My latest blog is actual found on slideshare - please check out the link at the bottom!
http://www.slideshare.net/Jan_Christopher_Arp/crowdfund-like-a-pro-10-questions-to-dive-into-the-minds-of-3-crowdfunding-gurus-43856894
Crowdfunding Canada
Saturday, January 24, 2015
Friday, November 7, 2014
Canadian Crowdfunding Platform Landscape
Canada has recently
emerged as one of the global leaders for crowdfunding, and as such, a combined
36 platforms have been launched across Canada. Due to provincial regulations,
this growth has been limited primarily to donation and rewards based models.
In order to better
understand how the industry is unfolding in Canada, let’s examine the different
Canadian crowdfunding platforms and their impacts.
Over $93 million raised, averaging over $1,750 per successful campaign
An impressive $93 million has been raised in
Canada. The majority has been provided for donation based purposes, although the
reward model has surged in popularity in recent years. The average amount
raised for a successful campaign is relatively low. Many Canadian-based
campaign owners tend to choose non-Canadian based platforms despite the high
potential to raise a large amount of funds on home soil. For instance, the very
patriotic fundraiser for Warrant Officer Patrice Vincent and Corporal Nathan
Cirillo that took place in 2014 utilized the U.S.-based platform Indiegogo. $394,000
was raised, an incredibly large campaign relative to Canadian platform
standards.
Canadian platforms represent an estimated 6% of platforms worldwide and an even smaller fraction in terms of global money raised, coming it at approximately 1%.
The Canadian landscape
is currently dominated by two powerhouses, FundRazr
and Chimp, which account for roughly 87%
of the total funds raised on the Canadian landscape. The other players are characterized
as follows:
- Four platforms that raised over $1 million;
- 15 platforms that raised between $100,000 and $1 million;
- 15 platforms that raised less than $100,000.
British Columbia
Platforms from B.C. account for over 90% of Canadian funds raised, attributed primarily to RundRazr and Chimp, but also Picatic.
Ontario and Quebec
Together these provinces
boast a total of 13 successful platforms, but are typically smaller and
more diverse, with funds raised ranging from $100,000 and $1.7 million. The
most utilized Ontario platforms are FlipGive,
followed by Smallchangefund, Cookiee Jar,
Giveffect, FWYC, GreedyGiver and My Class Needs. The best known Quebec
platforms are YoloMolo, MAKEACHAMP, LaRucheQuebec and Haricot.
Alberta, Nova Scotia & the others
Alberta is led by Uend, followed by Invest in YYC and Alberta Booster. Pursuit takes the lion's share in terms of funds raised in Nova Scotia, with negligible funds currently raised in other provinces.
Charity / non-profit campaigns raise the most on Canadian platforms
General purpose
platforms account for $52.5 million in Canadian funds raised; however, FundRazr claims 99% of this figure.
Although categorized as general purpose, the majority of FundRazr campaigns are geared towards charitable causes.
Charities
and non-profits have raised over $35.4
million across multiple platforms, and this success can primarily be credited to
Chimp, although other major players include
Yolomolo, Flipgive, Uend, Cookiee Jar,
Climb for Change, and Giveffect.
Artists and event organizers have embraced the niche Canadian platforms that tailor their
services to such a demographic, and have raised over $1.5 million, mainly
from Picatic, FWYC and InvestYYC.
Athletes prefer more the targeted platforms of MAKEACHAMP and Pursuit, despite the higher base fees ranging from 10%-15% of total
funds raised, not including transaction fees.
Local
platforms target a very specific
geographical area, and have garnered interest and close to $1 million in raised
funds, from Smallchangefund
(Ontario), La Ruche (Quebec) and Alberta Booster (Alberta).
Education has found a small niche for platforms, raising
approximately $420,000 through My Class
Needs (primary & secondary school fundraiser), Seeds of Change (McGill University), FutureFunder (Carleton University), and Equals6 (student scholarships).
It should be noted that
there are currently no platforms that specifically target raising money for
businesses, nor have there been many business oriented campaigns launched on Canadian platforms.
Final thoughts
The Canadian platform is
a budding industry. Despite the fact that many successful platforms have
simultaneously surfaced and that the average crowdfunding amount per successful
campaign is relatively low, a significant amount of total funds have been
raised, which is a strong indicator that this industry is full of promise and
can be sustainable long-term.
Canada has a great deal
to be proud of; however, platforms still dwarf in comparison to the major
players from the US, which have shown to be more diverse in terms of vertical
markets. The rationale for the success of the U.S. platforms includes greater backing from investors including venture capitalists, which in part results into more
user-friendly, professional looking websites.
If Canadian platforms
are unable to quickly grow to a larger mass, they run the risk of
forever being relegated to niche markets, typical of other Canadian firms in
global economy. It should be noted that niche markets can still achieve ample success. For instance, sports are close to Canadian hearts, given that there is a feeling of pride linked to the achievements of nation-wide athletes. Campaign donors may be more attracted to specific platforms that have an associated local, regional, or national focus. As such, Canadian based MAKEACHAMP and Pursuit have both achieved success following this notion.
To conclude, more growth
for Canadian platforms is expected, although the future positioning of the
platforms still remains uncertain.
Saturday, October 18, 2014
Crowdfunding Basics Every Canadian Entrepreneur Should Know
Crowdfunding, as recently defined by Merriam-Webster’s dictionary, is the
practice of soliciting financial contributions from a large number of people,
especially the online community. Entrepreneurs have enthusiastically embraced
electronic platform crowdfunding since its prominent introduction less than a
decade ago.This brief examines several basic components to understand before
commencing such an endeavor in order to increase crowdfunding awareness and to
avoid some of the associated pitfalls when crowdfunding for the first time.
THE MARKET
There are an estimated 582 active crowdfunds available since April 2013,
up from 462 in the year prior, according to the research firm Massolution,
spanning 160 differing countries, and across differing focuses (e.g. general,
musicians, software, charity, non-profits, political, etc.). Crowdfunding was
estimated to have reached $5.1 billion in pledges in 2013, up from $2.7 billion
in 2012, according to Massoluation, and other opinions by The Crowdfund Centre
have placed this figure at $2 million per day through 50,000 daily pledges. The
World Bank commissioned a study that projected crowdfunding could reach between
$90 billion to $96 billion by 2025.
Crowdfunding is currently largely driven by developed economies with
North America accounting for roughly ~60% and Europe accounts for ~35%, as per
Massolution, with the top most successful campaigns, as reported by The Crowdfund
Centre, being the United States, United Kingdom and Canada. However, crowdfunding’s
true potential may lie in emerging markets, especially China and Brazil.
The four crowdfunding models are donation (free funding generally for a
cause), rewards (campaign owner provides a reward for the funds received),
equity and debt (shares or debt issued by the campaigning venture). The first
two are the only models legal in Canada for non-accredited investors (i.e. layperson)
and account for roughly 50% of total global funding, as stated by Massolution,
and are thus the focus of this brief.
PREPARATION TIME
Operating a successful crowdfund campaign is not as simple as completing
some paperwork in a couple of hours. According to Reality Crowd Media
Corporation, successful crowd funding can take up to three months of pre-launch
activities, which includes business planning, intellectual property, social
media, public relations, campaign strategy, networking, team building, website
development, as well as profile and video construction. Many crowdfunding activities
would overlap with the other business launching related activities, and thus time
can be saved by incorporating a crowdfunding perspective at each overlapping stage.
Each model requires a unique emphasis on differing aspects, as per
Reality Crowd Media Corporation. Donation based crowdfunding is heavily
dependent on a compelling story that inspires; engaging relationships; strong public
relations and social media execution; as well as properly articulating the potential
taxable benefits when available. Rewards based crowdfunding is highly dependent
on engaging relationships; public relationships; social media; and a very
compelling video pitch. Additionally, reward crowdfunding should obtain 30% of
the project funding goal within its first week. Some projects are suited for either type of model;
therefore the campaign owner should choose the model which best reflects their
strengths. For more detailed information consult Manolis Sfinarolakis
presentation Crowdfunding: Financing Your
Small Business on Slideshare.
CHOICE OF PLATFORM
The three largest and most renowned reward and donation based platform
choices are Kickstarter, GoFundMe and Indiegogo.
Ø
Kickstarter funds creative based
projects across 15 categories. It is quick to boast their existing statistics,
which include $1,350 million raised to date for over 71 thousand projects,
alongside a 40% success rate and, according to the freelance writer Kristy
Hines, an estimated of 5.5 million U.S. visits per month. Additionally, Kickstarter reports that out of
43,193 funded projects, there have only been 4 reported cases of fraud (i.e.
0.01% fraud rate).
Ø
GoFundMe targets fundraiser initiatives
and it has raised over $500 million from over 6 million donors, and has an
estimated 2.3 million U.S. visits per month.
Ø
Indiegogo does not publish any
numbers; however, analysts have estimated that it is roughly 1/6th
the size of Kickstarter given that its monthly traffic is estimated to be 919
thousand according to Kristy Hines, and that crowdfunding freelancer Jonathan
Lau in Aug 28th, 2013, estimated that Indiegogo successfully raised
$99 million versus Kickstarter’s $612 million.
Canadian platforms face relatively strict legislation that differs on a
provincial basis. Nonetheless, there was an estimated 45 crowdfunding platforms
in Canada as of April 2013, up from 17 in the year before, according to
Massolution. The National Crowdfunding Association of Canada estimated that
there were over 106 active, beta and closed portals and service providers in
Canada, as of September 9th 2014.
Canadian Crowdfunding
Directory
Portals & Service Provider - September 9th, 2014
It may be wise to choose a platform within your provincial jurisdiction,
especially if your project is locally based and if it caters to the projects
targeted category (e.g. software, charity, etc.); however, one must also
consider funding requirements (e.g. total amount required post associated
fees), type of rewards offered, the duration of the project, and the desired
geographical scope of the venture.
TERMS OF SERVICE
Donation and reward crowdfunding platforms tend to have a similar style
regarding the terms of service. Prior to engaging in crowdfunding, one should
carefully consider the most notable terms of service:
Ø
Campaign owner’s requirements: The
campaign owner must complete the project and fulfill each reward/donation, or
bring the project to the best possible conclusion for the backers. This may
result in full or partial refunds to contributors. Note that most platforms clearly
state that they are not responsible for overseeing project performance or
mediating disputes between users (e.g. Kickstarter and Indiegogo). In some
circumstances, vague references are made with respect to the platform acting as
a dispute intermediary, such as enforcing project creators for the full
liability of any chargebacks and refunds that the platform handles on their
behalf (e.g. RocketHub).
Ø
Funding: Varies between each
platform. Donation platforms are generally free, while rewards based platforms
charge a fee. All platforms require the campaign owner to establish a funding
goal, whereby some platforms only fund if the goal is reached. Established reward
platforms charge 4% to 5% for projects that reach their goal, with some charging
8% to 9% for those that do not reach the planned goal. Additionally, a 3% to 5%
fee is likely to be applied for credit card charges, alongside a potential
fixed fee of $0.30 per transaction or per currency group. Also, applicable
taxes may be imposed given local regulations. As such, prior to launching a crowdfund
campaign, one should be aware of a potential 14% fee plus fixed charges, and applicable
taxes. Less established platforms will likely charge less in the beginning as
they try to encourage mass user acceptance.
Ø
Submitted Intellectual Property: Content
posted on any platforms may be used globally, non-exclusively, perpetually,
irrevocably, royalty-free, sublicensed, transferred with the right to use, commercialized,
modified, and exploited for marketing and promotional activities. Therefore,
campaign owners should be careful when posting any content on any crowdfunding
platforms, especially if they believe that content is valuable.
Ø
Create an account or license: It is
quite standard and expected that all sites require the creation of a
non-transferable, revocable account or license. Non-compliance with the terms
of service can result in account deletion. Among the reasons for cancellation
include breaking the law, falsifying information, spamming, hacking or stealing
data, victimizing, as well as tampering with their platform.
FINAL THOUGHTS
Subscribe to:
Posts (Atom)