Category Archives: Crowdfunding Research

Key determinants of crowdfunding volume

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Cambridge Network | Jun 27, 2017

A country’s control of corruption and quality of regulation are significant factors in the volume of crowd financing being carried out, but the type of legal system (civil or common law) has little effect, according to a new study at Cambridge Judge Business School based on more than 1,300 crowdsourcing platforms in 157 countries.

The study, based on a database compiled at the Cambridge Centre for Alternative Finance (CCAF) at Cambridge Judge, also found that the volume of crowd financing appears related to the level of trust individuals have for strangers, because such funding relies almost entirely on anonymous donors who have no social or other formal interactions with the recipients.

In addition, the study found that higher charges by banks boost crowdfunding volumes, while crowdsourcing volume declines when it is easier to set up a business – suggesting that crowd financing volumes are tied directly to high costs or other obstacles in pursuing traditional channels.

The study by Raghavendra Rau, Sir Evelyn de Rothschild Professor of Finance at Cambridge Judge, is being presented by Professor Rau later this week at the annual conference of the Centre for Alternative Finance, where he is Research Director. The conference is being attended by leading experts on alternative finance from banking, business, government and academia.

Last Call:  Help define the future of Alternative Finance in Canada.  Share your voice by Jun 30

The study – entitled “Law, trust, and the development of crowd financing” – is based on 1,362 crowdsourcing platforms in 2015; it follows detailed studies by CCAF on alternative finance trends and volumes in various regions around the world.

The study covers four distinct types of crowd finance business models – debt platforms for debt lending, equity platforms that allow firms to raise financing from investors, reward-based platforms where funders promise backing in exchange for non-monetary rewards, and donation platforms.

“This is the first paper that analyses the global determinants of crowd financing,” says Professor Rau. “Interestingly, the study finds that trust is the only factor that consistently seems to explain the volume on platforms that don’t have a financial motive, meaning reward-based and donation platforms.”

Globally, 98 per cent of crowd finance platforms are debt or equity platforms, and debt-based platforms are dominant with 96 per cent of global crowd financing originating on those platforms. In emerging economies, however, the predominance of debt and equity platforms is less pronounced, at 78 per cent.

The volume raised through crowd financed platforms increased globally from around $500 million in 2011 to nearly $150 billion in 2015, a growth rate of over 200 per cent per annum, fuelled by advances in technology (thus the term “fintech”). The three largest crowd financing markets in 2015 were China ($103 billion), the US ($36 billion) and UK ($5 billion).

“The overall level of crowd financing volume is strongly positively related to the level of development of the market,” the study says. “However, controlling for the level of market development, there are three factors that significantly affect the volume of crowd financing within the country.”

The three factors are: aspects of the legal system such as corruption control and regulation quality; a demand factor driven by the cost of using traditional financial institutions; and a supply factor linked to user demographics including the level of access investors have to the formal financial institutions.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Assessing the Potential for Crowdfunding and other forms of Alternative Finance to Support Research and Innovation

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European Commission | May 4, 2017

This report (dated January 2017) provides an assessment of whether alternative finance has the potential to help Europe address the problem of access to finance for innovative companies and bridge the gap in terms of access to risk capital, and if EU action is needed to support development of the sector.

To this aim, the study produced the following results:

1) an estimation of the size of the alternative market for research and innovation, together with a typology of sectors and of alternative finance funding models suitable for research vs. innovation;

2) an analysis of the European alternative finance landscape for research and innovation;

3) an analysis of the challenges limiting development of the alternative finance, and alternative finance for research and innovation in particular;

4) an assessment of policy options addressing those challenges;

5) a final recommendation of priority action at EU and national level to exploit the opportunities of alternative finance for research and innovation.

See:  Companies, Investors, Online Financing Platforms:  Complete the 2017 Altfi Survey in Canada and Help Define the Future of Alternative Finance Crowdfunding in Canada

Access Page to Download the report --> here

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

 

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CALLING ALL COMPANIES, INVESTORS & FUNDING PLATFORMS! Help Define the Future of Alternative Finance Crowdfunding in Canada

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NCFA Canada (About Us) | June 22, 2017

This is a vital time for the alternative finance crowdfunding sector in Canada.

The crowdfunding sector in Canada offers tremendous potential to innovate and improve capital formation, storage and the distribution of resources by leveraging technology to unlock transactional inefficiencies, provide more liquidity and help small businesses, the backbone of the Canadian economy, to commercialize and globally compete in modern digital times.  While market volumes grew 48% from 2013-2015 and is predicted to reach $190 million in 2016 (download 2016 NCFA report), Canadian markets continue to fall behind international competitors due to market stifling regulations (eg., US $35.2 billion in 2016, Chicago-Booth/Cambridge report).

Your voice is more critical than ever before! 

  • All survey participants will be entered into a draw to receive a $100 gift card of their choice plus $25 Uber promo card for their time.
  • Are you an innovative company raising seed or growth capital? Have you considered raising your next financing in alternative finance markets? What are the most important decision drivers?
  • As a retail or accredited investor, how many deals have you backed in the past 12 months? What’s working and what’s not?

Please take 5min and show support for capital innovation, SME growth and new investment opportunities in alternative finance markets:

  • Your confidential responses will form the basis for NCFAs annual 2017 report to be published later this fall
  • Armed with this data, we seek to promote nationwide growth within the industry and create a persuasive impact on allowing more flexible government regulations and educational support for Alternative Finance Crowdfunding in Canada.  Share your voice now

“We are on the cusp of a new, potentially revolutionary era in consumer and SME finance that harnesses the wisdom of the crowd and its power to effect huge change in the financial sector.”  NCFA Canada

Take the survey now:   http://bit.ly/2perd2N

*Only Open until June 30

We highly appreciate your time and thank for participating in the survey!  Questions?  info@ncfacanada.org.

Sincerely

Craig Asano
Founding Executive Director
NCFA Canada
(416) 618-0254

 

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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OSC Publishes Report on Exempt Market Activity

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Ontario Securities Commission | June 15, 2017

TORONTO - The Ontario Securities Commission (OSC) today published OSC Staff Notice 45-715 2017 Ontario Exempt Market Report, which provides a snapshot of the current state of Ontario’s exempt market and a preliminary assessment of recent regulatory reforms.

The report summarizes capital raising activity by corporate (non-investment fund) issuers in Ontario’s exempt market during 2015 and 2016. Additionally, the report examines capital formation by small Canadian issuers in Ontario’s exempt market, and the impact of recently introduced prospectus exemptions.

“Providing this data reflects our commitment to transparency and allows us to gauge the effectiveness of recently introduced capital raising tools,” said Paul Redman, Chief Economist at the OSC. “This data also supports the OSC’s ongoing compliance and oversight efforts in the exempt market.”

See:  Help define the Canadian Alternative Finance Crowdfunding - Fintech Industry (Share your voice)

Key Findings:

  • Approximately 57% of Canadian issuers that participated in Ontario’s exempt market were small issuers, which
    we defined as issuers raising less than $1 million annually. Notwithstanding the large number of small issuers,
    they only accounted for less than 1% of annual gross proceeds raised by Canadian issuers.
  • In 2016, there was a notable increase in both the number of small Canadian issuers (30%) and the gross proceeds
    raised by these issuers (40%). The increased activity was concentrated among small Canadian issuers in three
    main industries: natural resources; consumer goods and services; and real estate and mortgage finance.
  • Collectively, the new prospectus exemptions have gained traction among a sizeable proportion (25%) of
    Canadian issuers in the short period that they have been introduced. In 2016, approximately 400 issuers relied on
    the new prospectus exemptions to raise approximately $133 million, with close to half of these issuers raising
    capital in Ontario for the first time since 2014.
  • Among issuers relying on the new prospectus exemptions, natural resource issuers represented the largest
    industry group by number of issuers (37%), whereas real estate and mortgage finance issuers accounted for most
    of the capital raised (70%).
  • Accredited investors, mainly institutional investors, contributed over 90% of the total capital invested in the
    Ontario exempt market. However, most of the capital was invested in large issuers, primarily foreign-based and
    consisting of financial entities such as banks, private equity funds and asset-backed structured finance vehicles.
  • Within the context of the broader Canadian capital market, Ontario’s exempt market accounted for less than
    one-fifth of the total gross proceeds raised by Canadian issuers domestically and less than one-tenth of gross
    proceeds raised globally.

The report revealed increased activity in Ontario’s exempt market, especially among Canadian issuers and among small businesses. In 2016, approximately $27 billion was raised by about 1,600 Canadian issuers from Ontario investors. Approximately 57 per cent of these Canadian issuers that participated in Ontario’s exempt market were small issuers, raising less than $1 million annually. However, despite the large number of small issuers, this group only accounted for less than 1 per cent of annual gross proceeds raised by Canadian issuers.

See:  OSC Highlights Potential Securities Law Requirements for Businesses Using Distributed Ledger Technologies

The report also found that the new prospectus exemptions have gained traction among a sizeable proportion (25 per cent) of Canadian issuers participating in the exempt market. In 2016, approximately 400 issuers relied on the new prospectus exemptions to raise approximately $133 million, with close to half of these issuers raising capital in Ontario for the first time since 2014.

The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices and to foster fair and efficient capital markets and confidence in the capital markets. Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at http://www.osc.gov.on.ca

View original press release --> here

Your voice matters!  Help define the future of Alternative Finance Crowdfunding in Canada. 

Survey Open Until June 30

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Research: Americas Alternative Finance Grows to $35.2 Billion in 2016

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Crowdfund Insider | | May 25, 2017

The Cambridge Centre for Alternative Finance (CCAF) and the Polsky Center for Entrepreneurship and Innovation and Booth School of Business Booth School of Business at the University of Chicago have revisited the alternative finance market once again with a benchmark study. The research which covers the United States, Canada, Latin America and the Caribbean (LAC) showed continued growth in alternative finance across the region as total market volume rose to $35.2 billion in 2016 – an increase of 23% versus year prior. The report noted that the prior Americas benchmarking report had been adjusted down due to changes in the research methodology. While total volume grew the pace of growth and entry of new platforms both slowed during the year.

The 2017 Americas Alternative Financing Industry Report: Hitting Stride will be formerly presented at an event held at Chicago’s CME Group on May 25th. The Inter-American Development Bank and the CME Group Foundation were both sponsors of the research.

According to the report, the alternative finance industry “has hit a stride” as it continued to evolve at various rates in the regions covered.

“An array of crowdfunding, marketplace/peer-to-peer (P2P) lending and other online alternative finance platforms have emerged that use technological innovations to change the way people, businesses and institutions access and invest money. Furthermore, more than 200,000 businesses turned to online alternative sources of funding across the Americas last year,” stated Randall S. Kroszner, Norman R. Bobins Professor of Economics at the University of Chicago Booth School of Business and Faculty Advisor for the report.

Tania Ziegler, Senior Research Manager at the Cambridge Centre for Alternative Finance, added;

“This report highlights an alternative finance environment that has hit stride – having achieved a steady pace of growth that denotes a competency more akin to traditional players. With platforms from the US driving volume, and Latin American platforms achieving triple digit growth, 2016 has proven that alternative finance in the Americas is becoming a staple channel for consumers, entrepreneurs and small businesses in need of finance.”

The research found that the United States continues to be one of the world’s top markets for Fintech including online alternative finance channels and instruments. The 2016 US market volume of $34.5 billion marked a 22% year-on-year increase from 2015. The US sector was dominated by online lending both Marketplace and Balance sheet iterations.

See:  Canadian Alternative Finance Crowdfunding Market Grows 48% from 2013-2015 and is Predicted to Reach $190 million in 2016

LAC alternative finance markets grew by 209% to $342.1 million in 2016. LAC, collectively as a regional market, surpassed Canada’s national market in 2016. The growth was mainly led by high volume markets in Mexico, Chile, and Brazil.

Canada’s alternative finance market increased 62% to $334.5 million driven by both organic growth and expanded survey coverage included in the research.

Among the key findings of the report:

  • The US, Marketplace/P2P Consumer Lending continued to account for the largest share of market volume with $21 billion recorded in the US in 2016 (up 17%).
  • Balance Sheet Business Lending became the second largest model in the US in 2016 with $6 billion originated, surpassing Balance Sheet Consumer Lending which had $3 billion.
  • Equity crowdfunding in the US, not including real estate, declined marginally in 2016 versus 2015.
  • As of 2017, the report tracked 105 platforms that can be verified explicitly as becoming inactive in the past three years with 79 in theUS, 7 in Canada and 18 in LAC
  • For LAC, Marketplace/P2P Business Lending remained the largest alternative finance market segment with $188.5 million registered in 2016, an increasing of 239% over 2015.
  • In Canada, Donation-based Crowdfunding remained the top alternative finance model with $105.9 million, but balance sheet business lending became a close second, rising at a rate of 282% to $103.3 million in 2016.
  • Reward-based Crowdfunding declined during the year
  • Following changes to US regulatory policy in 2016, emerging Reg CF-enabled platforms made a big mark in Revenue-Sharing/Profit-Sharing Crowdfunding, with $28.5 million in total funding to businesses last year.
  • Self-reported risk perceptions of the alternative finance industry pointed to concerns about cyber-security breach. Seventy-six percent of platform operators believe there is medium to very high risk of cyber-security breach.

Continue to the full article --> here

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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What you need to know about launching a Kickstarter project in Montreal

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CBC | By Jaela Bernstien, Roberto Rocha | April 27, 2017

According to a CBC analysis, the majority of Kickstarter campaigns launched in Montreal are tech and video games, but the crowdfunding projects that succeed aren't necessarily what you'd expect.

CBC looked at six years of Kickstarter projects with data provided by Web Robots and HiveWire, two firms that track crowdfunding sites.

Only Kickstarter data was used since it has the largest and most representative sample of Canadian crowdfunding projects.

See: Share your opinion: 2017 Annual Alternative Finance Crowdfunding in Canada Survey

The crowdfunding data sheds light on creative trends in cities large and small, including Montreal.

As far as the total number of Kickstarter projects is concerned, Montreal is the third biggest city, after Toronto and Vancouver.

Montreal is known as a tech and video game hub, and that's reflected on Kickstarter, where most of the campaigns launched out of Montreal are in the tech and video gaming industry.

But not all Kickstarter campaigns actually succeed.

See:  What 10,000 Kickstarter projects reveal about Canada's entrepreneurs

So which projects are most likely to achieve their target fundraising goals?

In Montreal, films performed above the national average: 49 per cent of those launched here succeeded, compared to the 37 per cent success rate nationwide.

"Montreal also outperforms the country in tech projects — the toughest category according to CBC's analysis."

In Montreal, one-quarter of tech campaigns met their funding targets. In the rest of Canada, about 19 percent did.

What makes a Kickstarter campaign successful?

One key takeaway from CBC's analysis of nearly 10,000 Canadian Kickstarter projects was that crowdfunding works best on projects that already have something to show.

One of the highest fundraising goals in Canada that succeeded was for We Happy Few, a video game created by Compulsion Games.

They raised more than $300,000 through Kickstarter.

Continue to the full article --> here

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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Women & Minorities in Regulation Crowdfunding: High Success Rate Despite Low Representation & Lower Funding Levels

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Crowdfund Insider | | May 2, 2017

Regulation Crowdfunding finished its fourth Calendar Quarter this past March and the data shows that women and minorities have a higher percent chance at hitting their minimum funding target but represent fewer campaigns and receive less capital.

While the overall market is beginning to show signs of traction with over 265 companies trying their hand at Regulation Crowdfunding, the clear majority of them are founded by teams of white men. Given the opportunity for Regulation Crowdfunding to provide on average $300,000 to funded campaigns, this represents a missed opportunity for women and minorities who often find themselves alienated from the capital markets.

Regulation Crowdfunding allows any American startup or small business to raise up to $1,070,000 million from friends, family and followers on debt and equity crowdfunding platforms registered with the Securities & Exchange Commission (SEC).

Just like on donation or rewards sites, issuers launch Campaigns and use their social network to invite people to review their business plans, market opportunity, financial statements and video pitch. However, instead of getting a token of appreciation or a widget, backers get shares in a business or interest repaid on a loan.

See:  SEC Updates JOBS Act Amendments Including Reg CF Funding Cap

Since the launch of Regulation Crowdfunding on May 16, 2016, 265 companies have filed with the SEC. Of those companies, 50% were successful in hitting their minimum funding target and $25.4M was funded to those companies.  With the average campaign lasting only 93 days, compared to the many lengthy and cumbersome alternatives like applying for an SBA loan or seeking VC money, Regulation Crowdfunding seems to be a viable alternative. However, this seems to be true if you are a white male and have more than one founder.

  • Digging into all the offerings, 165 campaigns (62%) were started by White male founders, 43 where there was at least one woman founder, 26 where there was at least one minority, 8 that were run by women-only founders, 14 by minority-only founders and 10 by founders that were both women and minorities.
  • Adding it up, women and minority led companies only represented 37% of all offerings.
  • When filtered for only successful campaigns, 82 companies hit their minimum funding target, closed their offerings and received their funds. Of those 82 only 7 companies were founded by ‘women only’ teams, 6 by ‘minority only’ teams and 1 by a team of ‘one woman and one minority.’ The other 68 were by founders that were white men.
  • When looking at success percentages, campaigns run by women-only founders had an 87.5% success rate compared to 41% for men-only founders. Minority-only founders also had a higher success rate (46%) than men-only founders.

Given the high success rate (particularly compared to VC funding), it is surprising that more women and minorities don’t give Regulation Crowdfunding a chance.

Continue to the full article --> here

The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at www.ncfacanada.org.

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