Crowdfunding giant Indiegogo has chosen Canada as the test market for its new iPhone app that connects innovators with investors. Crowdfunding in Canada has taken off recently, with a huge share of Canadian funds funneled into charity events, new inventions and product launches daily. This latest introduction will change the way people fund and launch products and businesses in Canada and across the globe.
What is Crowdfunding?
To put it simply, crowdfunding is a platform that connects great minds to funders who want to bring their ideas to life. There is a variety of projects that are funded, from mission trips overseas to new technology and small business ventures. Inventors can find investors to back the costs of creating prototypes and start-ups can find money to pay for office space.
The funders are not venture capitalists or large corporations. In most cases, the majority of the funds raised come from individuals who believe in the project and want to see it through to completion. Some contribute as little as five dollars while others contribute $5,000. There are few restrictions on who can donate and in what amounts.
The highest grossing crowdfunded project was “Star Citizen,” an independent video game project funded through Kickstarter. The project’s campaign goal was $500,000, and as of this writing, the project has raised more than $47 million with 470,000 backers.
Other projects have come in at similar numbers, with funders clamoring to get in on the investment action. Project “Bring Back Reading Rainbow” is featured on Kickstarter and aims to bring a version of the popular 80s reading show to the iPad. These iPads will be distributed to children in disadvantaged neighborhoods. So far, the project has raised more than $3.9 million.
How Canada Ranks in Crowdfunding
Indiegogo, one of the largest crowdfunding sites on the market, has a huge share of revenue from its Canadian affiliates. Canada is the site’s second-largest source of donated revenue, and has enjoyed a 50% increase in funding from last year’s totals.
Rival crowdfunder Kickstarter has also captured a huge share of the Canadian donation market. Since the site opened up its platform to Canadian users in fall 2013, it has collected more than $14 million in donations for 1,400 new projects.
CoreChair, who produces an office chair that features a revolutionary adjustable multi-axis tilt mechanism that builds core strength, reduces back strain, and increases productivity, is an Inertia client and an early example of Kickstarter’s crowdfunding success in Canada, having achieved funding of over 140% of their goal.
Canada is the world leader in crowdfunding platforms, with more than 45 available for donors to connect with project creators from across the globe.
Canadian crowdfunding runs the gamut of offerings, from sites that offer general fundraising services to those that serve niches. Sites like Art Market Canada serve the artistic and creative communities and allow donors to fund up and coming artists.
Doc Ignite was specially created to fund documentary creation and is one of the fastest growing crowdfunding sites in the world. Some of Doc Ignite’s producers and project creators have gone on to release high-grossing documentaries and independent films.
Gambitious is tailored around game creators and the gaming community. A Swiss Indie studio recently raised enough capital from 651 investors to create a simulated train and railroad game for worldwide distribution.
Types of Crowdfunding
There are several types of crowdfunding available, each with its own benefits and drawbacks.
– Equity Based
In equity based crowdfunding, funders receive a portion of the profits generated from their donation. They receive an ongoing stake in the company, similar to shareholders and stock owners.
– Charity or Donation Based
All of the proceeds of the funds raised go toward a specific charity (all of the funds go to a needy student in Brazil, for example).
– Lending Based
This type of funding is similar to a loan in that it has to be repaid. The project creator will pay back the funders over a set period of time.
– Reward Based
Funders receive a product in exchange for their donation. This usually takes the form of a part of the project they are funding (all funders get a copy of software that is created).
– All-or-Nothing Funding
In this funding system, the project must raise 100% of the funds they request. If they fall short of their goal, all money is returned to the funders and the project creators get nothing.
– Keep-What-You-Raise Funding
Project creators keep all of what they raise, regardless of whether they reach their intended goal.
How Crowdfunding Helps Launch New Products
Creators looking to launch new products often find the cost of creating prototypes, hiring developers and conducting marketing campaigns cost-prohibitive. With crowdfunding, creators can raise both money and product awareness.
Contributors to new project campaigns often share their fundraising activities with their social media networks, creating an online buzz about the proposed project.
Indiegogo’s new app promises to open up the arena of Canada crowdfunding and create new avenues for inventors and project creators alike. Through crowdfunding, even the smallest idea can blossom into a world-changing invention…