finance

Barcamp review: New finance instruments for incubators

Session Host Corrado Bottoli introduces the work of the Milan Chamber of Commerce that helps to promote new businesses and support high potential growth companies. He points out the relationship between the public and private sector for new companies (like startups). Background is that in Milan 25% of new companies die after one year. Bottoli’s goal for the session is to show different ways to support startups and find new instruments with the help of the participants.

The Milan chamber of commerce gives support on three levels:

  1. Equity capital market with equity funds in terms of creating equity funds with a direct investment and setting up a co-investment with the private sector (ongoing project)
  2. Debt capital market in terms of guarantee funds for startups and grants to reduce the cost of bank loans
  3. Setting up new incubators in terms of low price for facilities and training/tutoring to reduce risk of investment 

The theses and major points for discussion of the session were:

  • With regards to equity capital market, the participants criticise the focus on only high potential startups like in the technology sector that gets enough support anyways. The creative sector, e.g. fashion design seems to be underrepresented. One Participant points out that high tech sector is not necessarily supported anyways because there are long production process, too, e.g. for computer game developers. The creative sector has the advantage of being able to form working groups that share space and capacities.
    The participants express their doubts that startups in the creative sector want to have equity money because banks wouldn’t finance their projects anyways and that debt instruments might be more suitable.

  • With regards to dept capital market, the participants note, that clients usually prefer grants while there is no proof that grants have a growth effect. The garantee system via microfinancing agencies (in Brandenburg) on the other hand doesn’t seem to have any effect. In Estonia grants sometimes work but very often it is a black whole. One suggestion for cultural support is to demand more professionalism from their clients/startups. The participants agree that grants are not the solution or at least should be designed in a better way. One suggestion is to follow the investors and how much money they want to invest.

Further points of discussion and other contributions:

  • The role of the public sector is also discussed, but the situations in the participants’ respective home countries are very different.

  • Crowdfunding as a potential alternative which also allows for early market research.

  • The idea of paying back some of the money or providing new jobs after success was brought up. The problem is to give the right incentives. If the condition is to employ new people companies would employ anybody to keep the money. It is always a distortian of the market. Another option is to pay pack if you are not successful in order keep the motivation to succeed alive. 

Examples:

  • Milano Speed Mi Up: incubator run by Milan Chamber of Commerce and Bocconi University. The idea is to combine startups with young freelancers to work together by providing services (training, innovation, internationalization), working spaces, tutoring and IT services. The goals are to set up about 10 startup/year (startup hub) and support 20 professionals/year (professional hub). http://www.speedmiup.it

  • Exist Gründerstipendium: provides a basic salary for the company members, money for the company and coaching. The project members have to reach milestones but if they are not successful they dont have to pay back anything. The advantage is they can concentrate on their project. http://www.exist.de/exist-gruenderstipendium/

There is no ideal model for public support due to the differences of the countries. All three introduced models could be helpful. There seems to be an agreement that debt instruments and creating new incubators might be more suitable for the creative sector. New instruments could be crowdfunding and networking, they should be added to the three models .

Links:
Milan Chamber of Commerce: http://www.mi.camcom.it

Barcamp review: Access to smart finance

This session was hosted by Søren Würtz, chief consultant from our Danish partner CKO, the Danish Centre for Culture and Experience Economy. CKO’s work is centered around building frameworks for creative industries and entrepreneurs. At the moment, the topic of access to finance is one of their foci, as they have just been conducting a survey measuring the needs of creative industries vs. other industries in Denmark in order to answer the question: “How can we build an ecosystem in a regional area that fosters good investments?”

A key finding showed that creative industries carried significant ambitions for commercial growth – in this aspect, they were most alike to other industries.
Based on this survey and its results, Søren Würtz set out to discuss the questions: What is smart financing for the creative industries? What is stupid financing for the creative industries?

The theses and major points for discussion of the session were:

  • Ambitions for commercial growth:

This point was challenged by some participants. First, because the study did not take into account companies with less than two employees, freelancers and artists.

Jörn Krug who is a coach for creative entrepreneurs in the region of Brandenburg: “My experience proves both the myth that the creative industry is not interested in growth and the opposite, so I’m surprised that the difference shown by the survey is so small. This shows that the business development components are similar in all industries.”

  • Use of classical analysis tools for success measuring:

Classical investors use the 3-year-ladder, whereas in the creative industries it makes more sense to use the leap metaphor: development 1 step at a time, testing in between phases, and a close relationship with the investor – essentially learning by doing.

In Søren Würtz opinion “the typical 3-year ladder-models doesn’t correspond to the pace of the market, they can’t compete with new developments or miss them completely. Instead, investors and creative industries alike should become experts in change, they should focus on short-term strategies and step-by-step scaling!”

  • Need for immaterial assets, much higher within creative industries than others.


(Source: CKO (2013) Access to smart finance, study and presentation for C2C, May 2013)

Examples:

In groups, the participants worked on the tasks 1) create a map of the investment ecosystem and 2) to develop a strategy for region x.

1) Create a map of the investment ecosystem

  • creatives in the center of the investment ecosystem as the most important aspect
  • creatives should reflect on whether they really need an investor and if yes, what kind, as investments can also be immaterial.
  • Investors should aquire more knowledge of the market, support life-cycle growth models and reflect on their own mindset, as investment gains can also be immaterial.

 

2) Develop a strategy for the region X!

Key questions:

  1. What are the elements of the ecosystem?

  2. How can we create good meeting places?

  3. How can we put new actors into meeting places?

  4. Why are banks always the main go-to actor when it comes to financing? What about venture capital, crowdfunding, private funding?

 

The session concluded that in order to improve the investment system for the creative industries
We need to change the cultural mindset: the intellectual property is unique, not the money involved.
We need to change the paradigm of needs/communication.
We need to help creatives develop business sense.
We need to mix financing sources.
We need to develop small scale financing/crowdfunding as business strategy.
We need to develop incentives and models for role models/ambassadors.
We need to focus also on mentors, not just investors.

Research trip to Denmark, Day 5: social funders and rebellious artists

Research trip to Denmark, Day 5: social funders and rebellious artists

The last day in Copenhagen had arrived much fast than anticipated and so it was already time for our two last interviews: den sociale kapitalfond in the morning and the Art Rebels for coffee.

Lars Jannick Johanssen, ex-director of Denmark’s leading think tank “Monday Morning“, founder and director of den sociale kapitalfond had invited us to the new office in the Nyhavn-neighbourhood where he presented us a super concise and very insightful overview of the fund’s activities and working methods. He was so well prepared that he actually answered most of our questions without us even having to answer them!

Here is what we learned: Den sociale kapitalfond was launched in February 2012 and is “Denmark’s first social venture fund, investing capital and competencies in promising social entrepreneurs to scale their social impact and economic performance.”

It was established by TrygFonden (one of the largest and most prominent Danish charity funds focused on improving safety, health and opportunities in Denmark) and runs with professional support from Accura (“the leading Danish law firm within transactions”), KPMG (“the leading professional service company”) and Accenture (“the leading management consulting, technology services and outsourcing company”).

To reach its goals, the fund builds on methods and approaches from commercial venture funds to help:

  • Socially vulnerable individuals improve their opportunities in society and social capital.
  • Social entrepreneurs build capacity and scale their social impact and economic performance.
  • Social investors achieve high social returns on investment (SROI).

The fund relies on the enterprises to becom capable of repaying the investments, allowing the fund to reinvest capital in new social entrepreneurs. Lars wants investors with a philantropical motivation, who are willing to swap the monetary return on investment for a social return on investment. The social change that will result is measurable, he says: “It’s tricky, but it can be done.”

The team consists of 6 people whose job it is to choose the right projects and companies in which to invest and then to prepare both sides for the cooperation, so as to make sure that the process itself goes about as smoothly as possible. The elected companies get knowledge (seminars and interviews) and money (patient loans at very low rates / „evergreen loans“).

Examples of supported projects:

  • Specialisterne (Specialist People Foundation) – an IT-service company based on the special skills of employees with Autism Spectrum Disorder; 60 employees
  • Grøn Koncert – an annual concert tour that raises awareness and millions of DKK for people with muscular dystrophy.
  • Allehände – a kitchen project with only deaf cooks.

(For more information visit: http://www.densocialekapitalfond.dk/)

 

And then it was already time for our last interview of this trip: with the documentary film maker and Art Rebel Simon Caspersen, partner, strategic planner and responsible for the Rebel Agency. After a quick tour around the new office close to Nørreport station in a lively neighbourhood close to the city center (so new, the paint on the walls had not yet dried), we headed for a nice café around the corner and Simon answered all our questions.

Art Rebels was founded 6 years ago as a creative business, a movement and a network for artists, musicians, designers, film makers, cultural activists, web designers, event makers and other creative souls. At first, it was all centered around a web-platform, but today, Art Rebels operate on- and offline.

At Art Rebels ...

At Art Rebels …

... just moving in.

… just moving in.

They work like a one-stop-agency, distributing jobs and sub-tasks to the freelancers in their network. This way, Art Rebels can help one-person entrepreneurs with getting jobs and not to loose them because they are perceived as too small. Size should not be an argument, but the quality of the work.

Art Rebels activities can be divided into the following fields:

  • The webshop: a global platform that sells selected artwork and products from creatives around the world.
  • The blog: exposes culture and sub-cultural scenes from around the world
  • The Trailerpark festival: a festival for/of art and music in Copenhagen
  • The Art Rebels Agency: a communication agency working with/for both commercial, cultural, artistic, and social projects
  • Art Rebels Events: Talks, conventions, vernissages and other events, e.g. a road show for a big Danish media company

Most of all, we were interested in the Rebel Academy, sought to function as a consortium of creative professionals and an incubation platform for projects and collaborations where knowledge and inspiration on creating and running businesses as a creative entrepreneur can be collected and shared. However, the Academy is not yet operational as there is no reliable funding (the national government gave them money to start the online-platform but there is no regular funding available).

In general, money is an important issue for the Art Rebels, as most of them work as volunteers and can only take care of the Art Rebels activities in the evening after work, which means that all processes take a very long time. Simon hopes for financiers to be more willing to take on some risks and invest in the project. We hold our thumbs and wish them good luck!

(For more information visit: http://artrebels.com/blog/)