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What do European investors look for in the CCIs?

18:00h 19:00h

What do  European  investors  look  for  in  the  CCIs?       The   entrepreneurs   are   more   than   ever   being   required   the   capacity   of   detecting   different   typologies   of   investors   and   being   able   to   identify   their   interlocutor’s   profile,   what   are   their   priorities,   fears   and   uncertainities.   What   do   investors   look   for   in   the   creative   industries?   How   can   I   adapt   my   project   to   the   different   type   of   investor,   either   a   business   angel   or   an   equity   fund   or   a   bank   representative?   An   european   survey   on   this   issue   will   be   presented,   as   well   as   a   round   table   with   the   point  of  view  of  different  european    investors.       Moderator:     Jenny  Tooth,  Managing  Director  of  Angel  Capital  Innovations  and  Chief  Executive  of   UK  Business  Angels  Association    

Jenny Tooth,   since   July   2012   has   taken   the   role   of   part-­‐time   CEO   of   the   UK   Business   Angels  Association  which  has  superseded  the  British  Business  Angels  Association,  the   trade   body   for   angel   and   early   stage   investing.   Jenny   has   been   providing   strategic   support  to  BBAA  since  its  establishment  in  2004,  supporting  both  policy  and  interfacing   with  Government,  as  well  as  developing  the  trade  body’s  major  annual  events.  Jenny   has  over  20  years’  experience  of  supporting  SMEs  access  to  investment,  both  in  the  UK   and   internationally.   She   ran   her   own   consultancy,   including   spending   nine   years   based   in  Brussels,  working  closely  with  the  EC.  She  has  operated  a  wide  range  of  investment   readiness  programmes,  including  projects  supported  by  national  and  EU  funding.  She   has   also   participated   in   a   number   of   expert   groups   on   access   to   finance   and   chaired   the  EC  Knowledge  Intensive  Services  group  under  DG  Enterprise.  In  2006  she  took  on   the  role  of  Business  Development  Director  at  GLE  Growth  Capital  and  in  2009  she  co-­‐ founded   Angel   Capital   Group   where   she   has   been   acting   as   MD   of   Angel   Capital   Innovations  focusing  on  demand  side  issues  and  angel  investment,  operating  projects   on   ICT;   nano   technology   and   Mobile   services   and   applications.   She   has   also   been   a   frequent   judge   at   business   plan   competitions   and   acted   as   an   assessor   for   the  

Technology Strategy  Board  for  innovation  grant  applications.  Jenny  is  an  experienced   speaker,  both  in  the  UK  and  across  Europe.  She  has  an  MSc  in  Economics  from  London   School  of  Economics  and  Political  Science.     PANELISTS     § Antoinette  Godin,  European  Projects  Officer  of  St’Art       Antoinette.GODIN@start-­‐    

Antoinette is  the  European  Projects  Officer  at  St’art.  St’art  investment  fund  is  a  unique   financial   instrument   in   Brussels   and   Wallonia   supportingthe   development   of   the   creative  economy.     St’art  is  aimed  at  small  and  medium  companies,  including  non-­‐for-­‐profit  organisations.   The   fund   contributes   to   the   creation   of   companies   and   the   development   of   existing   structures  in  order,  for  example,  to  undertake  new  projects,  create  new  products  and   win  new  markets.  The  fund  provides  financing  in  the  form  of  loans  and  investments.   The  objective  is  also  to  influence  banks  and  private  investors.  St’art  will  work  closely   with  public  bodies  and  regional  investment  funds.  Therefore  St’art  complements  and   not  replaces  other  existing  financial  mechanisms  and  possible  public  subsidies.   To   implement   that   objective,   St’art   is   also   involved   in   two   European   projects:     C-­‐I   factor   aiming   to   develop   access   to   finance   to   creative   industries   and   Wallonia   European  Creative  Districtexploring  creative  economy  in  the  Wallonia  Region.     § Jose  María  Pina,  Entrepreneurship  Director,  Keiretsu  Forum  Barcelona  

§ Anthony Clarke,  MD  of  London  Business  Angels      

Anthony is   the   co-­‐founder   and   CEO   of   Angel   Capital   Group   which   includes  London   Business  Angels  where  he  has  the  role  of  Managing  Director.   Anthony   qualified   as   a   Chartered   Accountant   and   Chartered   Secretary   with   Deloitte   Haskins   &   Sells   (now   PWC)   in   1980.   Thereafter,   he   worked   on   a   full   time   basis   as   Finance  Director  and  Chief  Executive  of  a  number  of  privately  owned  SME  companies   and  since  1995  he  has  been  a  business  angel  investor/non-­‐executive  director  of  over   20   start-­‐up/early   stage   businesses.   Between   2002   and   2009   Anthony   was   Managing   Director  of  GLE  Growth  Capital  and  also  sat  on  the  main  Board  of  GLE.   Anthony  has  been  involved  with  London  Business  Angels  for  18  years  and  took  on  the   role   of   MD   of   LBA   when   it   became   part   of   GLE   Growth   Capital   in   2002.   He   is   also   a   co-­‐ founder   and   currently   sits   on   the   advisory   Board   of   Seraphim   Capital-­‐   the   UK’s   first   £30m  Enterprise  Capital  Fund.  He  was  Chairman  of  the  UK  Business  Angels  Association   (UKBAA)   from   August   2004   to   July   2012   and   remains   on   its   Board.   He   is   President   Emeritus  of  European  Business  Angels  Network  (EBAN)  having  been  its  President  from   2004-­‐2009.  Anthony  also  sits  on  the  Venture  Capital  Committee  of  the  BVCA.     § Núria  Bosch  Balada  -­‐  Board  of  Directors  member  at  Baring  Private  Equity  Partners  

Ms. Bosch  began  her  professional  career  as  a  risk  analyst  at  Banque  National  de  Paris,   where  she  later  became  Associate  Regional  Manager.  In  1992,  she  joined  RBA  Editores   as  Controller.  During  the  period  1994-­‐97,  she  was  a  shareholder  and  director  of  the   university-­‐level  school  EUROAULA,  after  which  time  she  returned  to  the  financial   field  as  a  Private  Wealth  Manager  at  Andorra  Private  Banking.  She  later  worked  in  the   area  of  investment  capital  in  Catalonia  as  Director  of  Financing  and  Entrepreneurship   at  the  CIDEM  (Generalitat  de  Catalunya),  where  she  represented  the  Catalonian   Government  at  investment  fund  board  meetings.  She  joined  Baring  Private  Equity     Partners  in  January  2007.  Ms.  Bosch  holds  a  Business  Management  degree  and  MBA   from  ESADE  University.        

Moderator: Jenny Tooth, Managing Director of Angel Capital Innovations and Chief Executive of UK Business Angels Association

The Views of Investors, both traditional and alternative Finance Sources in Financing Creative Industries Jenny Tooth, MD, Angel Capital Innovations , CEO UK Business Angels Association Barcelona 5th June 2013

C-I Factor Research Study| 08.01.2013 | peacefulfish

Background to the Research Many studies look at the Demand side- not enough info on the Views of the Finance Supply Side Research Focus on Investors C-I Factor Partner countries: UK, Netherlands, Belgium, France, Germany: June to October 2012 1. Review of Online profiles of existing CI Investors: 594 2. Online Survey: ~1200 invited to participate 231 Investors participated 3. Interview series: 25 participated (July-October 2012) 4. Case Studies: 5 active CI Finance funders 5. Report with Key findings and Recommendations for CI Factor Partners - December 2012

C-I Factor Research Study| 08.01.2013 | peacefulfish

The Participants in the Research Online Survey Investors: 188 • Venture capitalists: 47% • Business angels: 26% • Private investors using invest. vehicle: 20% • Sector specific funds: 8% Lenders: 14 (well experienced in CI) Alternative Investment Platforms: 29, • 15 donation crowd fundraisers • 11 investor crowd fundraisers • 3 crowd funding /peer-to-peer lenders 25 Interviews Series – 12 EU Countries • Investors: 19 (BAs: 8; VCs: 11) • Lenders: 1 • Platforms: 5 C-I Factor Research Study| 08.01.2013 | peacefulfish

Where do Investors currently invest? 82% of investors invest in ICT; 65% in Telecoms/Mobile; 59% in Cleantech, 54% of investors say they invest in Creative Industries

9% of investors said that they never invest in CI sub-sectors! Source: C-I Factor Survey

C-I Factor Research Study| 08.01.2013 | peacefulfish

Which CI Subsectors do they invest in? Highest investment interest in Software (78%); Video and Interactive Games (55%) ; Advertising (40%);

Source: C-I Factor Survey

C-I Factor Research Study| 08.01.2013 | peacefulfish

INVESTORS’ assessment of the risks compared to return in CI

C-I Factor Research Study| 08.01.2013 | peacefulfish

Biggest Risks for Investors in CI Investors identify what are 4 biggest risks in CI

1.Lack of Skilled Management Teams 2.Business lacks clear revenue generating model 3.Business not scalable 4.Unlikely to find Exit C-I Factor Research Study| 08.01.2013 | peacefulfish

Survey: What attracts Investors to CI? Investors identify what makes a good deal in CI • scalability • disruptive business models • strong intangible assets • “fit” with organisational & personal interests and current portfolio were also significant drivers BAs and VCs prefer locating deals • through direct contact from entrepreneurs • and personal recommendations • • BAs rank pitching events combined with market intelligence higher than VCs • crowdfunding and online networking platforms are the least favoured C-I Factor Research Study| 08.01.2013 | peacefulfish

Investor Survey: Cross Border Investing • 39% of BAs and 59% of VCs invest transnationally • 93% of BAs and 58% of VCs said they would consider investing in CI outside their own countries or would consider investing more.

BAs and VCs would invest in more CI businesses if • they were internationally investment ready • or had been sourced from a trusted investor in the target country

C-I Factor Research Study| 08.01.2013 | peacefulfish

Incentives to Invest in CI

• BAs were more enthusiastic about government incentives than were VCs!. • BAs also were overwhelmingly in favour of CI sector specific tax incentives • Both BAs and VCs were in favour of Dedicated CI Co-investment Funds from either public/private funds

C-I Factor Research Study| 08.01.2013 | peacefulfish

Lenders Survey: Results Where do they invest?

71% of our sample lenders lend to the CI 43% lend to property/real estate sector 36% lend to the ICT sector 36% lend to the Telecoms/mobile sector Top 3 CI sub-sectors in nearly all 4 lender categories in our sample • Software • Publishing • Film All bank groups in the sample consider CI higher risk compared with other sectors !. C-I Factor Research Study| 08.01.2013 | peacefulfish

Lenders Survey: Results

Source: C-I Factor Survey

C-I Factor Research Study| 08.01.2013 | peacefulfish

Incentives to Lenders: Results Incentives to lend to CI sub-sectors

• All lender groups sampled, support risk reduction through 3rd party guarantees, including a 50% guarantee. • Public funds lenders think co-lending with an expert in the sub-sector and risk reduction through a public bank are equally interesting. • Most lenders are not willing to lend outside their countries • but follow existing clients to make cross-border loans in CI.

C-I Factor Research Study| 08.01.2013 | peacefulfish

Alternative Finance Platforms Survey: The sample of crowdfunding platforms consisted of • Donation platforms 56% • Investment platforms 41% • Lending/Peer-to-Peer Lenders 7% 79% of surveyed platforms facilitate financing in CI

TOP 3 sub-sectors for lender platforms: • Games; Software; Publishing TOP 3 subsectors of donation platforms: • Film/TV programmes & music; Design ; Crafts TOP 3 of investor platforms (similar to trad. investors): • Games ; Software ; Film & Music

C-I Factor Research Study| 08.01.2013 | peacefulfish

Average ratings

Crowdfunders Perception of Risks of CI

Unlikely exit

Crowd Lenders much more risk averse in CI Hard tothan value crowd investors or donators

Size Long dvlpmt

crowd lending

Sunk costs Supply costs Low revenue

Regulation No guar'tees

crowd donation crowd investor

Lifestyle Not scalable

C-I Factor Research Study| 08.01.2013 | peacefulfish

What Could be Done? CI Factor  Develop a Knowledge Centre of CI Market Intelligencesuccess stories, deals done; exits etc:  Market Intelligence at CI Pitching and showcasing events  Create an online CI Investor community – sharing intelligence and deals creating better connectivity between all finance sources  Develop an integrated programme of finance awareness and investment readiness dedicated to CI and subsector specificincl a new Serious Game for investors and CI SMEs  Create database of CI finance sources: investors, lenders , platforms interactive information Tools for accessing CI Finance Actions at EU Level  Support Development of the new Bank Guarantee Fund for CI  Support Development of new CI Co-investment Fund of Funds  Support an integrated overall EU Policy agenda for financing CI C-I Factor Research Study| 08.01.2013 | peacefulfish

Questions for Discussion • How does this research compare with your views on financing of CI businesses? • How much investment are you making in which CI subsectors - and what are you looking for? • Is the problem with the CI Businesses not being Investment ready, or not investor attractive? • Or the lack of awareness/interest of investors in financing CI businesses? • What are the right measures to take for the supply and demand side? C-I Factor Research Study| 08.01.2013 | peacefulfish

Antoinette Godin, European Projects Officer of St’Art



















MINIMUM 100.000 €

50 %

50 % BANKS



BA, VC …



Productions du Dragon & Dragone Costumes

Sector: performing

Date: 2001

FishingCactus Cactus Fishing

Sector: Leisure Software

Date: 2008

SUB-SECTORS (31.12.12)

Trans-sectoriel 2% Cinema (digitilal in theaters) 2% Software 4% advertising 1% Gastronomy 3%

Other (for ex. boarding games, eventiel, etc. and no ICCs) 23%

publishing 7% Television 6%

Radio 0%


heritage 1%

Design 6%

fashion 19%

Architecture 3%

Performing art 9% Music 8% videogames Visual art 2% Cinema (digitilal Other Digital art 4% in theaters 1% 9% 9%

Portfolio Fashion 9%

Software 9%

Gastronomy 9%

Performing art 27% Heritage 9%

Music 9%

Visual art 9%


What do European investors look for in CCI’s?


sustainability PRIVATE INVESTORS


Link with the pilot on crowdfunding with C-I factor New creative financial models

A possible validation of existing market for investors




Jose MarĂ­a Pina, Entrepreneurship Director, Keiretsu Forum Barcelona

Anthony Clarke, MD of London Business Angels

Creative Industries: Early Stage Investment Anthony Clarke CEO: London Business Angels ( LBA) Director : UKBAA

London Business Angels • • •

UK’s Oldest formal angel network – 32 years old Part of Angel Capital Group/ Founder member of UKBAA +£50 million currently available for investment via members

Key Statistics: – – – – – – – –

175+ Active Business Angels 7 Pitching Events p.a. 1,000 Business Plans p.a. 45 SMEs selected to present annually. 17 deals closed in 2012. +£50 million invested since 2000 95% of deals syndicated £100,000 - £2 million per company in syndicates Most active partner of UK Government’s £100m Angel CoFund.

– Working with City of London Corporation to deliver Angels in the City – Identify 150 new Angels to invest in entrepreneurs in and around the City Fringes

LBA Deal Breakdown 2012 •£2.65m invested by 40+ LBA investors with £7.50m of co investment •17 deals completed

Sector Preferences

26% TMT

3% Bio

33% Medtech

Medtech Cleantech ICT

•Av. Angel £37k inv.

•Creative Industries Deals – 30% completed

TMT Hardware

14% ICT

Bio science

24% Cleantech

LBA: Investment in CI Sub sectors – LBA deal flow circa 1,000 projects a year – Circa 50% of deals from “Creative Sector” – 14 Creative Industry companies pitched from 45 selected to pitch in 2012 – 5 CI SMEs received funding from 17 successful projects in 2012 – 1% of CI companies successful from 500 CI applications each year. – Digital Media most CI subsector most popular + design solutions for industry – Games and Music no traction ( too sector specialist)

Investment Ready/Attractive? • • • • • •

Both often a problem given investor “bias” towards CI sector Strong in human capital (often not productised) Low barriers to entry? Scalability? Lack of defensive core IP? Platform viability issues with growing revenues not just growth in Users Creative Innovators may lack skill sets to grow a commercial business

Investors understanding of Creative Sector? • • • •

Lower initial capital needs of Creative Industry Sector often not understood – Early Exists? Early mover advantage Trade Mark and other IP protection such as copyright not always understood Investors skills in strengthening and adding value to the CI management team often ignored More case studies of successful early stage deals

Stimulating Demand/Supply Side?....... BOTH! • •

• • •

Sector Specific investment readiness programmes delivered by industry experts with mentoring support More visibility in medis of successful Creative Industry projects from their seed/ early stage Angel capacity building focused more towards the CI sector Tax breaks for angel investment at seed ( e.g. 50% in the UK for all commercial sectors with 30% post seed) Specialist CI Angel Co Investment Funds

Recent CI Funding Case Studies from LBA •

Orbel Health - £250k

Circalit - £140k

Style on Screen - £150k

Glopho - £150k

Gloople - £150k

NĂşria Bosch Balada Board of Directors member at Baring Private Equity Partners

The Views of Investors, both traditional and alternative Finance Sources in Financing Creative Industries Round table - Nuria Bosch conclusions

Questions for Discussion #  1.  How  does  this  research  compare  with  your  views  on  financing   of  CI  businesses?   #  2.  How  much  investment  are  you  making  in  which  CI  subsectors   -­‐  and  what  are  you  looking  for?   #  3.  Is  the  problem  with  the  CI  Businesses  not  being  Investment   ready,  or  not  investor  aEracFve?   #  4.  Or  the  lack  of  awareness/interest  of  investors  in  financing  CI   businesses?   #  5.  What  are  the  right  measures  to  take  for  the  supply  and   demand  side?  

Questions for Discussion #  1.  How  does  this  research  compare  with  your  views  on  financing   of  CI  businesses?   è  Financing CIs = Other equity financing: Equity costs high, returns on equity must match profitability expectations (on portfolio average). è  Critical mass on Deal flow needed. è  IP valuation: To investors the Balance sheet analysis is crucial. Sometimes Due Diligence is not informative enough for generalist investors. Bancs are in the same situation: future cash flows to pay back are difficult to estimate.

Questions for Discussion #  2.  How  much  investment  are  you  making  in  which  CI  subsectors   -­‐  and  what  are  you  looking  for?     è  We are looking for Companies having 3 to 5 m€ on EBITDA è  We pay attention to leverage, in order not to enter to a Company with a reduced value. è  We like teams with certain corporate skills (in order to enable buy & build projects)

Questions for Discussion #  3.  Is  the  problem  with  the  CI  Businesses  not  being  Investment   ready,  or  not  investor  aEracFve?   è  If we could make a second disclosure on your #5 slide, showing Business Models in each sub-sector, probably we could find a certain correlation between non attractive sectors and the use of certain business models. è  Business models as Saas, Long tail, any product large scalability, etc. are interesting because of their profitability, being as growing exponentially. è  Investors try not to invest in one business highly dependent on one sole person, because of the inherent risks.

Questions for Discussion # 4.  Or  the  lack  of  awareness/interest  of  investors  in  financing  CI   businesses?   è  Investors don’t have any prejudgement. Awareness or interest is raised deal by deal. è  Investors have the profitability pressure from LPs. è  The most important amount on funds dedicated to CI as a vertical will come from nowadays entrepreneurs, once the will exit their Companies.

Questions for Discussion #  5.  What  are  the  right  measures  to  take  for  the  supply  and   demand  side?   è  Both sides + governments have to understand the risk – profitability binomial. è  Measures on tax saving always have a return: taxes avoided to investors will enter the system through new business created and unemployment reduction. è  Available spaces (real or virtual) to be able to share languages and increase trust.

Thanks for your attention.

ECIA CONFERENCE - Investors panel - 5th June 2013  
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