WEBVTT

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[MUSIC PLAYING]

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Crowdfunding is actually an
act where you collect money

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from the crowd--

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as the word says.

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So you try to attract funding
not from one bank or a grant

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from public government.

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But you try to raise money with
a large group of individuals.

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That's the idea of crowdfunding.

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It's nothing new.

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So already Mozart at
the time did actually

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a crowdfunding campaign
to organise a concerto.

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What of course makes
crowdfunding nowadays

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a more hot topic and a
much more used instrument

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is of course the
fact that now you

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have online platforms
to organise crowdfunding

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campaign, which makes it on the
one hand much easier to do it.

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And also the scale is much
larger than the capabilities

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that Mozart at the time had
to crowdfund he his concerts.

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How it's being used in
cultural and creative sectors?

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That is in many,
many different ways.

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Maybe before I go
into that, it's

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important to say that's when
we talk about crowdfunding

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there are different models
behind that one word,

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"crowdfunding."

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And they are very
different in nature.

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When we look at
the models, there

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are four basic models
that one can talk about.

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There is donation-based
crowdfunding, which actually

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means that backers give money
and they don't expect anything

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in return.

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A second model is the
reward-based crowdfunding

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where people donate but in
return they get a reward.

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It's often a symbolic reward.

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Could be you get a postcard
with a thank you and a signature

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of the artist, you get whatever.

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So this is reward-based
crowdfunding.

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Within this category of
reward-based crowdfunding,

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you also have another
type of reward.

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Instead of the symbolic reward,
it's more the pre-sales type

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of crowdfunding where people
provide finance for a specific

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project--

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for instance, the
release of a new welcome.

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And when the artist is capable
of collecting sufficient money

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and producing the new album
and the album comes out,

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all the backers get
a copy of the album.

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So in that sense it's
more a pre-sales action

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than it is a symbolic reward.

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So you have those two
types of crowdfunding

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where there is actually no
real financial return expected

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by the backers.

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Then you have two other
types of crowdfunding,

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being the peer-to-peer
lending type of crowdfunding

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and the equity-based
crowdfunding where backers

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provide finance
but in return they

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do expect a financial
return on investment.

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So it's lending as if
a bank lends money.

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The only difference
is that you do not

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repay the loan to
one bank but you

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have to repay it to
many different backers.

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And backers can lend money
as much as five euros.

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So it depends.

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So that's something that you
have to take into account when

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you talk about crowdfunding.

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Now when we look at
the use of crowdfunding

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in cultural and
creative sectors,

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the dominant model that
is being used there

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is reward-based crowdfunding.

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A recent study that we did
on behalf of the European

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Commission to map the use
of crowdfunding in cultural

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and creative sectors, there we
found that almost 90% of all

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crowdfunding campaigns that
have been run by cultural

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and creative organisations
in the period between 2013

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and October 2016 were actually
reward-based crowdfunding

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campaigns.

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Nearly I think 8%
of the campaigns

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were donation-based
crowdfunding campaigns.

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And a minority--

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1%, 2%-- were actually equity
and peer-to-peer lending

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crowdfunding campaigns.

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The average amount that are
being raised by cultural

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and creative organisations
when they run a crowdfunding

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campaign was in 2016
approximately 7,200 euros per

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campaign.

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And when we look at the success
rate of running a crowdfunding

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campaign-- because
it's not easy money--

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about half of the campaigns that
have been run were successful.

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Crowdfunding, as I mentioned,
it's not easy money.

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It's not like when
the bank decides

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to provide you the money--

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you have the money
and you can do

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with the money what you want
as long as you repay it.

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The money that you collect
through crowdfunding

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is money that you have to
earn in a different way

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than you have to earn it
from public government

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or from a bank.

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But at the same time,
the creative part--

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or the nice thing
about crowdfunding--

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is that apart from being
a source to collect money,

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it provides you also with a tool
to go much beyond collecting

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finance from your backers
in the sense that cultural

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and creative organisations,
when they do a crowdfunding

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campaign, mostly it also
generates many other effects

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either wanted or not
wanted beforehand--

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so, unexpected effects.

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And these are, for instance,
audience development.

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You attract a new
type of audience

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with running a
crowdfunding campaign.

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A marketing tool-- because
a crowdfunding campaign

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goes along with a strong
communication campaign.

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And so it can be a powerful
marketing tool to highlight

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your project, your organisation,
the things that you work on.

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So in that sense, it
can be a good tool.

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Also for market this thing.

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I was mentioning
that's reward-based

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crowdfunding campaigns are also
used in a pre-sales setting.

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So people can use a
crowdfunding campaign

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to actually test whether there
is an audience for their music,

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or the movie that
they have in mind,

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or the product that they have
prototyped and want to sell.

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They run the
crowdfunding campaign.

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And when they see that they
have sufficient backers,

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that's the moment
to start production.

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And they are sure that they
have sufficient audience

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or customers that are
interested in the products

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that they will produce.

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So crowdfunding is a tool
that goes much beyond finance

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and can be used in many
different ways to actually

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strengthen an organisation,
to enlarge their audience.

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But also to create a movement
it's also an interesting tool.

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So crowdfunding is definitely
an interesting instrument

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to explore for cultural
and creative organisations.

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[MUSIC PLAYING]

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