New Directions for the Financing of Interactive Digital Media in Canada, a new report commissioned by the Canadian Interactive Alliance / l'Alliance Interactive Canadienne (CIAIC), reveals that increased private capital is the missing link for building up successful interactive digital media companies in Canada.
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 Ontario Media Development Corporation (OMDC), Canada Media Fund (CMF) and other relevant funders.
download: Financing of Interactive Digital Media in Canada.pdf (3MB)
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," stated Ian Kelso, CIAIC president and CEO. "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."
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.