April 24th, 2017
Canadians wary of jumping into less than crowded fundraising field
Ottawa Business Journal by Tracy Olson | August 26, 2013
When Paul Dombowsky first founded Ideavibes in 2011, he was hoping to tap into something big – the power of the crowd.
He envisioned his Ottawa-based startup as a place for crowdsourcing, a way of exchanging ideas by engaging the public. He also hoped it would be a portal for crowdfunding, similar to platforms such as Kickstarter and Indiegogo. Branding the crowdfunding side under the name Fundchange, Mr. Dombowsky hoped it would help charities raise money from the public for important causes and campaigns.
But by December 2012, Mr. Dombowsky found himself removing crowdsourcing from the equation and transferring his Fundchange customers to FundRazr, Canada’s largest crowdfunding platform. Ideavibes now focuses on providing a crowdsourcing platform for governments and organizations looking to collect feedback from their citizens, members and the public.
Crowdfunding just wasn’t viable for his startup, he said. Mr. Dombowsky said he thinks that’s because Canadians have been slow to pick up on crowdfunding, with the most enthusiastic backers coming from the United States.
“It’s just kind of how we do things here – it’s a more conservative approach to anything,” he said. “I also believe that maybe it’s just not our thing quite yet.”
So are Canadians less interested in crowdfunding than their neighbours to the south? That may be something with which smaller crowdfunding platforms have to contend, especially those based in Canada.
There are currently about 50 crowdfunding platforms across the country, according to the National Crowdfunding Association of Canada. Yet they’re dwarfed by U.S. crowdfunding platforms like Indiegogo and now Kickstarter, which recently announced it would be coming to Canada by the end of the summer.
Kickstarter campaigns have raised more than $693 million since the program was launched in 2009, easily outstripping the amount raised by any Canadian platform. FundRazr, the top Canadian platform, has brought in about $25 million so far.
And while Canadians are definitely becoming more interested in crowdfunding, many pay lip service to the concept but are hesitant to actually go out and take the risks involved, Mr. Dombowsky said.
“There are lots of examples of Canadian companies and artists and inventors who have used American sites, (like) Indiegogo,” he said. “There have been a few who have done well, but in general ... I think at the end of the day, it hasn’t really hit mainstream yet. I think you’re still getting outliers.”
One of those outliers might be Gabor Vida, president of Teknision Inc. His company develops user experience apps for mobile devices. Based in Ottawa, Mr. Vida and his team decided to crowdfund the development of Chameleon, a home screen replacement app for tablets and phones running the Android operating system.
When they began organizing their crowdfunding campaign last summer, the obvious choice was Kickstarter because of the brand’s reach and influence, Mr. Vida said.
Mr. Vida notes there was more work involved in using Kickstarter than with a Canadian crowdfunding platform, especially since it meant he and his team had to find a U.S. reseller to handle the payments pouring into the account because Kickstarter was not available in Canada yet. Teknision also ran into trouble when its first U.S. partner proved to be unreliable, dropping the project and losing $50,000 in campaign pledges. Mr. Vida had to set up a second campaign, which raised substantially less than the first.
But he said it’s something he would do again. While handling all the U.S. taxes with Kickstarter was difficult, Mr. Vida added that Kickstarter has a lot of clout, which makes it worthwhile. Going with a Canadian platform just wouldn’t generate the same kind of momentum, he said.
But that doesn’t mean smaller crowdfunding platforms can’t compete, said Daryl Hatton, founder and CEO of FundRazr, which is headquartered in British Columbia.
“How does David fight Goliath? It’s a challenge,” he said. Since FundRazr is a lot smaller than Kickstarter or Indiegogo, it has to be nimble and quick to adapt to succeed. It also occupies a niche within the crowdfunding space, he added.
For one thing, FundRazr focuses much more on social media than either Kickstarter or Indiegogo. Users can set up media galleries and get backers to “like” or comment on posts.
Many campaigners using Fundrazr are repeat customers. For example, U.S.-based scientific research organization the SETI Institute is using FundRazr to raise money for four campaigns under its Curiosity Movement. The most successful one has raised about $11,300.
FundRazr also offers customers the ability to embed the crowdfunding portal on their own websites, driving traffic to them instead of to its platform.
“Crowdfunding is growing here and will definitely happen,” Mr. Hatton said. “We’re going to see a period of time where all of a sudden, we have massive amounts of diversity and a whole bunch of different kinds of crowdfunding ... Natural selection will take over, and some models won’t work.”