Creative England's taking risks to promote regional growth-stage businesses

Mehjabeen Patrick, CFO Creative England
Mehjabeen Patrick, CFO Creative England
Christopher Goodfellow
Editor
Sift Media
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Creative England aims to fund, connect and mentor arts and digital businesses. Specifically, growth-stage companies that have the talent but lack the opportunity, in many cases because they are based outside of London or are working in a sector that’s considered risky.

We talked to chief financial officer Mehjabeen Patrick about the organisation’s investment philosophy in the latest of our Investor Voices interviews.

The core focus is on new and emerging talent. On growing scale-up companies. On finding new products services and ideas that can shape our creative economy. We really want to support new ideas and new voices. We take risks. We’re not just looking for safe bets. We believe talent is everywhere, but opportunity is not. If you are a company in London you have access to plenty of opportunities, if you’re not you have less.

Our mission is to unlock the creative potential of businesses in the country. We support creative and digital businesses that don’t have access to that opportunity. We’re not a traditional investor in that sense, we’re not a VC, we’re a not-for-profit.

All of our money is for regional companies, that’s the ethos. We believe that talent is there and opportunity is not, that’s our mantra. We know London is full of opportunities. It’s an opportunity to get your hands on some money and a network, if you’re not in London you have to try much harder, you get left behind.

Our team is very well travelled, we don’t sit in our office and wait for companies to come to us. We are seeing the disparity with London and the rest of the country is changing.

In addition to investing, we do a lot of work around supporting companies. We have mentoring and training sessions. We try and connect our businesses to markets and buyers. We also provide mentors. Lastly, we really profile our companies. We ensure that every time we have an event or do something we showcase our companies.

We focus on digital tech, games, film and television. Digital and tech are quite broad. We are keen on companies that are in a cross-sector space. We are very interested in the connection between social enterprise and tech. How the creative sector can influence ideas in other sectors like transport.

We started offering loans four and a half years ago. The performance has been really, really good. We’re now getting 95-97% returns. Because of the support they get from us, we’re very flexible on how they return back investment. We’re very happy with the performance of our loan portfolio.

We invested about £150,000 in The Floow through a loan. Direct line bought a 15% stake in them, a couple of weeks ago they announced a £13m raise. Their growth has been exceptional. Our portfolio has got lots of those examples.

We started doing equity investments a couple of years ago. We haven’t seen any exits yet, but the companies in our portfolio are doing well. They’ve gone on to attract more money in multi-million-pound rounds. There are some that may not succeed, that’s the whole purpose of backing a risky proposition.

One big issue is that when companies from the creative industry go to traditional financiers they aren’t understood. We deal with some of the misconceptions of creative businesses in the finance community as being riskier than other businesses, they aren’t.

Intellectual Property (IP) is a huge issue with creative industries. What we find is that with creative companies, it doesn’t give them enough collateral to go out and get finance. Banks don’t consider IP from creative companies as a security. We look at the talent and skills and the market they’re in, rather than the IP that is bankable or not.

We help small companies get access to big corporates. We now have five key partnerships; Microsoft, Sky, Sony, Barclays, NHS and Nominet. We go and talk to the big partners because we can find access, we say we have access to small and medium-sized companies and we can bring them to the table if you’re willing to bring your expert in. We’re working on more of those.

Angel’s normally work in groups or on their own, they don’t normally see all the opportunities that they might want to invest in. We went to a few angels and said do you want to co-invest. They were very keen. They get access to a plethora of opportunities. They invest money alongside us.

With VCs we talk to them, that’s on a co-investment basis. There are a lot of companies that our money has unlocked other funding for them. We are mainly looking at growth capital. In the UK there's no shortage of finance out there, it’s the right sort and right level of money that’s the problem. It’s difficult to find growth capital between startup and Series A or Series B, that’s where most people fall down.

The focus for the next five years? With Brexit, we’re keen that the talent doesn’t get lost in all of this. That we can continue taking risks where appropriate. Regional Growth Funds are finishing, but we are working on putting together funds for next year and hopefully can make an announcement in the summer. Going forward we are hoping to have a much bigger pot of money.

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