Crowdfunding in China could be $50 billion business by 2025

“A Hundred Thousand Bad Jokes” laughing all the way to the bank.DemoHour

“A Hundred Thousand Bad Jokes” laughing all the way to the bank.DemoHour

By Vickie Elmer – Nov. 18, 2013 – The biggest crowdfunded project in China has drawn 5,533 donors and raised more than $200,000 to support an online cartoon series called “A Hundred Thousand Bad Jokes” on China’s first crowdfunding site, DemoHour. This is paltry sum compared to crowdfunding projects in the US, which have reached upwards of $10 million—but that is about to change.

By 2025, crowdfunding in China could explode to $46 -$50 billion—about half the amount expected to be channeled to startups and businesses throughout the world, according to a new World Bank report (pdf). Globally, crowdfunding investment could reach $96 billion in the next 12 years, or almost twice as much as venture capitalists invested worldwide last year.

These estimates are based on factors that enable a “crowdfunding ecosystem” with social media penetration being the single most important predictor. Internet usage and lots of early stage entrepreneurial activity are other important indicators.

While crowdfunding is already multi-billion dollar industry in 45 countries, it’s still is a tiny speck in China, raising only a few million dollars a year. The report points to just one crowdfunding site operating in China, plus another one in Hong Kong, compared to 17 in Brazil, 87 in the UK and 344 in the US. This doesn’t account for every site, since some are aimed at nonprofit or arts projects and others are just coming online. Among those excluded are SeedAsia, launched in May in Hong Kong, Dreamore and Emie.

Weak intellectual property laws and a culture that does not encourage entrepreneurial activities present some of the biggest hurdles to crowdfunding in China. “Innovative ideas, especially in the technology category, trails far behind the United States in terms of both quality and quantity. The situation is sometimes likened to be too many ships chasing for too few fish in the river,” the World Bank authors wrote.

It hasn’t caught on in Asia yet partly because Chinese want to back projects “where they know the founders, or they have an understanding of what the person is doing,” Tom Russell, CEO of SeedAsia told Fortune.

DemoHour limits projects to design, film, music, publishing, games, photography and technology, with film and video its top category. Rewards must be physical, relevant to the project, and no equity or cash returns.

Yet some projects capture interest—and cash. About 12 of DemoHour’s more than 400 successfully-funded projects in China since 2011 raised more than $16,000, according to the World Bank report. Another animated film Big Fish and Chinese Flowering Crabapple raised the most money so far, about $260,000.

Follow Vickie on Twitter @WorkingKind. We welcome your comments at ideas@qz.com.
Source: http://qz.com/148119/crowdfunding-in-china-could-be-50-billion-business-by-2025/

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