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  • Dec 20, 2014
  • Updated: 9:41pm
BusinessBanking & Finance
FINANCING

Chinese flock to crowd funding sites with home-grown flavour

For some of the early movers on the mainland, investment is just part of the mix in fundraising operations that also emphasise public welfare

PUBLISHED : Tuesday, 11 March, 2014, 10:10am
UPDATED : Wednesday, 12 March, 2014, 12:51am

Crowd funding might be a late bloomer in China, but it is taking on a different flavour from similar, well established services in the United States.

Mainland crowd funding websites such as Demohour and Dreamore play down the investment aspect and emphasise their role in product innovation and public welfare.

"We have never considered ourselves to be an internet financing company. In fact, we are no different from a Groupon or a presale retailer online," said Chang Yu, founder and chief executive of Demohour, the first and at present the largest crowd funding platform on the mainland.

Founded in July 2011, Demohour.com has helped more than 2,000 projects without access to bank loans or wealthy private investors to raise funds from small contributors online. More than 40 per cent of the projects reached their funding goals or pulled in more than their target within three months of listing.

I believe this year will be a turning point for … crowd funding in China
HENRY CHEN, DREAMORE.COM

Chang declined to disclose the total amount Demohour has raised so far but said each contributor gave an average of 300 yuan (HK$380).

Demohour focuses on innovative household gadgets and designer goods. Some of the new products promoted on the site have been a Bluetooth sound box made from bamboo, an anti-pollution air control system for cars, and an "intelligent wallet" that operates like a global positioning system, telling the user his or her location.

Although Demohour was inspired by US crowd funding website Kickstarter.com Chang said there were huge differences between the US and Chinese markets. Compared with the US, he said, the mainland has a weaker culture of donations, which is the basis of the crowd funding concept.

"To run a crowd funding site in China means we have to find a balance between what we can do and what we cannot," Chang said.

Despite the lack of detailed rules from the central government for the crowd funding industry, Chang and his colleagues have been cautious.

For example, the website does not accept projects that are starting from scratch; rather, fundraisers must demonstrate their product is at least half-finished before going online for further funds.

The website also guarantees a refund to every contributor in case the project fails to deliver what it promised.

"Crowd funding has just started to boom in China. There's nothing worse than losing people's trust or being involved in any financial fraud cases," Chang said.

Cuptime is one of the most successful projects on Demohour. Invented by a small home-appliance start-up, Shenzhen Mecare Internet Technology, the white cup embedded with intelligent sensors can record a person's daily water intake and remind him or her to drink water at an appropriate time. Each donor would receive one or more cups, depending on the amount contributed. The response was overwhelming: Cuptime received a total of 1.35 million yuan from more than 2,600 people within a month.

"Angel investors may also provide us with enough funds. But what we can get from a crowd funding platform is more than money," said Li Xiaoliang, one of the cup's inventors.

While raising funds on Demohour, the Cuptime team kept an open line of communications with contributors and collected opinions on the product. Based on that feedback, Mecare upgraded the packaging and attached a small filter for users who wanted to drink Chinese tea rather than water.

"Their opinions were so valuable in helping us make a better product before formally launching it into the market," Li said.

Taking a different approach to Demohour, Beijing-based crowd funding website Dreamore.com operates more like an event organiser, raising funds for various art, cultural and public welfare causes as well as boosting awareness of these causes among youth.

Founded in September 2011, Dreamore has raised more than six million yuan for more than 300 projects. Among the people who were funded were a filmmaker who needed sponsorship to travel to Tibet to shoot a documentary, a media professional who sought financial help to plant organic rice in his hometown, and two young girls who dreamt of selling their spicy cakes to more people.

Dreamore charges a 6 per cent commission on total funds raised by each project.

"Compared to those in the United States, Chinese contributors are very practical," said Henry Chen Weibang, a co-founder of Dreamore.com "After giving hundreds or thousands of yuan, they are not expecting to be simply rewarded with a thank you card or a T-shirt. They want something that is more in line with what they have paid," Chen said.

He said most of the projects offered their supporters coupons, souvenirs, books or DVDs.

Chen believes crowd funding platforms have a bright future in China, because the concept is in line with the central government's goal of encouraging technological innovation in cultural industries.

"I believe this year will be a turning point for the development of crowd funding in China. We have seen the social interest in us growing very fast, and more investors and entrepreneurs intend to tap this market," he said.

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