Vancouver startups put a new spin on crowdfunding
When FundWeaver launched last January, Mishon Sutherland was sure it would spark a “firestorm” of crowdfunding in Canada’s aboriginal communities. Ten months later, the North Vancouver resident concedes her expectations were unrealistic.
As its first anniversary nears, the first crowdfunding website dedicated to First Nations, Métis, and Inuit people’s causes has only hosted two projects. Nevertheless, Sutherland, cofounder and community manager of FundWeaver Networks, remains upbeat about the platform’s future.
“Crowdfunding in this particular niche of the aboriginal communities, I think it’s important because we are the quickest growing demographic in the country—young aboriginal people,” Sutherland said in an interview at the Georgia Straight offices. “There’s going to be a lot of really great ideas coming out of our specific demographic, and there’s no net there. There’s no support there.”
FundWeaver is one of three unique crowdfunding sites based in Vancouver that launched this year. As artists, musicians, filmmakers, and video-game producers around the world flock to U.S.–based juggernauts Indiegogo and Kickstarter, as well as other portals, Canadians are also getting in on the action in the exploding crowdsourced-financing space.
A study commissioned by the Canada Media Fund defines crowdfunding as the raising of money through small contributions from the public using the Internet and social media. According to Crowdfunding in a Canadian Context, as of April there were over 450 crowdfunding platforms in the world, including 17 in Canada.
Released in August, the report divides crowdfunding into three models applicable to the creative industries. The donation model, in which people give money to a project without expecting a financial return, is the most popular means of crowdfunding, with US$676 million raised worldwide this way in 2011. The lending model can involve forgivable loans, traditional lending agreements, and presales.
Although the investment model is illegal in Canada, the U.S. Securities and Exchange Commission is hammering out rules that will allow entrepreneurs in that country to raise up to US$1 million through the sale of shares via registered equity-crowdfunding portals, starting in 2013.
Like Indiegogo and Kickstarter—as well as Vancouver-based crowdfunding sites FundRazr and Education Generation—FundWeaver uses the donation model. Project creators keep any money they raise during campaigns lasting up to 88 days, minus a commission—four percent for projects that reach their funding goal and six percent for unsuccessful projects.
Sutherland, who has Carrier and Scottish ancestry, now regards FundWeaver’s first year as being about raising awareness of her site and crowdfunding in aboriginal communities. She’d be happy if FundWeaver hosts five to 10 successful projects during its second year.
Launched in July, Weeve is another Vancouver-based crowdfunding site using the donation model. What makes this platform different is that it only runs campaigns from nonprofit organizations and doesn’t charge any fees.
Right now, Weeve is hosting a dozen projects. For example, the Burns Bog Conservation Society hopes to raise $7,500 to expand the boardwalks in the Delta Nature Reserve, and YWCA Metro Vancouver is asking for $3,000 to put on a youth conference to raise awareness of the hypersexualization of girls in media.
Trevor Loke, cofounder and chief operating officer of Weeve Ventures, told the Straight the site can be used by nonprofits anywhere in the world. According to Loke, who’s also a Vision Vancouver park commissioner, the key to a successful crowdfunding campaign is a “compelling story” that demonstrates how financing a project will impact a community.
“Sometimes there’s this notion that ‘Crowdfunding is magical and we’re going to create the project, and we’re going put it out there, and through the power of the Internet people will stop by and give all their money, and we’ll raise it in no time,’” Loke said by phone. “Of course, that’s just not true. How crowdfunding works—and I think how fundraising works in general—is basically through a lot of work.”
While Loke knows he’s not going to get rich from Weeve, other Canadian entrepreneurs are hoping to use the investment model to raise larger sums of capital than they could through the donation model. Through the Canadian Advanced Technology Alliance, the high-tech sector has been lobbying provincial and territorial governments to legalize equity-based crowdfunding.
In an October newsletter published by the law firm Fraser Milner Casgrain, Ottawa corporate lawyer Andrea Johnson likens equity-crowdfunding sites, which are legal in Australia, to “micro stock exchanges”.
“If Canada does embrace equity crowdfunding, market regulators will need to strike the right balance between protecting investors and allowing capital to flow through new online channels,” Johnson concludes. “If they succeed, Canada may be better positioned to compete, spark innovation, and hold onto talent.”
Until equity crowdfunding is permitted in Canada, David Geertz says he’s got the next best thing. The cofounder and CEO of Vancouver’s SoKap Community Networks is carving out a niche in the space between the lending and investment models.
Launched in beta during the summer, SoKap sees filmmakers, musicians, and authors raise funds by selling micro-licences. Licensees—typically nonprofit groups looking for a new way to raise funds—have an incentive to promote a creator’s movie, album, or book locally because they earn royalties from sales in their town. The products are preordered and sold via the SoKap site.
Geertz told the Straight by phone that SoKap is also quietly using its platform to sell the territorial rights to products from beer, wine, and coffee companies. According to the White Rock resident, the donation model doesn’t work for everyone. Unlike other crowdfunding sites, SoKap enables both creators and supporters to profit from a project.
“What we are trying to do,” Geertz said, “is build a bridge between people looking for funding and people trying to fundraise.”