspiral is planning and budgeting for our twice yearly retreat, where our distributed network gets together for a series of events and spends time away together. And you know what? We don't have as much money as we'd like to fund it. But all the suggested events went on the budget spreadsheet, and now the entire network understands the problem and collectively owns the responsibility to solve it.
Some people will revise the budgets for their events down to make them leaner. Some will focus on bringing in some more resources. Others will let go of their pet idea because they can clearly see it's not getting a lot of support and the budget is already stretched. And when the retreat arrives, no one will complain that the lunch is potluck instead of catered, because they were directly involved with the decision to spend that money on hosting a workshop to help local charities instead. Nothing is ever as well-funded as it would have been in an ideal world, but we'll all understand the choices and tradeoffs we made, and everyone will feel like it's something we truly made happen together.
Dissolving the central point of authority in a group and replacing it with a process where people can express their opinions, exercise power, and bid for resources can have a transformative effect on an organisation. It breaks down the “us and them” dynamic and invites people to step into responsibility for the bigger picture. This causes a cultural change which ripples through every aspect of organisational life.
There is no behind the scenes. There is no "us versus them". There is only us, doing the best we can to make a difference with what we have.
A massive thank you to everyone at Enspiral, especially Joshua Vial, the original inventor of the collaborative funding process, and the Cobudget team who are taking it to the next level.