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Gray area

Crowdfunding could be a nice shot in the arm to boost the sluggish economy. Amongst our Fact Cards there are some great examples internationally, but for some reason the Finnish authorities have taken a resistant stand and the examples we have posted from Finland are all about crowdsourcing not funding.

Positioned somewhere in the gray areas of economy, crowdfunding is not impossible nor illegal in Finland, but it usually involves handing over a hefty check to a legal adviser who can help a project navigate through the messy jungle of legislation and avoid stepping into the traps of wording’s and false expressions that could result in unpleasant dealings with the authorities. But in the case of say, a small scale urban development project, the price tag for a lawyer might exceed the budget for the project tenfold. The projects are left alone to carry the burden of searching for funding through other means, which in many cases means people involved digging their own pockets.

Having really hit Finland over the past year, crowdfunding (and its hazy positioning in the legal system) has been noted in the media throughout Finland. A bunch of active citizens have started lobbying for clarification from the government side of things, naturally by crowdsourcing, and started a project to re-write the Fundraising Act.

Whether being discreet or running a campaign in English and staying out of Finish mainstream media did the trick, there have been successful crowdfunding campaigns left unnoticed by the Finnish authorities: For example, the film Iron Sky used crowdfunding to cover costs of filming and collected around 700 000€. Kickstarter has also been used to fund projects like the Wishbone. Currently Unmonday is running a Kickstarter campaign to sell wireless ceramic Airplay speakers and BiiSafe is developing a remotely controllable dock.

Despite the positive signals, the Finnish government seems to be living in a time before the Internet: Instead of looking into opportunities, officials are in denial and not realising that projects like these are emerging on a daily basis. And if you make the mistake of doing something innovative and going public about it, you’re calling for trouble.

Meet Senja Larsen, also known as Fröken Senja. Senja wanted to improve her Swedish, so she started a Facebook page to connect with like minded people. Her study group became extremely popular reaching more than 16 000 followers (big in Finnish terms) and the project that had grown from a one-person initiative to a group of contributors started collecting material to publish a book. The group decided to use Kickstarter to raise funding to publish the book. By this time the project had gained attention in the Finnish media (see articles in Finnish here, here and here).

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The book project exceeded its original goal of 10 000€. At this point the Finnish National Police Board got interested in the case and asked for clarification on the project. After receiving a reply from Senja and the project team, the National Police Board claimed the project violated the Finnish fundraising act (download PDF in Finnish). Interestingly enough, four Finnish professors had all taken an opposing view on the matter.

The Kickstarter campaign was called off, backers were given their money back and the books were donated to the backers. All this was also widely documented in the Finnish media (see articles here, here and here). The Police Board did not proceed with the case since the crowdfunding was canceled. The final turn was the intervention of the Finnish Fair Corporation who bought books worth of 11 000€ to use at their events. The purchase was big enough to cover for the costs of printing the books. Everyone won, right?

The Finnish fundraising act is very strict and aims at making sure that donated money ends up in the right place as well as protecting citizens from frauds. Finland surely being no exception, every year a number of people send money in response to circling hoax emails and especially older people are an easy target.

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Many crowdfunding cases are more like pre-sales than fundraising, as majority of them offer a reward or product to the supporters. So in a way, the Police Board was applying the wrong legislation in the case. Renewing legislation and reinterpreting it would enable more creative projects to collect funding from the public. A balance should be found somewhere between enabling new business and protecting consumers. It should be up to people themselves to decide how to spend their money and therefore the legislation should only focus on preventing the obvious frauds, not preventing a market from emerging.

Case Senja took another turn the other day, when the team announced the renewal of their Kickstarter campaign in response to a plea by the
Aalto University Entrepreneurship Society and Borenius & Co, a Finnish attorneys office. Often these cases are a matter of wording than anything else. Mention word ‘fundraising’ on your website without the official permission or drop the number of your bank account in the wrong place and before you know it, you’re being persecuted of a fundraising violation. Technically it is illegal to have a PayPal Donate-button on a Finnish website.

Senja is now preparing to renew her campaign to fund the tablet version of the book with the support of law experts, which will hopefully prove the case. If the project turns out successful and is legally solid, other projects can follow in their footsteps. In the long run this is not the right way to go: legislation should be adapted to enable crowdfunding and creative initiatives.

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