A Venture Capital Fund for the Creative Industries


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Presentation by Kath Morgan on a Venture Capital Fund for the Creative Industries given at the Experience exchange event in Warsaw, October 2009

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  • The Advantage Creative Fund is a publicly funded venture capital fund with the remit to support the creative industries in the West Midlands region of England. This presentation will give a brief history of the project and how it came into being, the objectives and achievements of the project and the lessons learned for development of the model.
  • The Advantage Creative Fund had a predecessor in the form of a brief pilot of a venture capital fund called the Creative Advantage Fund which was launched in March 2000 and had a project period of 22 months in which to invest £1.3 million into creative businesses in the West Midlands. It could invest a maximum of £130k into each company in the portfolio in the form of an equity investment The pilot fund returned the original £1.3 million investment after a period of 7-8 years. The pilot was too short and with too small an investment to see any real impact on the sector in the region, but the concept was supported and the ACF was launched in July 2003, with the financial backing from the Regional Dev Agency, AWM, the ERDF, and the Arts Council England.
  • Equity gap for amounts below £2million and in particular for the CI because of different risks and competition faced when approaching generic providers. Specialised support acknowledged as important to the development of the CI. Important that could make follow on investments into portfolio businesses to avoid dilution before returns maximised The fund had double bottom line – economic development objectives with the remit to make commercial investments that made sufficient returns to the fund to help it evergreen Both the pilot fund and ACF were designed as evergreen funds, with all returns reinvested into the funds to make further investments into the creative industries sector in the region.
  • - How ACF operated, virtual operation, face to face contact with IMs throughout process ACF has a subsidiary business support organisation Advantage Creative Services which provided investment readiness services and which still provides post investment support to the portfolio. Important to mention that the ACF developed a subsidiary fund, Da Capo Enterprises to manage its micro investments of below £25k. This was an acknowledgement of the additional business support that businesses require at this stage of financing, in most cases seed corn businesses that need help with business planning and lack key management skills within the very small teams. Intensive support provided through Da Capo Da Capo provides the larger fund with a pipeline of relatively low risk
  • Statistics correct as at August 2008
  • The formation of two entities, CAF and ACF, has caused numerous difficulties. This aspect of the development of the model is not best practice. However, the experience of the CAF and ACF over the last 8 years has led to significant lessons learned for the development of finance models for the creative industries. Critical to success is that business support services are closely aligned with access to finance. Vital that there is an integrated support infrastructure and that networks between intermediaries are strong, so the business support agency is linked closely with the grant making, the loan funds and the equity funds and that all of the funds talk with one another. Escalator of business support and finance. Evergreen is idealistic but problematic, needs a long term commitment and clarity about the destiny of the reinvested legacy funds. Evergreen model does not easily enable private sector partnerships
  • Flexibility of model In ideal world a one stop shop, providing an escalator of finance and money with management At least ten year commitment needed to the development of the project from the funding partners and a close relationship which develops the strategic vision of the project in line with strategic priorities within the region. Networks within the region with other support providers and with the creative industries sector vital Networks with other sources of finance very important to help provide an external escalator of finance, i.e private venture capital funds etc. I have said it before and I will say it again – the vital component for success in developing the creative industries is an integrated infrastructure, with all of the business support and finance providers networked and working with one another to a clear objective.
  • A Venture Capital Fund for the Creative Industries

    1. 1. A Venture Capital Fund for the Creative Industries Kath Morgan
    2. 2. Brief History <ul><li>Pilot fund launched in 2000 </li></ul><ul><li>Pilot -16 investments in 13 businesses investing £1.3 million </li></ul><ul><li>ACF launched in 2003 </li></ul><ul><li>Project completion date of December 2008 </li></ul><ul><li>£5.4 million to invest into West Midlands’ creative industries over 5 years </li></ul>
    3. 3. The ACF <ul><li>Funded by the public sector to act in an area of market failure </li></ul><ul><li>Small scale equity investments (£10k -£250k) into creative businesses capable of growth </li></ul><ul><li>Double bottom line </li></ul><ul><li>Evergreen </li></ul>
    4. 4. The ACF <ul><li>Virtual business model </li></ul><ul><li>Advantage Creative Services to manage business support </li></ul><ul><li>Da Capo Enterprises created to manage micro investments </li></ul>
    5. 5. ACF achievements <ul><li>81 investments into 55 companies, investing £5,415,618 </li></ul><ul><li>Average investment £98k </li></ul><ul><li>320 new jobs created; 210 jobs safeguarded </li></ul><ul><li>Turnover created in businesses of £27m </li></ul>
    6. 6. ACF achievements cont.. <ul><li>Private sector leverage of £5.8m </li></ul><ul><li>111 businesses assisted with investment readiness </li></ul><ul><li>877 applications and 319 business plans reviewed </li></ul><ul><li>2 exits, £428k realisations as at August 09 </li></ul><ul><li>27% failure rate against expected 40% </li></ul>
    7. 7. Lessons learned <ul><li>Separate organisations managed the pilot CAF and the ACF – Problematic </li></ul><ul><li>Money with Management is critical to success </li></ul><ul><li>Integrated infrastructure to support the business from start-up to established </li></ul><ul><li>Evergreen?? </li></ul>
    8. 8. Development of model <ul><li>Flexibility vital – grants/loans/equity </li></ul><ul><li>One Stop Shop for the creative business </li></ul><ul><li>Escalator of finance/ business support </li></ul><ul><li>Long term commitment from sponsors, financially and strategically </li></ul><ul><li>Networks vital – with sponsors, with other intermediaries, with creative sector </li></ul><ul><li>Integrated infrastructure </li></ul>