What happens if Civil’s token financing doesn’t work?

Civil, which is simultaneously trying to create an open platform for journalism managed by its members (via a crowdsourced constitution) and launching a new cryptocurrency to help fund and operate the platform, is one of the most ambitious media experiments in recent memory. The cryptocurrency is a branded form of Ethereum tokens that Civil started offering to potential backers and/or users of the platform on September 18, with the goal of raising at least $8 million by October 15 (the original token launch date of August 13 was postponed because the company said it wanted to give potential buyers more time to understand the process).

As of Thursday, however, Civil had only managed to sell about $1.3 million worth of tokens, according to a transparency report published by co-founder Matthew Iles on Medium. Purchases worth another $800,000 or so are in the system, Iles says, but haven’t been completed yet. Even if those are finalized, it would still leave Civil well short of its minimum target for the financing, and significantly behind its maximum target of $24 million. And as Iles also notes in his report, more than half of the money raised so far has come from tokens that were acquired by ConsenSys, the cryptocurrency venture that originally financed Civil with a $5 million investment.

“This isn’t how we saw this going—but our company and our community are pushing hard to make it happen,” Iles writes. “We don’t know if it will work.” So what happens if the project doesn’t hit the $8-million goal? The original plan was that any money invested would be returned to those who bought tokens, but there is a possibility those who have invested could be offered the option of keeping their tokens and continue with the project if they wish. Even if that does happen, however, it could mean less funding for the newsrooms that have already set up shop on Civil, including the Colorado Sun, Block Club Chicago, and Popula. (Instead, readers could opt to help fund them using regular currency). And it would definitely mean less funding for the Civil Foundation, which was supposed to use 100 percent of the proceeds to fund independent journalism efforts, as promised by Civil in a number of public statements.

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Civil spokesman Matt Coolidge says the project has considered alternatives for what it will do if the $8 million target isn’t reached, but he says the company won’t address specifics until after the sale is complete, and that Civil is still trying hard to convince investors to acquire tokens and meet the cap.

At least one former backer of Civil seems to have given up on the idea, however: Daniel Sieberg, a former Google News executive and co-founder of Civil who left the project earlier this year for undisclosed reasons, says he became increasingly skeptical about the venture’s chances of success as the token sale went from the planning stages to execution and eventually left Civil Media in July. “The business model just won’t work,” he tells CJR. Sieberg says he is pursuing a wrongful dismissal suit against Civil (when asked for comment, the company said it doesn’t comment on potential disputes with former employees).

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As for why the project has fallen short of its goal, one factor Iles mentions is something others have also criticized, namely the overly complicated process Civil originally set up for the launch, which required potential buyers to not only set up an online “wallet” and buy Ethereum coins, but also fill out a quiz testing their knowledge about cryptocurrency. The rules were later modified to allow buyers to acquire tokens using a regular bank account, but the changes may have come too late for some.

It’s also possible that some of the initial enthusiasm for cryptocurrency ventures has waned since Civil started its project, as the price of currencies like Bitcoin and Ethereum have tumbled. And on top of that, the universe of people who want to invest in a cryptocurrency as a way of helping support journalism may be significantly smaller than Civil was hoping. Although Civil’s goal of helping to support independent journalism is widely shared, many of its critics say the cryptocurrency model is unnecessarily complicated. “If I wanted to give money to a site, I could just give it to them,” CUNY journalism professor Jeff Jarvis told The Wall Street Journal. “Where is the value created? I can’t get my head around it” (Jarvis later clarified that he is a supporter of Civil and its goals, although he said the process of governance and the use of cryptocurrency still seems overly confusing).

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Mathew Ingram is CJR's chief digital writer. Previously, he was a senior writer with Fortune magazine. He has written about the intersection between media and technology since the earliest days of the commercial internet. His writing has been published in The Washington Post and the Financial Times as well as Reuters and Bloomberg.