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In an era when presidential candidates have found more success than ever raising millions of dollars online, a startup that tried to overhaul how political fundraising works through nonpartisanship has found that it couldn’t raise enough funds itself to survive.
Crowdpac, a venture-backed attempt to create crowdfunded political candidates similar to how Kickstarter creates crowdfunded consumer products, is telling clients on Tuesday that it will be closing next month after failing to secure additional money. It’s a death that speaks to how political organizing these days centers on partisanship — and how hard it can be to build a scaled business in politics, particularly one centered around crowdfunding, when you aren’t clearly aligned with one party.
“The political climate was: You could not be nonpartisan,” says Gisel Kordestani, Crowdpac’s CEO. “And we learned that the hard way.”
Though Crowdpac now only fundraises for liberal candidates, it was a nonpartisan organization when Kordestani co-founded it in 2013 with Steve Hilton, the startup’s former CEO. That all changed beginning in 2017 after Hilton became a host on Fox News and began promoting Donald Trump, which attracted harsh scrutiny from the left.
“I don’t think anyone should be using Crowdpac,” one Democratic legislator, California State Senator Henry Stern, told Mic at the time, “and I’m not gonna be soliciting use of their platform, and encourage all my friends to do the same.”
Hilton, a former adviser to British prime minister David Cameron, was taking on water so Crowdpac ousted him, saying that the moment demanded partisanship. But what was also obvious, according to Kordestani, was that their business was going to suffer the wrath of liberal activists if they insisted on being a neutral platform.
Crowdpac defends its revenue model by saying it’s just like Kickstarter or GoFundMe, but it still doesn’t exactly scream financial juggernaut. The analogy isn’t perfectly apt: Kickstarter, for instance, has raised $4 billion for projects — donating to create something like a smart watch or a bluetooth speaker has more mass appeal than donating to a political candidates. Crowdpac made money through tips that donors could give alongside their donations, and also a 4 percent fee tacked to any pledged donation made to a potential candidate who had not yet decided to run but was merely trying to assess their hypothetical support.
“That business model requires a really long runway. We basically ran out of runway,” said Kordestani, who declined to share recent revenue figures beyond saying that 2018 revenue doubled 2017 revenue. She said her company had explored other ways to make money through things like pooling donor data or through advertising, but never got there.
Crowdpac began as a way for voters to take informational political quizzes and learn about candidates and their platforms, but it eventually became a fundraising tool for Democratic and Republican candidates, primarily those who focused downballot. After the Hilton controversy, Crowdpac appealed to its left-leaning donor base and banned all conservative groups and candidates from the platform as part of what it said was an effort to resist Trump.
The problem, though, was that it then still couldn’t gain favor with the left, according to Kordestani. She said the Democratic establishment — national and state parties, and aligned advocacy groups like Planned Parenthood — did not trust a for-profit group working in Democratic politics and saw them as pilfering from possible donors.
Still, she says Crowdpac was making progress after it “cleared our partisan problem.” The group directed about $16 million in donations to candidates and causes since 2016. It raised even more in to-be-determined conditional donations, such as the $4 million it raised — in its most successful initiative — for money that will support an as-yet-unnamed 2020 Democratic challenger to Maine Senator Susan Collins, who attracted ire when she voted to confirm Supreme Court justice nominee Brett Kavanaugh last year.
Kordestani, who raised $15 million for Crowdpac, says it’s shutting down because venture capitalists have not shown enough willingness to back political startups. But she acknowledges that the startup had not yet established a sustainable long-term business — something that venture capitalists, of course, want to see.
She also acknowledges that her startup is dying at a time when most presidential campaigns on the left and right, from Donald Trump to Beto O’Rourke to Bernie Sanders, are raising monstrous amounts of money online. The irony is hard to miss.
“We’re at the moment where the market is meeting exactly the tools that we built,” she said, “So yeah, this is not the time to shut down at all.”
But it is also easier than ever before for donors on their own to learn about and donate to campaigns and causes on the internet — which increasingly makes platforms like Crowdpac obsolete.
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