Mary-Alice Stack, DirectorArtCo Projects, Arts Council England

Creative Industry Finance Seminar Series

Session 4: Tuesday 27 November 2012

Creative Industry Finance Seminar Series

Tuesday 16 October 2012Down to Business - when does a creative idea becomea business, and how?

Tuesday 30 October 2012An introduction to grant funding for creativebusinesses

Tuesday 13 November 2012The ins and outs of loan finance for creativebusinesses

Tuesday 27 November 2012A slice of the pie – equity investment for creativebusinesses

What do we mean by equity finance?

“A means of raising funds to support the development of a business through the issue of shares in return for money”

Benefits• Money doesn’t need to be paid back • Investor may bring added value to the business through their

knowledge/ contacts etc

Risks • Loss of control

- investor may influence the direction that the business takes in order to maximise the potential return on their investment- once you’ve issued shares in your business, you may not be able to control how these are subsequently traded

Importance of equity finance for creative enterprises

Only viable source of funding for production based enterprises (films, theatre, opera) where• Significant upfront costs are required to finance the production over a

period of months/years• Revenues will not be generated until the production is complete • Investment is highly speculative (no guarantee that the production will

be a hit, however well made)

Only viable source of funding for start-up/early stage businesses that require capital investment where• A significant capital injection is needed to bring the product/service

to market• The product/service is highly innovative, and therefore the market

for it is not yet established (ie high risk)• The company has no track record and cannot raise funds through

other sources

What is an investor looking for?

Growth potential – the business must be scalable

Market opportunity – is there a market for the product/service?

Protection of assets - is their any IP in the business, and how will this be protected?

You – who are the people behind the business? Are they “investable”? Have they got the drive, commitment and skills necessary to take the business forward?

Return on investment – how much money can I expect to make from the sale of my shares in X years time, if all goes to plan?

Risk – what is the likelihood of this business failing to achieve it’s financial projections?

Terminology

• Equity• Stock• Shares• Angel investor• Venture Capital investor (VC)• Valuation• Due diligence• Exit strategy

Peter Tullin & Simon CronshawFounding Partners

www.culturelabel.com

Further information/useful links

Seed Enterprise Investment Schemehttp://www.seis.co.uk/ http://www.seiswindow.org.uk/

Seedrshttp://seedrs.com/

Creative Arts Investment Networkhttp://cainuk.com/

Advantage Creative Fund (West Midlands)http://www.advantagecreativefund.co.uk/

The North West Fundhttp://www.thenorthwestfund.co.uk/

www.artscouncil.org.uk

Any questions?

Mary-Alice StackDirector, ArtCo ProjectsArts Council England14 Great Peter Street, London SW1P 3NQ

Email: mary-alice.stack@artscouncil.org.ukTel: 020 7973 6503