Canada’s next-gen digital sector requires new forms of capital to compete globally

Latest study unveils industry growth opportunities through more private investment
(See below for a link to a PDF of the study.)

(TORONTO and BANFF, June 12, 2012) Increased private capital is the missing link for building up successful interactive digital media companies in Canada, according to a new report commissioned by the Canadian Interactive Alliance / l’Alliance Interactive Canadienne (CIAIC).

New Directions for the Financing of Interactive Digital Media in Canada is released by the CIAIC with research conducted by Communications MDR and authored by Maria De Rosa and Marilyn Burgess, in partnership with the Ontario Media Development Corporation (OMDC), Canada Media Fund (CMF) nand the assistance of the Bell Broadcast and New Media Fund, Department of Canadian Heritage, National Film Board and the Canadian Media Production Association.

The newly released study takes an in-depth examination at the current financing landscape for Canada’s interactive digital media industry. Additionally, it assesses the effectiveness of financial mechanisms that support the sector including from the private sector, and identifies potential new financial vehicles that are of interest to the OMDC, CMF and other relevant funders.

“OMDC is proud to support this innovative research that provides valuable insight into the financing gaps that limit the potential of Ontario’s dynamic interactive digital media sector,” says Karen Thorne-Stone, President & Chief Executive Officer of the OMDC, adding that the study also points the way to making support for digital content producers more flexible, efficient and effective.

Canada’s public financing along with available assistance from the federal and provincial governments (including tax credits) have provided a competitive advantage for Canadian companies, but the study finds gaps when it comes to growth and development of the sector.

Approximately 75% of the almost 3,000 digital media companies in Canada are identified as small- to medium-sized and their dominance points to very specific financing needs. Businesses (mainly start-ups) typically suffer from the a lack of financial support in early stage development, either choosing to self-finance or seek formal sources of seed or angel investment.

Government funders have made a significant impact in helping the development of industry clusters in British Columbia, Manitoba, Ontario and Quebec, noting that Canada has “demonstrated value proposition for investors in interactive digital media due to its highly skilled and talented workforce.” But funders could broaden the potential eligible market triggers for their programs as well as explore ways of encouraging greater marketing and online exploitation support for companies.

“Canada has the talent in creativity, innovation and business — if we can lock down access to risk capital, that will help cement Canada’s position as a global leader of interactive digital media,” said CIAIC president and CEO Ian Kelso in a statement. “Money follows talent and talent follows money. That circle is necessary to drive substantial growth — if we can’t take the same financial risks that happen in Silicon Valley, we won’t get the same rewards that help the industry thrive.”

“This new research is an integral part of the Canada Media Fund’s objective to provide valuable industry intelligence to its stakeholders,” says Valerie Creighton, President and CEO of the Canada Media Fund. “By examining how the digital media industry can maintain its growth by partnering with different types of funders, the CMF builds on its ongoing support for the creation of groundbreaking digital media content. A broader financing landscape can greatly benefit our industry and keep Canada at the forefront of innovation.”

Creating relationships with private partners has benefits for the industry that go beyond securing funding — those investors also bring expertise and a professional network to the table.

The study also finds that Canada’s angel investor community is becoming more structured and organized, and from their perspective, interactive digital media companies need to increase their investor-readiness. Companies backed by venture capital are reported to grow more quickly than the overall economy, which also generates more wealth and talent that can then be reinvested in the next generation of start-ups.

For more information on the study or for an interview, please contact Ian Kelso at ian@ciaic.ca or 647-799-4030 ext. 222.

(Click here to download a PDF of the study.)

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Comments

  1. I could find no mention, anywhere inside this report, about crowdfunding (e.g. Kickstarter).

    I would say the single most urgent thing the Federal government of Canada should do is legislate and clarify crowdfunding – much the way the JOBS Act has in the United States.

    Crowdfunding is one of the most exciting new developments in game financing.

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