Demystifying ‘Creative Industries’ Investment

Last week on Thursday 19th September, I made a fleeting visit to Manchester for an Investor Forum hosted by UKBAA, Creative England, BFI and GC Angels. The event focused on 'Investing in Screen Based businesses' and was an opportunity to hear from some investors and founders about the nuances, similarities and opportunities of investing in the creative industries so I thought it might be useful to share my highlights to inform the conversation in the South West too.

The event opened with a flurry of welcomes from the various partners that had a hand in organising this event – we heard that the creative industries is one of the fastest-growing sectors in the UK and best performing; that it was worth £101bn to UK economy in 2018 and that it has more than doubled in size since 2010. We touched on the breadth of businesses included in this broad ‘creative industries’ community – from the games industry to films and television from immersive to advertising and much more between, and we considered how they all provide an important source of innovation for other industries from healthcare to urban planning and education.

Next, we learnt about a brief piece of research organised by the UKBAA (the UK trade body for early stage investing), Creative England and BFI to better understand investment patterns in screen-focused businesses. This research highlights offers a snapshot of data that indicates some trends:

  • There is a limited amount of investment in creative (15% of the 494 investments analysed).
  • The amount invested by angels is lower in the creative industries (64% is less than £20k which is almost double the national average across all sectors).
  • Angel investors are most interested in immersive technology and film.
  • There is a lack of angel investors with personal experience in creative industries companies which leads to a lack of domain knowledge to inform investment activity.

The brief report goes on to recommend that we need more ‘industry-savvy angels and better access to market intelligence’ and also encourages us all to share case studies and stories of creative industries investment to inspire and support others. Read more in the online version here: https://www.ukbaa.org.uk/wp-content/uploads/2019/09/The-Angels-Perspective.pdf

The first panel discussion provided an opportunity to hear from Rose Kay, award winning screen writer and CEO of Immersive StoryLab. Rose shared insights into their funding story so far (largely grant funding from InnovateUK, universities and others) and explained their work as experience designers, film-makers, audio drama producers and researchers who are making imaginative possibilities for the future of story, place, entertainment and culture like Secret Coast for example. I couldn’t help but wonder whether Rose is already in touch with Catherine and the team at our Bristol Immersive cinema experience, Limina (which I highly recommend for an alternative and absorbing night out!).

The second speaker was Clemens Wangerin, Managing Director at vTime – a leading VR and AR engagement company, developing immersive communication experiences across new realities. Clemens described the project as a ‘sociable platform to change how people communicate and engage with each other which is largely consumer focused.’ When asked about their story, Clemens explained that one of the founders had two successful exits prior to the launch of vTime which gave them some runway initially. With traction and demonstrable strategic value in the business they successfully closed a Series A investment of £5.4m led by Deepbridge and are looking towards a Series B round in the future. Clemens described the fundamental importance of building the ‘strategic value’ at an early stage within the business – a decision that later made it investable.

The next part of the afternoon saw Rose and Clemens joined by others for a broader discussion on the theme of Creative Industries investment. The speakers included Eric Elms of Fabrik Games, Jess Jackson of GC Angels, Gina King of Rooks Nest ventures, Mehjabeen Patrick of Creative England. The group discussed all sorts of topics, my three favourite snippets included:

  • An exploration of the sector and how its investment potential is misunderstood. Mehjabeen quoted some research which suggests that creative businesses are 3 – 4 time less risky than other investment opportunities. They are diverse, innovative and flexible.
  • The need for innovative approaches to pitch events for creative businesses to reflect the fact that these companies are unique and tactile – it made me think of the brilliant SWCTN Immersion Showcase that I attended in July this year.
  • Prompted by a question from the audience, the panel discussed the nutty issue of IP in creative businesses. One panellist suggested that investors should look at how end user will react with the IP – is there potential for behaviour to become sticky? Is it distributed in a way that will allow for scale? They suggested that distribution and execution are key, not necessarily defensibility. Another panellist reinforced this perspective highlighting that the ability to execute on 52 updates a month is the best indicator and that ‘ideas are considered as commodities by investors.’ One panellist went so far as to say, “Investors want to know you have the ability to take an innovation to product in shortest possible time with highest possible quality.”

The event closed with some speedy networking but I had to dash off for a return train back to Bristol, so my reflections happened in isolation – and as I left, I considered the striking simplicity of the messages that I heard – is it fair that the ‘creative industries’ have developed a reputation as being flighty, being businesses that are harder to invest in and being businesses that need special treatment to support their growth? The data discussed at this event would certainly suggest otherwise.

In Creative England’s experience, we heard that ‘creative’ businesses are in fact less risky investments than some of their tech focused counterparts; we heard from UKBAA that an effective investor focused on the creative industries looks for exactly the same things as an effective technology investor and that broadly the term ‘creative industries’ is in fact rather poorly understood – it encompasses some incredibly innovative tech companies (AR, VR, MR, Immersive, gaming) and it also includes some stalwarts of the industry (like marketing and architecture). Ultimately it seems that project financing is considered by some old-fashioned investors as the only way to engage with fast-growth creative businesses, this event certainly invited the audience to consider otherwise. Just because a company is categorised as 'creative' doesn't mean it isn't scaleable. Often these companies have huge growth-potential but they need to fight investors' preconceptions in order to compete with their tech and traditional investment counterparts.

There are three programmes that are currently actively supporting Creative industries in the West of England (and some in the South West too), all of which are committed to developing investor readiness amongst the community – and building up the appetite amongst investors for some of our regions most exciting and innovative investment opportunities too.

  1. South West Creative Technology Network focusing on immersive, data and automation
  2. Bristol and Bath Creative R&D focusing on placemaking and 3 other pathfinders
  3. The Creative Scaleup Programme offering support to businesses to improve their leadership capacity so they are better placed to access finance. (there’s no information online yet but keep an eye on WECA’s twitter stream for more in late October)

If are an active investor interested in the creative industries in the South West, please get in touch.

This blog is written by Briony Phillips, Scaleup Enabler for the West of England. You can contact her to find out more via twitter or email: briony.phillips@engine-shed.co.uk