Creative sofa

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Creative sofa

  1. 1. ECONOMIC GROWTH AMBITIONS IN THE CREATIVE INDUSTRIES MASTERCLASS BUSINESSMODEL INNOVATION CULTURAL SECTOR E BY KAO AND CI 3 CREATIVE DEVELOPMENT | AMSTERDAM | 2011 D TH MIN P! DR ADRIAAN KUKLER - 22 SEPTEMBER GAvrijdag 30 september 2011
  2. 2. INTRODUCTION ADRIAAN • Management science • Philosophy of science / in business • Financial economics • PhD Basel II / Economic Capital • 13 years Rabobank International, credit risk management & modelling • Since 2008: Kukler Advies & Ontwikkeling BV • Since 2006: co-founder CI Sofa, with Walter Amerika • Since 2008: partner in Applied Ethics Associates BV Adriaan Kukler | KAO creatieve economie, maatschappelijk verantwoord ondernemen, risico management, filosofie in bedrijfvrijdag 30 september 2011
  3. 3. AGENDA • Dominant thinking in banks after Basel II • Credit crisis and Basel III • Financial transformation Creative Industries • Creative thinking • What is required to bridge the gap • Examples of bridges: Knowledge / Crowd Funding / Creative Industry Sofavrijdag 30 september 2011
  4. 4. BASEL II: CALCULATED RISK risk is: an, 1. a d eviation form the me 2. objective DNB requires banks to calculate their credit risk using this formula Risk weight (RW) = (LGD x N [(1 - R)^- 0.5 x G (PD) + (R / (1 - R))^ 0.5 x G (0.999)] – PD*LGD) x (1 - 1.5 x b)^- 1 x (1 + (M - 2.5) x b) x 12.5 X 1.06 Correlation (R) = 0.12 x (1 - EXP(-50 x PD)) / (1 - EXP (-50)) + 0.24 x [1 - (1 - EXP(-50 x PD)) / (1 - EXP(-50))] Maturity PD Factor (b) = (0.11852 - 0.05478 x ln (PD))^2 DO YOU FIT IN?vrijdag 30 september 2011
  5. 5. CREATIVE THINKING • Holistic - not reductionist, like mainstream. creativity comes from anywhere and everything can play a role • No control over creative process, as it is open • Not algorithmic means outcomes can be different, irrational • Deviating from the mean, ie in the fat tail, where the mainstream model doesnot work • Creating new things that may surprisevrijdag 30 september 2011
  6. 6. CREDIT CRISIS AND BASEL III • Heavy losses for banks -> Governments -> Local Governments -> Consumers -> Double dip? • IASB: Banks should write off more (Greece, RE) Fragile equity position • Basel III to repair Basel II: Higher requirements Goverments and banks are weak source of fundsvrijdag 30 september 2011
  7. 7. WHY INVESTORS? Investments are needed when there is a profitable opportunity where costs proceed sales An investor provides risk bearing capital and/or finance for businesses if he sees more returns than risks A bank provides credit only when someone else will carry the business risks, ie. when risk bearing capital is supplied by others ES THIS OUNT OF LOSS THIS IS THE AM E BEING A BSORP BEFOR COMPANY CAN BANKRUPT EG banks: 10 % y: 45% Ind ustrial compan 100% Design starter:vrijdag 30 september 2011
  8. 8. CI RISK IDENTIFICATION Risks of creative products are indeed higher in respects like: • Audience preparation (do consumers appreciate it, ie buy?) • Operational excellence in execution, but also • Concerning the timing of reaching markets with these highly symbolical products or services • Since the CI as a whole are characterised by first mover advantage and a winner takes all form: creating the wrong thing for the wrong moment creates near to 100% losses, ie a high downside • This high risk is reflected in the industry structure, with less than 1% of companies > 100 employees and more than 2/3 < 5 employees. > Can you grow and remain creative?vrijdag 30 september 2011
  9. 9. CI DUTCH CONTEXT Cultural Transformation: Coming From • AUTONOMY: Art comes from within, is not driven by any demand • RESENTMENT AGAINST COMMERCE: Koons/Hirsch; Emancipation, Not Profit • HERITAGE OF SUBSIDY-CULTURE: Compare modern paintings UK - NL • LACK OF BUSINESS EDUCATION • LACK OF BUSINESS INSTITUTES FOR KNOWLEDGE TRANSFER/ ACCUMULATION • LACK OF ROLE/BUSINESS MODELSvrijdag 30 september 2011
  10. 10. THE GAP • Greenpaper Creative Industries of the European Committee in 2010, p11:“Access to finance is a core barrier to growth for many businesses within the sector”. • p12: “The world of creation and the world of finance – which are often "worlds apart" – need help to find a common language, through which CCIs can have fairer access to funding.” • Required: - learn to speak each other’s language, - mutual respect for arguments and expectations, - customisation, - knowledge transfer, - intensive monitoring and feedback, - plan based workvrijdag 30 september 2011
  11. 11. HOW DO WE MIND THE GAP? 1. Decrease risk by increasing knowledge (risk as uncertainty is the inverse of knowledge) 2. Use hightech to address alternative funding sources 3. Customise investment approach to CI (the active banker)vrijdag 30 september 2011
  12. 12. RISK IDENTIFICATION IS RISK MODELLING As we can’t see risks, we need a model to talk about it and address it BUSINESS MODEL input creative output materials product labour process technology capital inspirationvrijdag 30 september 2011
  13. 13. RISK IDENTIFICATION IS RISK MODELLING SOURCING MANAGEMENT MARKET BUSINESS MODEL input creative output materials product labour process technology capital inspiration IS THE PRODUCT ARE INPUTS IS THE PROCESS (READY TO BE) SOLD? SECURED EXCELLENT? WHERE IS MY MARKET?vrijdag 30 september 2011
  14. 14. RISK AND RETURN Investors want to be compensated for the risk they run by providing (risk bearing) capital Venture capitalists expect 25% return on their investment in startupsvrijdag 30 september 2011
  15. 15. VARIOUS TYPES OF RETURN Investors want to be compensated for the risk they run by providing capital Compensation can be more than just financially: • Insight in newest developments, be in touch with new talent or trends • Participate by providing management support, develop strategy and/or marketing • Paying back, having earned in the CI, wealthy creative people like to give the young a chance • Do good by helping an appealing sector, sustainable product and/or promising startervrijdag 30 september 2011
  16. 16. HOW DO WE MIND THE GAP? 1. Decrease risk by increasing knowledge (risk as uncertainty is the inverse of knowledge) 2. Use hightech to address alternative funding sources 3. Customise investment approach to CI (the active banker)vrijdag 30 september 2011
  17. 17. CROWD FUNDING Based on the wisdom and power of the crowd • Financial contributions from a large number of stakeholders / online investors, sponsors or donors to fund for-profit or non-profit initiatives or enterprises. •Three types of crowdfunding models: 1. Donations, Philanthropy and Sponsorship where there is no expected financial return, 2. Lending (Microfinance) and 3. Investment in exchange for equity, profit or revenue sharing • Pro: it allows good ideas which do not fit the pattern required by conventional financiers to break through and attract cash through the wisdom of the crowd. Next to that, it may also secure evidence of backing from potential customers and benefit from word of mouth promotion • Con: requirement to disclose the idea at a very early stage. Risk of the idea being copied and developed ahead of them by better-financed competitors • Soliciting investments from the general public is usually illegal by Security laws (SEC, FSA) Security: if there is (1) an exchange of money (2) with an expectation of profits arising (3) from a common enterprise (4) which depends solely on the efforts of a promoter or third partyvrijdag 30 september 2011
  18. 18. HOW DO WE MIND THE GAP? 1. Decrease risk by increasing knowledge (risk as uncertainty is the inverse of knowledge) 2. Use hightech to adress alternative funding sources 3. Customise investment approach to CI (the active banker)vrijdag 30 september 2011
  19. 19. ONLINE SCAN OUT BACK CI SOFA ADVICES SELF ASSESSMT GO OUT FACTCHECK AMBITION CLIP OUT CI SOFA GROWTH FUND FLOW CHART GO PEER TALK OUT PEER SUPPORT GO MILESTONE DEAL GO PROGRAM STRUCTURING BUSINESS START TABS PROGRAM QUARTERLY IP UPLOAD CI SOFA EXIT GROW ON ROUND 2vrijdag 30 september 2011
  20. 20. THANK YOU http://www.creativeindustrysofa.com adriaankukler@mac.comvrijdag 30 september 2011

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