SHANGHAI – Conor Roche believes China could kick off a new wave in equity crowd-funding that might even leave the European and the US-based philanthropic and rewards-based crowdfunding movements in the dust. While the US startups such as Kickstarter have largely dominated the crowdfunding space geared toward art and design projects, Roche sees potential for crowdsourcing private equity stakes to serious entrepreneurial projects.crowdfunding marketing Roche, a computer scientist from the UK who works in Shanghai as Associate Director of BOP Consulting in China and co-leading a CultureCrowd.co.uk research project into the crowdfunding sector, spoke to The Berlin School of Creative Leadership EMBA participants on their recent module in Shanghai. He talked about the various types of crowdfunding and how the market has room to evolve. ![]() What are the types of crowdfunding?
Debt-based crowd funding. In this structure, you use the Internet to solicit debt from investors and you must repay that debt to them.
![]() English: Spike Lee at the Vanity Fair kickoff party for the 2009 Tribeca Film Festival. (Photo credit: Wikipedia) “This created quite a storm online,” Roche said. “Why is a rich guy who has his own funding doing this on Kickstarter?” The same was true when virtual reality headset maker Oculus Rift raised startup funds on Kickstarter and, later, went on to sell itself to Facebook for nearly $3 billion, igniting the ire of supporters who thought they were sponsoring an independent project rather than helping to make the founders rich. ![]() These brouhahas, Roche argues, “Might reveal a need for an equity-based crowd funding model, where investors actually get a stake in the project they are sending money toward.” He thinks such equity crowdfunding has the potential to unleash a host of new art investors and patrons among middle-class and younger people rather than a small club of bankers, lawyers and wealthy establishment patrons of the arts. “Wouldn’t it be interesting if there was some equity for early funders?” Roche asked. “With equity funding, there is a legal imperative to get money back.”indiegogo marketing One major question is the legal basis for such crowdfunding. At present, the UK allows for more experimentation in this space with startups launched already including. The US regulators are still studying the matter, considering whether such a platform could function without fraud or deception. Roche said:
Meanwhile, China tried a short experiment in equity crowd-funding that allowed users to invest up to RMB 100 up to two times on certain cultural projects and to seek an expected annual return of 7% on the original investment according to Roche. Equity fundraising is currently considered an illegal funding mechanism in China except for this experiment. Roche is hoping to launch an equity crowdfunding platform in the Shanghai Free Trade Zone, a physical piece of land with more relaxed trade regulations. A meglev train is coming out of the Pudong International Airport. (Photo credit: Wikipedia) Roche thinks China may have an advantage to allow for equity crowdfunding kickstarter project ![]() more rapidly than Western economies. China has roughly 30 crowdfunding sites, including two that deal with cultural industries such as cartoon films “There’s a huge market for us to come together to create a project,” he said. Marina Guo, head of Arts Management in the School of Creative Studies at the Shanghai Theatre Academy, told us that Shanghai offered RMB 290 million in 2013 for creative industries. Roughly 54% of the funds went to the design sector, while the rest went to arts and culture platforms. Local and regional governments in China are funneling large amounts of money toward tech incubators, startups and design-oriented businesses. They are desperately hoping to kick-start a culture of technology and innovation on par with Silicon Valley. While many US-based tech giants such as Twitter and Facebook are often blocked in China, the government helps foster copycat versions of these companies, which it hopes will dominate the Chinese market and perhaps even expand abroad, challenging the US giants.CrowdFunding advertizing Already, creative industries make up 10% of the Chinese economy according to experts. China is going through “museumification,” whereby every city and region is putting together museums. While 40 new museums were built in the US in the economic peak of the 1990s, China built 400 new museums in 2013 according to Guo. In the last five years, roughly 4,000 museums, galleries and art centers were established she said. One problem, however, is that few of China’s new museums are regarded with critical acclaim. Rather, they tend to be poorly-attended, digital-heavy and substance-weak. Guo and Roche hope that equity crowdfunding can increase the quality of arts within China. “What I would like to see from a principled perspective is that you have a flattened approach, particularly for arts and culture projects. It’s very difficult to get funding for artistic projects in the US and the UK. It’s getting more and more difficult,” Roche said. “Equity crowdfunding allows people to get more funding through more means and the chance to be more entrepreneurial.”CrowdFunding marketing Posted from: http://www.forbes.com/sites/berlinschoolofcreativeleadership/2014/07/17/china-has-a-chance-to-introduce-equity-crowdfunding-ahead-of-the-us-and-europe/ |