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Observations from Ma Earth’s first quadratic funding round

Ma Earth recently conducted its first “grants round” on Gitcoin, an experiment to provide quadratic funding for regenerative land projects. We put up a matching pool of 35 ETH, which equated to approximately $100,000, for 23 land projects.

Quadratic funding means the matching pool was distributed based on crowdfunding donations, factoring in both the amount raised by each project as well as the number of unique donors. You can learn more about quadratic funding here.

In total, the Ma Earth grants round raised $20,000 from 400+ donors and 1000+ contributions over a 2-week period, plus we received an anonymous donation of $40,000 that was spread evenly across the projects. Given it was our first round, and considering the positive feedback from participating grantees, we are happy with the results and learnings.

This post offers some observations from the round, intended especially for funders considering running their own quadratic funding experiments.

  • Quadratic funding rounds on Gitcoin combine several distinct innovations. These include: the quadratic funding mechanism, the crypto payment tooling, and the identity/fraud systems. So when drawing conclusions, it’s important to consider there are several interrelated moving parts, each in their formative stages.

  • Crypto wallets and Ethereum UX are not yet ready for mainstream adoption. Things are improving rapidly, especially around cost and speed, but the user experience is still too complex and cumbersome for most people. This means rounds will generally accrue more benefit to projects with crypto savvy networks. Gitcoin will likely have credit card payment options soon. Coinbase/Base is also releasing highly anticipated wallet tools, which should improve the “onchain” experience.

  • Quadratic funding differentiates project curation from resource allocation. In other words, the process for determining who gets funding at all, is different from determining how much they receive. I believe this is one of the reasons QF will take hold in traditional philanthropy. It aligns with similar trends around flow funding and trust-based philanthropy, but puts more trust in communities to determine the ultimate allocations, since donations act as votes (sometimes referred to as “vonations”). Funders can continue to exercise important roles upstream around determining grant criteria, performing application reviews and due diligence, and deciding total matching funds.

  • An important variable for QF round operators to consider is how many projects are accepted/included for a given matching pool. In our research of others rounds, we repeatedly heard the complaint from projects that they received such small matching amounts in the end, it wasn’t necessarily worth the time involved in promoting it to their communities. That’s why we decided to go with 23 grantees, from a pool of ~50 qualified applicants. We wanted to ensure that once the $100,000 was divided up, it would still be meaningful for each project relative to their efforts.

  • Quadratic funding gives projects a powerful new context to fundraise. Traditional fundraising often makes appeals based on matching donations, because it works. (E.g. “Every $1 you donate will be matched by a donor, which means you’re having double the impact.”) This creates both a reason to ask for donations, as well as a compelling pitch that “your funds will be multiplied”. In the QF model, these matching multiples can be much greater than 2 or 3x, but they’re by no means guaranteed, since projects are effectively competing with others in the pool. The more funds that get raised in aggregate, the more these matching multiples will dimish over time; but that also means more capital is coming in, so it’s working.

  • Quadratic funding can be good for marketing and bringing attention to a specific cause. It’s somewhat similar to prize competitions in this regard. Everyone is competing and coordinating in a way that promotes the round. The current social media landscape reinforces this. It can become fatiguing, and a common criticism is that people feel it becomes a “shill fest” and “popularity contest”. That marketing can have real value though, and one can imagine foundations and intermediary NGOs combining QF rounds with broader campaigning efforts (e.g. a QF round for projects reducing microplastics, to also bring attention to the issue).

  • Quadratic funding can be a convening force that helps projects learn from each other and coordinate together. This is a slightly unexpected dynamic, because it’s technically a competition amongst grantees for the matching pool, but we repeatedly observed and heard from the land projects that connecting with each other was a highly valued part of their experience. There is a spirit of coordination deep within the Gitcoin culture as well.

  • Gitcoin doesn’t enable the community donations to be tax deductible yet, but this seems feasible in the future. For example, Endaoment is making progress in supporting nonprofits to accept crypto donations in a streamlined and tax efficient manner. If QF crowdfunding donations went directly to a fiscal sponsor, that sponsor could be responsible for ensuring charitable compliance from participating projects. These types of enhancements could help unlock contributions from donor advised funds, for instance.

  • Better impact measurement and reporting will accelerate QF further. By providing more standardized ways for projects to show their impact, donors will have more confidence in allocating resources. Many are exploring tools like Hypercerts to support with this, and blockchains are well-suited for innovation around impact verification and reporting.

  • It’s still early. Things are buggy and chaotic. Quadratic funding will probably receive an outsized amount of attention because of its crowdfunding component, but other forms of capital allocation will still usually make more sense for funding projects and teams.

What Gitcoin has created here is not only a working model that combines multiple innovations together, but a context in which more experimentation around capital allocation can take place. While its roots are in open source software, I think there will be a lot of applicability in other cause areas and traditional philanthropic giving.

If you’re a funder and want to discuss these themes further, or possibly experiment together, you can reach me on LinkedIn or Twitter.

Explore Gitcoin here.

Matthew Monahan
Ma Earth

P.S. We host an interview series called “The Regeneration will be funded” exploring topics around regenerative finance. You can find it on YouTube, Spotify, and Apple.

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