Exploring the Potential of Crowdfunding in Canada: Study
By Andrea Wahbe on Sep 19, 2012 / Categories: CDMN News, Featured
Canadian content creators, just like startups and entrepreneurs, face challenges when seeking capital to get projects off the ground. Earlier this month, Nordicity (an international consulting firm providing private and public sector clients with solutions for Strategy and Business, Policy and Regulation and Economic Analysis) and the Canadian Media Fund (CMF) released the findings of a new report entitled Crowdfunding in a Canadian Context: Exploring the Potential of Crowdfunding in the Creative Content Industries that investigates the opportunities and risks for content creators in Canada.
The CMF study, conducted via primary (through interviews with key stakeholders) and secondary research, explores a detailed definition and description of the different types of crowdfunding models that exist in Canada, how they work and how they can be utilised in different ways to meet the needs of different types of projects.
We caught up with Mila Dechef-Tweddle, a Consultant at Nordicity’s Toronto office, to learn about some key findings from the study and understand the pros and cons of using crowdfunding as a source of capital.
Q – Why do a study on crowdfunding and why now?
A – Not only does the CMF help Canadian content creators to get projects off the ground, they also follow and report on industry trends. Crowdfunding has actually been around for about six years now but has only gained momentum in Canada in the last year or so. CMF wanted to be ahead of the curve and investigate some of the trends, pros and cons, best practices and how crowdfunding might fit into the existing funding and regulatory ecosystem in Canada.
Q – What was most surprising about the use of crowdfunding in Canada?
A – Well, we realized that crowdfunding is not a blanket fix for all of a startup or content creator’s financial woes. It’s really just one more tool in your toolbox. Most of the people who use crowdfunding have not been able to access other sources of capital to kick-start a project, or they need to top-up their existing funds.
Q – What are some of the pros and cons of crowdfunding?
A – One of the biggest pros to crowdfunding (other than to source capital for a project) is the added exposure and awareness that a project or company gets from their fundraising campaign. However, there are risks associated with every reward. One of the hesitations that many project owners have is that they don’t want to risk having such a public failure if they don’t meet their goals. In addition, there is the risk of intellectual property protection – someone could steal your idea before it gets off the ground. Finally, as crowdfunding is such a new tool, it’s unclear how using these platforms will impact relationships with potential investors or partners who you may need to work with down the road.
Q – What is the average amount of funding that people are seeking and how do funded projects typically achieve success?
A – The average funding campaign size is roughly $5,000 to $50,000. It’s rare to see those million dollar funding campaigns that we hear about in the media. The most successful crowdfunded projects require the fund seekers to actively promote their campaign and connect with the right audience to spread word of mouth – attracting the right contributors. It’s important to really engage with that audience and provide updates via the campaign’s website. In addition, the more compelling the project is itself, the more likely you are to be successful in your fundraising efforts.
Q – According to the study, there are already 17 crowdfunding platforms available in Canada. Is the market already saturated, or is there still room for growth?
A – Yes, there is a bit of a risk that the more platforms there are, the more fragmented the exposure for projects seeking funding (from the right audience and contributors) will be. We’ve seen a huge flow of funding come through channels like Indiegogo and Kickstarter. However, some of the new Canadian platforms (like IdeaVibes, SoKap, FundRazr and Small Change Fund) offer unique value propositions that are tailored to a specific market.
To access the full CMF report or to check out other research reports on all things digital media in Canada, visit the Canadian Digital Media Network’s online research portal.