A initiative to provide up to £750 000 of equity finance for creative businesses has failed to shortlist any design consultancies, largely because designers struggle to speak the language of investors and rarely demonstrate rapid growth potential, its organisers say.
The scheme, organised by the Centre for Creative Business and equity finance group London Business Angels, last week shortlisted five start-up companies from a longlist of about 120 applicants. Although there were a number of design consultancy entrants, LBA investors plumped in favour of businesses with either products to sell or readily measurable growth.
Run as part of the London Development Agency’s Creative London Business Accelerator programme, the Dragon’s Den-style scheme is open to all creative businesses, including design consultancy groups, says head of Creative London Graham Hitchen. However, according to LBA business development manager Jenny Tooth, typical creative consultancies rarely attract this type of investor, which is looking for a return of ten times investment within five years.
‘They would only invest in a graphic design consultancy [for example] if the company has an ambition to open all across London and open a chain of graphic design businesses. You have to have a trajectory for very rapid growth,’ says Tooth.
An initial shortlist of 60 was selected from the 120 in February and vetted for suitability for equity investment, using measures such as management team strength, product ideas, financial skills and financial predictions. A second shortlist of 15 was then put on a fast-track programme, from which five have already won backing.
‘One of the main challenges for creative businesses is separating the creative talents of the management team from the business. It is not just about “you”, and if you’re still struggling to make that leap, you’re not going to get equity funding,’ says Greg Orme, chief executive of the CCB.
The collaboration between the CCB and LBA is intended as much to educate investors in the creative sector as it is to help prepare suitable businesses for investment, adds Tooth.
‘Dragon’s Den’ shortlisted winners
• Interactive Rights Management – interactive entertainment content management
• EC One – luxury jewellery retailer and designer
• Feast Promotions – lifestyle entertainment brand providing public and private events, festivals and tours
• Juice Mobile Entertainment – mobile content creator and publisher