New Study Takes a Serious Look at Crowdfunding the Canadian Way

The phenomenon known as crowdfunding or participatory financing is generating a growing interest among creators of innovative products and content worldwide. In Canada, public funding is a limited resource, and while private sector financing for creative industries and innovation is on the rise, it’s still unable to meet the enormous demand for funding in this sector, particularly in the start-up and pre-marketing phases.

In this context, crowdfunding may fill an existing gap in the quest for new sources of financing in the sector that encompasses audiovisual content and production, video games and new entertainment technologies.

The Canada Media Fund (CMF) recently published an article, “Advice on best crowdfunding practices,” which appeared on its industry and market trend blog Trendscape in May.

Today, at the GROW Conference in Vancouver, the CMF announced the publication of a new study titled Crowdfunding in a Canadian Context: Exploring the Potential of Participatory Financing in the Creative Content Industries.

About the study

In keeping with its strategic oversight mandate, the CMF commissioned the Nordicity Group to present an overall picture of the crowdfunding phenomenon and identify its potential and limits in the legal, regulatory and cultural funding context in Canada.

In the course of the study, Nordicity analysts reviewed case studies and secondary sources, and also conducted interviews with industry stakeholders, including content producers and broadcasters as well as funding, certification and regulatory agencies.

The study first offers a definition of crowdfunding and an analysis of various existing models around the world (based on grants, loans or investment). Next, it presents an overview of the major crowdfunding trends in Europe, the US and Canada. It then outlines how Canadian producers might implement this practice within the legislative, regulatory and financial context for creative industries in Canada.

Altogether, this is a comprehensive review that includes both a macro view and an analysis of factors that may have an impact in Canada. Producers and entrepreneurs will also find a series of observations and factors that may be helpful in organizing an effective crowdfunding campaign.

Highlights

  • Platforms that host crowdfunding campaigns are multiplying both in Canada (which has at least 17 to date) and in the US and Europe (altogether 461 worldwide).
  • A study by Massolution/Crowdsourcing LLC indicates that over $1.5 billion has been raised through crowdfunding campaigns, supporting over a million projects and initiatives worldwide.
  • The study suggests a classification of various crowdfunding models based on the relationship between the promoter or parent company of a given project and the contributors. There would be a grants model (based on an outright award), a loan model (based on pre-sales) and an investment model (based on the sale of equity).
  • Of the 6 case studies presented, 2 are “record breakers” funded by the Kickstarter crowdfunding platform: Pebble Technology raised $10.3 million, and the Double Fine company put together $3.4 million to develop an electronic game.
  • Besides the financial advantages, crowdfunding offers undeniable advantages in terms of audience involvement. From initial market studies right through to consolidation of reliable backers, crowdfunding campaigns take advantage of social networks and make it possible to gather valuable data on a project’s creative aspects or the market potential of a given product.

The Crowdfunding in a Canadian Context: Exploring the Potential of Participatory Financing in the Creative Content Industries study is available online here

Posted in: Business Practices



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