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Edgar Garcia Casellas: Key issues and challenges regarding access to finance

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Presentation by Edgar Garcia Casellas during the Parallel Session on Access to Finance @ ECIA Closing Conference on November 27 2014 in Amsterdam (The Netherlands).

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Edgar Garcia Casellas: Key issues and challenges regarding access to finance

  1. 1. Create. Innovate. Grow! A new policy agenda to maximize the innovative contributions of Europe’s creative industries ECIA Final Conference Conclusions WG on Access to Finance Amsterdam, 27th November 2014
  2. 2. Edgar Garcia ECIA’s WG Coordinator on Access to Finance
  3. 3. ECIA’s WG on Access to Finance members • Michela Michilli – Concrete Action FAME (FILAS) • Marija Popovic - Concrete Action CI-Factor (EDC) • Miguel Rivas – CLAND, Audiovisual and Digital Cluster Andalucía • Jenny Kornmacher - Hamburg Kreativ Gesellschaft Gmbh • Ragnar Siil –Estonia Ministry of Culture • Henri Monceau – Cabinet of the Minister for Economy, Wallonia • Johanna Bolhoven – Creative England • Thierry Baujard – Media Deals • Edgar Garcia Casellas – Coordinator of the WG (ICEC)
  4. 4. Current framework • The on-going financial and economic crisis has an important impact on the adoption of public funding initiatives for the CCIs . • Growing acknowledgement of the economic performance of the cultural and creative sectors. • The cultural and creative sector can become the basis for economic recovery and potential growth in Europe. • The sector’s role as an upcoming attraction for private funding should be equally supported and enforced. • The digital shift places the creative sector in the need to reassess business models.
  5. 5. Key issues and challenges on Access to Finance • Creative sector’s main challenge • To find innovative business models, which would allow them to achieve investment readiness within the new digital environment.
  6. 6. Assessment of current policies and policy initiatives Examples of policies and initiatives Cross-sectoral Invest. Awareness Alternative financing Leverage Cross-border Level Score (1-5) MEDIA Production Guarantee Fund Pan European Guarantee for film production x x x EU 4* Belgian Tax shelter for films Key finance instrument for film finance x x x Nat. 4* OSEO Guarantee Offer risk mitigation to innovative SME x x Nat. 3 Film London PFM (Production Finance Market) x http://filmlondon.org.uk/PFM x x Key finance market supported by MEDIA EU 4* EASY Early stage investors www.earlystageinvestors.org/ Pilot project for cross border investment x x x x EU 2 FILAS VC Fund http://www.filasinternational.eu/ Regional fund for CI x X Reg. 3
  7. 7. CIM Venture Pan European CI Investment Fund x x x EU 1 Caisse des Depots VC fund „Heritage and Creation“ Development fund for established CI x Nat. 3 VC Fonds Kreativwirtschaft Berlin http://www.ibb-bet.de/vc_fonds_kreativ.0.html?&L=1 Public private fund focussing on CI x x Reg. 4* European Regional Development Fund (ERDF) Key regional fund x x EU 3 How to grow platform CI Online platform x x x EU 3 European Angels Fund (EAF) http://www.eif.org/what_we_do/equity/eaf/index.ht m EIF co angel fund x x x EU 1 Enterprise Investment Scheme (EIS http://www.hmrc.gov.uk/eis/ Key UK scheme to support innovation x x x Nat. 4* Seed4Start www.seed4start.org Pilot project on cross border investment x x x x EU 2
  8. 8. Nordic Game Program http://nordicgameprogram.org/ Key programme for Video Game x x Nat. 4* INTERREG Key interregional funding x x x EU 3 JEREMIE http://www.eif.org/what_we_do/jeremie/index.htm x x x EU 2 Co investment scheme European Progress Microfinance Facility http://ec.europa.eu/social/main.jsp? catId=836&langId=en Pan European Micro loan x x x x x EU 2 CIP Microcredit Guarantee Window http://www.eif.org/what_we_do/microfinance/microc redit_guarantees/index.htm Pan European Micro credit guarantee x x x x x EU 2 Entrepreneurship and Innovation Programme (EIP) http://ec.europa.eu/cip/eip/index_en.htm Support programme for innovative SME x x x EU 2 SME Guarantee Facility http://ec.europa.eu/enterprise/policies/finance/cip-financial- instruments/index_en.htm x x Nat 2
  9. 9. First steps towards a benchmarking: the best rated practices and policy initiatives • Detection of already undertaken policies and upcoming policy initiatives in the field of access to finance for CCIs, which have been be reviewed according to their effectiveness in replying to one or more of the key issues identified. • To explore and analyze key schemes through:  their goals, results and context  the role of the private and public sector  their cross sector/spill over character  their replication potential  the success or failure factors
  10. 10. First steps towards a benchmarking: the best rated practices and policy initiatives • draft list of policy examples • MEDIA Production Guarantee Fund (EU) • OSEO Guarantee (FR) • Cultur-Ondernemen Guarantee Fund (NL) • FILAS VC Fund (IT) • Caisse des Depots VC Fund “Heritage and Creation” (FR) • VC Fonds Kreativwirtschaft (Berlin) • Nordic Game programme (Nordic countries) • Production Finance market (London Film Festival / UK) • Belgian Tax shelter for audiovisual production (BE) • Nordstarter – Hamburg Kreativ Gesellschaft (GE) • Repayable Grants – ICEC (CAT) • CIM Venture (FI)
  11. 11. Impact Assessment • Quantitative survey: estimation of number of projects supported, amounts invested • Qualitative:  Sector transversality • Aim > assess the support of creative industries in generic schemes  Key success factors • Aim > compare the perception of “success” and “fail” for initiators and beneficiaries and suggest areas of improvement  Replication potential • Aim > distinguish the geographical/ sectorial specificities from the factors allowing to multiply the scheme in other regions/ creative sectors • Other areas of assessment: • Improvement of public policy; • Mobilization of private finance; • Long term impact; • Social or environmental impact
  12. 12. Conclusions of the assessment • A fragmentation between initiatives specialised in CCIs and policies with a larger scope is observed. • Many of the not sector-specific existing tools have proven very effective in all fields of application, and CCI stakeholders should be encouraged to make good use of them. • Investment readiness and awareness-raising schemes, as well as financial leverage instruments to support risk mitigation and exchange of expertise, have been already largely implemented in all levels (EU, national and regional). • However, policy-makers are aware of the need to introduce and further support such initiatives. • In the context of such existing initiatives, the spotlight should be henceforth put on IP assets valuation.
  13. 13. Other relevant conclusions related to Access to Finance • Despite the fact that the creative sector brings together a wide variety of different sub-sectors, the sector faces common needs… and common solutions are as much required as sector-specific solutions. • The most needed generic solutions to be undertaken for all creative sub-sectors are: – the shifting from project to business finance – and the shifting from grants/subsidies/(credit) to equity finance • There is a special need for cross-sectoral networking. • Clustering and network activities are expected to bring specific expertise by building bridges between various stakeholders: related industries, CCIs, public bodies, investors, producers, services providers, educational and research institutions, financial institutions and other private and government institutions.
  14. 14. Other relevant conclusions related to Access to Finance • There is a need to identify the creative sub-sectors that actually dispose the most or least advanced market intelligence and that consequently are the most or least attractive for investors. • A crucial point is the bond between new CCI business models and an innovative use of ICT services.
  15. 15. Other relevant conclusions related to Access to Finance • Conclusions of the “Investor’s Survey” (Taking the Pulse of Investors, traditional and alternative Finance Sources in Financing the CI) resulting from the CI-Factor work ended in February 2013. • 82% of the investors invest in ICT-based companies • Thus, a thorough ICT understanding across the creative sector, is expected to attract more investors to all creative sub-sectors. • A challenge: to transfer knowledge through synergies between highly innovative and less ICT-aware creative industries. • The creative-sectors the least targeted for finance are: the performing arts, architecture and crafts. • Thus, its professionalization by the involvement of experienced and specialized M&A consultants is crucial in order for cultural organizations to emerge with new competitive and innovative business models .
  16. 16. Other relevant conclusions related to Access to Finance • Conclusions of the “Investor’s Survey” (Taking the Pulse of Investors, traditional and alternative Finance Sources in Financing the CI) resulting from the CI-Factor work ended in February 2013. • Investors show special interest for the following sub-sectors: Software, Games, Advertising, Film/TV programming and Publishing. • Investors find more interest in investing in start-ups. • Conclusion: there is a particular need to encourage these companies to become investment-ready from an early-stage.
  17. 17. Methodology • a) identification of the main key issues and challenges, based on previous • literature and information from stakeholders. • b) collection of case studies covering 4 categories • *Funds • *Guarantee schemes • *Public initiatives • *Trainings and support schemes • c) conduct of online survey addressed to initiators and beneficiaries representing • and having participated in support schemes of the above mentioned categories • d) benchmarking and impact assessment of the chosen sampled cases, comparing the categories taking into consideration 8 specific criteria
  18. 18. • Criteria • *Mobilization of private finance • *Cross border impact/ Internationalization • *Cross-sectorial character • *Improvement of public policy • *Professionalisation of the industry • *Investors/Financiers awareness of the CCI • *Long term social or environmental impact for beneficiaries (non financial) • *Impact on the local community/ growth • e) synthesis of key recommendations extracted from the whole process.
  19. 19. Comparison per category • a. Funds • Cases: FILAS RISK CAPITAL FUND (Italy); VC FONDS KREATIVWIRTSCHAFT • BERLIN (Germany); VC FUND HERITAGE AND CREATION - CAISSE DES DEPOTS • (France) • b. Guarantee tools • Cases: OSEO GUARANTEE (France); CULTUUR-ONDERNEMEN GUARANTEE FUND • (The Netherlands); MEDIA PRODUCTION GUARANTEE FUND (EU) • c. Public initiatives • Cases: NORDSTARTER - HAMBURG KREATIV GESELLSCHAFT (Germany); TAX SHELTER • FOR AUDIOVISUAL PRODUCTIONS (Belgium); REPAYABLE CONTRIBUTIONS – ICEC • (Catalonia) • d. Training/support schemes • Cases: NORDIC GAME PROGRAM – NORDEN (Nordic Countries); PRODUCTION FINANCE • MARKET - FILM LONDON (UK); SDE - BUSINESS DEVELOPMENT SERVICE – ICEC (Catalonia)
  20. 20. Key impact by criterion for each category
  21. 21. FINAL REPORT: 10 recommendations in 3 chapters I. Stimulating innovation and growth by enabling cross-sectoral collaboration II. Build better business support and access to finance for creative industries III. Measure and raise awareness of the true value of the creative industries as a key driver of innovation and growth
  22. 22. I. Stimulating innovation and growth by enabling cross-sectoral collaboration Recommendations: 1) Introduce creative innovation voucher schemes 2) Stimulate cross-sectoral innovation through public-private innovation challenges
  23. 23. II. Build better business support and access to finance for creative industries Recommendations: 3) Test and review existing business services and financing schemes 4) Develop and support capacity building in regional clusters 5) Enable and support internationalization efforts in cluster organizations
  24. 24. II. Build better business support and access to finance for creative industries Recommendations: 6) Launch new and innovative financing schemes to support early stage SMEs 7) Stimulate investor awareness through effective regional eco-systems 8) Support new initiatives to define how to achieve better IP valuation for creative SMEs
  25. 25. III. Measure and raise awareness of the true value of the creative industries as a key driver of innovation and growth Recommendations: 9) Incentivize and support stronger advocacy for creative industries 10) Map and measure the effects and value of the creative industries in the wider economy
  26. 26. II. Build better business support and access to finance for creative industries Recommendations: 3)Test and review existing business services and financing schemes Member States and regions should test new and review their existing business support and financing schemes to examine whether these services are being used by CIs. If the needs of CIs are shown to be inadequately addressed, meaning that they do not benefit from these schemes, this should be seen as a systemic error that needs to be addressed. The EC should also contribute to oversee such efforts on policy improvements as part of their country-specific recommendations on the National Reform Programmes to boost growth and jobs.
  27. 27. Creative Industries Friendliness • An important part of the work of ECIA has been to assess existing business support programmes, to ensure they are fit-for-purpose for use by creative businesses. A toolkit has been developed to identify the defining characteristics of support suitable for creatives. • http://www.cluster2020live.eu/creative-industry- friendly-test
  28. 28. II. Build better business support and access to finance for creative industries Recommendations: 6) Launch new and innovative financing schemes to support early stage SMEs Member states and regional authorities should introduce new and innovative forms of financing for creative SMEs. New financing schemes should build on emerging trends such as microcredits, refundable contributions, peer-to-peer lending, crowdfunding, etc.
  29. 29. • These need to be taken into consideration and given credibility by the public sector thus providing smart solutions to finding equity funds and becoming internationally investment-ready. • Mitigating risk between public and private financing is an important aspect of new schemes which may have a positive impact on the general professionalization of the sector. • Crowdfunding in particular seems to be the most promising trend in alternative financing; cooperation of public bodies with crowdfunding platforms could be achieved through a regulatory framework promoting such initiatives from short-term project-based to long-term business-based.
  30. 30. Repayable Contributions (RC) • RC is a new tool for project finance in the CCS launched by the ICEC. • The programme is designed to shift the companies’ mentality from a subsidy dependency to a shared risk attitude between the public and private sector. It aims thereby at improving competitiveness and financial sustainability among companies in the CCS. • RC provide financial support to CCIs so that they can move forward with their projects, provided these are market oriented. They offer funding based on company risk and do not make provision from charging interests. On successful projects, the ICEC recovers a proportion of the amount granted. • Produced an overall 89% return of the closed cases.
  31. 31. Growth support of Creative Businesses through repayable loans • Creative England’s innovative Creative Business Loan programme offers interest free business loans of up to £150,000 to support creative and digital businesses across the English regions. • The Fund totals £3.5million (to-date) and has been running annually since July 2012 – the first two loan funds were so successful and heavily over-subscribed that the decision was taken to increase the third round of loan funding from £1,000,000 to £1,500,000.
  32. 32. NORDSTARTER • Nordstarter is the world’s first regional and public crowdfunding platform, established by the City of Hamburg (Hamburg Kreativ Gesellschaft) in autumn 2011. Stakeholders within the Cis present their projects online, promote their cause in a campaign and convince the crowd to support them financially in order to realize their ideas. • Nordstarter has been able to fund 113 great projects with about 700.000 Euros via the crowd. The success rate in 2014 was 62%. • www.nordstarter.org
  33. 33. II. Build better business support and access to finance for creative industries Recommendations: 7) Stimulate investor awareness through effective regional eco-systems Member States and regional/local authorities should encourage private investors to invest in early stage creative SMEs by facilitating community building between specialised creative clusters in effective regional ecosystems and early stage investors.
  34. 34. Developing effective ecosystems led by professional cluster organisations can potentially have significant impact on stimulating private investments in creative industries. Effective clusters are known to accumulate sector experience and knowhow, which is much needed for investors in order to invest in creative industries. A need to facilitate regional matchmaking and community building between creative clusters and investors. The task of the cluster organisations is not only to prepare the creative SMEs to meet the investors, but also to prepare the investors to asses, valuate and fully understand the creative SMEs.
  35. 35. The Venture Capital (VC) Fonds Kreativwirtschaft Berlin • VC Fonds Kreativwirtschaft is a joint initiative of Investitionsbank Berlin (IBB) and the State of Berlin which was launched in 2008. It has a volume of € 30M and is partially backed by the European Union’s European Regional Development Fund (ERDF). The limit per investment in a company is 3 million EUR. VC Fonds Kreativwirtschaft covers maximum 50% of a financing round. The rest is backed by private co-investors. • http://www.ibb-bet.de/vc_fonds_kreativ.0.html?&L=1
  36. 36. Creative Business Cup (CBC) • CBC is a global initiative, network and marketplace supporting entrepreneurs from the creative industry in scaling and growing their business. CBC unleashes the potential for growth among creative entrepreneurs, and their contribution to creative and innovative solutions in other industries by providing training, matchmaking and mentoring. • http://www.creativebusinesscup.com
  37. 37. FILAS – an early stage VC Fund for CIs • FILAS, the Financial Agency of Lazio Region (Italy), has a long outstanding role in the Region financing and supporting innovative high-growth potential companies. FILAS has several financial tools customized to the different life cycles of entrepreneurships. In 2002, FILAS has designed, launched and implemented the first regional Early Stage Venture Capital fund in Europe financed through structural funds that is for most to support the CIs. • The FILAS early stage VC fund was set up with support of the ERDF (2007-2013) with a budget of € 24 M.
  38. 38. II. Build better business support and access to finance for creative industries Recommendations: 8) Support new initiatives to define how to achieve better IP valuation for creative SMEs The European Commission, Member States and regions should support new initiatives to investigate and define how further actions can be taken to provide better IP valuation for creative SMEs.
  39. 39. Training investors, bankers, accountants and entrepreneurs in IP valuation • St’art, an investment fund for creative industries involved in the European project “Wallonia, European Creative District”, has run a two-day pilot training about investments awareness in the creative industries in May 2014. One of the most important and popular modules was on the valuation of intangible assets (a combination of juridical framework of intangible assets, and the accountancy know-how). • www.creativewallonia.be/wecd www.start-invest.be/
  40. 40. Discovering IP! • Discover.IP is a project of Austria Wirtschaftsservice (AWS) in cooperation with the Austrian Patent Office (ÖPA). The aim is to help companies to recognize their intellectual property (IP) and discover how to best use it as a business asset. • Experts of AWS and the ÖPA offer personal interviews with company owners and collect relevant information for an optimal utilization of the IP for the company, including confidentiality agreements, patents, trades, copyright, cooperation contracts etc. The company finally receives an extensive report containing all the collected information.
  41. 41. Feelings • The programme ‘Feelings – Intangible value creation and experienced value’, run by Tekes, The Finnish Funding Agency for Innovation, envisions that in 2030 Finland will be the leading country in business driven by intangibles. • The programme encourages companies to exploit their intangible assets better, including brands, reputation and knowledge capital. It also offers funding for academic research in the area of intangible value creation and customer experiences. The programme runs from 2012- 2018 with a budget of 100 M€. • http://www.tekes.fi/en/programmes-and-services/ tekes-programmes/feelings/
  42. 42. www.ECIAplatform.eu edgarcia@gencat.cat

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