The document discusses economic growth ambitions in the creative industries and bridging the gap between creative thinking and traditional banking/finance. It argues that decreasing risk through increased knowledge, utilizing alternative funding sources like crowd funding, and customizing investment approaches can help connect the creative world and financial world. Examples presented include the Creative Industry Sofa platform which provides online tools, peer support, and growth funding to help creative startups.

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 GA
vrijdag 30 september 2011

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 bedrijf
vrijdag 30 september 2011

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 Sofa
vrijdag 30 september 2011

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. 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 surprise
vrijdag 30 september 2011

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 funds
vrijdag 30 september 2011

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. 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. 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 MODELS
vrijdag 30 september 2011

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 work
vrijdag 30 september 2011

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. 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
inspiration
vrijdag 30 september 2011

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. 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 startups
vrijdag 30 september 2011

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 starter
vrijdag 30 september 2011

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. 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 party
vrijdag 30 september 2011

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. 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 2
vrijdag 30 september 2011

20. THANK YOU
http://www.creativeindustrysofa.com
adriaankukler@mac.com
vrijdag 30 september 2011