Czech Republic leads region with crowdsourcing but full potential still to be tapped

United Islands, photo: archive of Radio Prague

Since its modest beginnings several years ago, crowdsourcing has become a popular financing tool among Czechs. Hundreds of mainly artistic and cultural projects have been backed through Czech crowdsourcing sites, and compared to other central European nations, the Czech Republic has become a leader in community funding. However, the overall amount raised is still relatively small as most bigger-scale projects tend to use global platforms.

United Islands,  photo: archive of Radio Prague
The UK rising star Ella Eyre’s first live performance in the Czech Republic was the highlight of this year’s United Islands of Prague music festival, held in the capital in June. For the first time in the event’s 11 editions, the organizers this year approached its fans, asking them to crowdsource 1.6 million crowns to help keep the festival admission free. In the end, 1.7 million crowns was raised in what became the most successful Czech crowdsourcing campaign to date.

The funds for the United Islands of Prague festival came via, the most popular Czech crowdsourcing platform which has raised 16 million since its launch in 2012. Aleš Burger is one of hithit’s founders.

“I used to work in advertising and event management so I’m well connected at the Czech cultural scene which made it easy to start the project two years ago. In the first weeks, we decided to begin with big projects, and other projects just started coming.

“But we are still hunting for good projects, we meet a lot of people – artists, musicians, painters – and we educate them about ways of getting funding for their projects.”

What kind of projects are people most frequently looking to fund through your website?

“It’s music and it’s books, and the reason is simple. Bands have a big fan base which makes it easier to finance them, and there is another advantage with books. Whenever you have the money to release a book or an album, it’s always good to put it on hithit or another crowdsourcing website.

“You usually don’t know how many copies you need to release. If you go to a crowdfunding website, you already know that there are a thousand people, let’s say, who pre-ordered the book. And it’s the same with the bands.”

Music, books and various artistic and cultural events have indeed been the most common projects funded through Czech crowdsourcing platforms since they first appeared in 2011, according to a recent study by the Prague branch of the US organization Aspen Institute which looked into the state of crowdsourcing in the Czech Republic, Slovakia, Poland and Hungary.

The survey found that over the last three years, 24 million crowns has been raised through community funding in the Czech Republic. The overall amount is not exactly breath-taking, mainly due to the fact that technological and industrial start-ups tend to seek funding on global platforms rather than local ones.

But compared to other post-communist nations of central Europe, the Czech Republic, along with Poland, has become a leader in making use of this alternative financial instrument. I discussed the findings of the Aspen Institute report with one of its authors, Milan Zubíček.

“In the Czech Republic and in Poland, traditional crowdfunding is quite well-developed and there are many platforms similar to the big global platforms like Kickstarter and Indiegogo. In Slovakia, on the other hand, there were no such platforms until recently so most of the authors were using Czech ones. Also, two successful projects were done outside these platforms.

“In Hungary, there have been several attempts to create regular crowdfunding platforms but they have been mostly unsuccessful. There is now only one such platform which focuses mainly on non-profit or humanitarian issues.”

Why is there such a big difference between the Czech Republic and Poland on the one hand, and Slovakia and Hungary on the other?

“That’s a difficult question. I think one of the reasons is that crowdsourcing is not a huge issue, and it reflects personal initiative and creativity. The Czech and Polish platforms might have been successful because there were individuals with ideas and connections to the art scene who could get the first projects off the ground.

“In Slovakia, the authors of the projects naturally looked to Czech platforms because of the close ties and cooperation between the two countries, of the closeness of the languages, and so on.

“And in Hungary, I think it was a combination of many different reasons. There were personal antipathies between the authors of the platform, and maybe the political situation, low levels of trust in public affairs and involvement might have also played a role.”

Your report says that while crowdsourcing in the Czech Republic has been relatively successful, it has not become a “game-changer.” Over the last three years, 24 million crowns have been raised which does not seem a big number…

“It’s not a huge amount, which is something we mention in the study. But it’s still a good number when you compare it to Poland which has many more people and you would expect the numbers would reflect that but they don’t.

“So it’s not that bad and the thing is that crowdfunding is often used for smaller-scale projects. That’s why the overall amount does not seem that huge but if you look at the number of individual projects that have been funded, it’s quite big.

We also need to mention that big projects often use global platforms, as was the case of the most successful Czech project, the computer game Kingdom Come which raised 36 million crowns on Kickstarter.”

Are there attempts to fund technology and industry projects here, too?

“Now we are getting into the more complicated field of equity funding where you offer funders equity or profit. That’s quite a tricky field when it comes to the Czech legal environment because with it come many legal difficulties, and there have not been any major projects here.

“There are some start-ups from Slovakia; one of them was raising money for new products. But we are getting back to the pre-sale or reward-based crowdfunding. For instance, a Slovak start-up used Kickstarter or Indiegogo, I’m not sure now, to develop a USB charger but they did not offer equity.”

“This issue has been talked about a lot in the US but even there, they didn’t really manage to implement legislation that would cover equity crowdfunding.”

There has been one interesting political project that got funded like these. The Brno-based satirical-turned-political movement Žít Brno raised money for their municipal elections campaign this year, and they were successful. Were they pioneers in using crowdsourcing for this purpose?

“In this region, they are definitely pioneers. We talked about his with the representatives of some political parties and some of them said this might be the way to go because you are getting interesting by-products. It’s not only about raising the money but also about attracting attention, creating ties with the funders, and all of these things. But Žít Brno were certainly the first, and I’m not sure if the big, traditional parties will ever use crowdsourcing.”

So how do you see the future of the Czech crowdfunding scene? Will it remain predominantly focused on artistic and cultural projects?

“I think will be very strongly connected to art. When it comes to equity crowdfunding, I think a lot will depend on whether there will be some pilot project. Although it might be technically possible under existing legislation, and some lawyers say it is, the initial investment is really big. The question is if anyone decides to invest so much money so that the next projects could be cheaper.

“But I definitely think that the amount of money raised through crowdsourcing will certainly grow. It’s a dynamically developing field and there will be more projects which will raise more and more funds. But like in the rest of Europe, crowdfunding in the Czech Republic will mostly be used for cultural projects.”