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Financing

Creative sector companies and entrepreneurs face difficulties in accessing finance - both private and public – in order to start-up or grow. One of the structural obstacle for creative business to access credit is the little knowledge they have about practical business matters and consequently the difficulties in finding investors or access to public or private funds. On the other end, credit institutes and financial entities in general inside difficult that usually we found in creative companies is the difficulty of individuate and evaluate the intangible assets hidden in many creative initiatives, and so the risk connected with this kind of businesses seems always an obstacle for granting credits. 

At regional level, some innovative public intermediaries have set up creative industries funds – often with the assistance of regional banks. Moreover, intermediaries sometimes provide a multitude of related services such as coaching, mentoring, networking and business training schemes which are meant to increase creative sector companies “credibility” for obtaining credit. This is, for instance, the case of Cultuurinvest, an investment company of the region of Flanders which give credit to companies that produce or distribute culturally related activities.

  • Partners Involved: Arnhem – Flanders - Nottingham

  • Stakeholders involved: CultuurInvest (Flanders) -  Confetti (Nottingham) - Provincial authorities of Gelderland, Oost NV, and PPM Oost

The municipality of Arnhem, Lead Partner of the Organza Project, undertook  a pilot action with the guide of Cultuurinvest and Confetti group with the objective of mapping the national and regional financing instruments that are available to the creative industries, linked to the possibilities or impossibilities for the creative industries to access these means. Output of the action is the creation of a plan that can be implemented to achieve the right balance between the creative industry’s demands and the supplies from the various public and private regulations and financing possibilities. Creative industries in the region of Gerderland can already count on a number of financial instruments to support development of new businesses in this filed.

Nevertheless, very interesting lessons can be learnt from specific instrument that the Organza project has brought to life in other regions. In the financing process for creative industries, the first problem to face is the fact that banks do not trust in giving loans to young creative starters. Sometimes you can find private investors, or “business angels” that can supply necessary venture capital to starting entrepreneurs, receiving a participation to the ownership in return. A very successful example of this kind of financing approach is the H-FARM Venture Incubator located in Treviso Province,  investigated also in the Organza Project as one of the best practices individuated during the research and analysis phase. For made this happen with positive results in terms of sustainability of the new start-up, the support to of the investor in supplying location, network and help on developing contents of the idea are fundamental. Beside financial help, an in-deep study of the effective capacities of making business of the potential entrepreneur is a “condition sine qua non”, which sometimes is never really tackled by credit institutes. On the other side, creative sector’s entrepreneurial skills remain at a very low stage and insufficient for creating a good business plan and encourage banks to give credit to a potential risky investment. To face the problem from both sides, Arnhem undertook a pilot in which the experience of CultuurInvest form Flanders, a governmental investing division focused on cultural activities and services, and the Confetti Group, a consortium of companies committed to developing creativity through business start-up support.

Overall consideration:

In this pilot finance the municipality of Arnhem, together with ARCCI, wants to investigate which financial instruments can be deployed for the creative industries.

Funding is often the bottleneck in the development of promising creative companies and governmental support is not yet well developed in this field, even though the importance of supporting creative industries is getting more and more attention form policy makers at European, Regional and Local level. Arnhem powerful network of contacts with the creative background of the region granted the support of a number of partners with significant experience in the field of business development, informal investing, and venture capital.  These are: the development agency Ontwikkelingsmaatschappij Oost Nederland NV (Oost NV) and the participation company Participatiemaatschappij Oost Nederland NV (PPM Oost), through funds like ‘Gelderland voor Innovaties’, Innovatiefonds Oost Nederland and an informal investors network ‘Meesters van de Toekomst ‘(Masters of the Future).

Purpose and scope was clearly defined from the beginning? Overall mission achieved? The first step of the pilot was a detailed map of financial instruments already present at a National and Regional level, and evaluate the accessibility for creative companies. After that the approach carried out was to learn good advices from the two best practices chosen and report them to the local development agencies in order to start a virtuous process of supporting policy making in the field of supporting young creative and creative sector financing.

As far as the support to young creative entrepreneurs in learning business skills and marketing awareness, the attention of Arnhem has been focused on the “Amplify” award scheme, tailored by Confetti Group to offer support to valuable business start-ups. The award offers a diverse range of practical resources from an economic contribution (up to 5.000 pounds), office facilities and studio space to professional services, mentoring and training. Plus, they help young entrepreneurs find new sources of funding and investment. Fundamental component of the success of the initiative seems to be the link with the education sector, which allow a good spread of creative approach from the very beginning of pedagogic paths and a direct connection between education and business. This allow also the managing staff of Confetti to individuate from the very beginning the most valuable and interesting ideas to be developed in the second part of the programme of start-up support. Shifting the attention to the second focus of the pilot, that is to say the financing aspect, Cultuurinvest has given a number of good advices to be taken into consideration to help in a more effective way the granting of credit to creative idea.  The first think that the project Organza has seen in this investment agency is the idea at the basis of its activities, that is to say that the creative activities they support must have a value for the market. This is a quite simple idea for an investment agency, but if we apply this idea to creative sector, it could not be so predictable. The success of this initiative belongs to the fact that CultuurInvest does not pose itself as a bank, neither as a business mentor. Indeed it is both, and they provide in this way a powerful bridge between the entrepreneurial skills and the creative attitude. The basis of the success of this activity is therefore the presence of a “task force” of experts both in the field of business and in creative attitude, which evaluates very carefully the business plans proposed and decided to invest only in companies that are very likely to gain success. The big challenge to face with is the recurrent gap between the economic word and the creative one. The result from this analysis is the awareness of the efforts that still have to be made in order to better fit existing financing instruments into a more “creative minded” attitude. The path to be followed is twofold: on one side it is necessary to give a business preparation to creative people; on the other side a stronger commitment of local and regional entities have to be made in order to increase the visibility of already established financing instruments and make them more accessible also to creative entrepreneurs.

The proper target group has been identified? How the communication with stakeholders worked? The attention Arnhem paid in addressing the province of Gelderland and the development agencies of the Region seems to result in a number of interesting events and activities directed to the development of creativeness in the region. Indeed, may initiatives have already been developed that help facilitate the development of the creative industries, and the creative sector is at the top of the agenda. Among established initiatives we can number for instance of ArtEZ institute, the Arnhem Mode Incubator, the Dutch Fashion and Design Centre (DF&DC: a platform that coordinates business-oriented initiatives in the region) and the CLICK platform, a network of innovation networks that help reach information about the latest news and events on creative milieus . Currently many initiatives for the creative economy are unfolding and great attention will be paid to a capillary diffusion of the information in order to reach as many potential creative entrepreneurs as possible.

Any budget matters? If compare to the situation of other region investigated by the Organza project, the economic situation of the creative sector in the city of Arnhem and its region seems already positively committed to sustain creative companies. Nevertheless, the demand from the creative industries is increasing as well as the awareness of their potential for the economy of a country. That is because the European economy is in need of new impulse is developing and stimulate innovation and growth through crossovers with other sectors and through their input of creativity. Nevertheless, to put into practice the systematic approach of creative business plan check, we might consider an additional effort and expertise covered by a governmental initiative, as indeed happen in Flanders with CultuurInvest, since financing institutes will not be willing to invest their own budget on this activity.

The Risks foreseen have occurred? How they have been managed? Did they effect the outcomes? The gap between formal instruments for sustaining innovative business and creative entrepreneurs is still present and needs to be filled out in order not to waste the opportunity already present in the territory and “reinventing the wheel” while a few adjustment in the already existing schemes would be perfectly fitting the need of creative business. Various networks, such as DF&DC and Design Platform Arnhem (OPA), but also ArtEZ itself will have to pay active attention to the conditions that have to be met by the entrepreneur to take advantage of these schemes.

Possible further cooperation with municipality? The cooperation between the City of Arnhem and local policy maker are progressing in the way of enhancing the great creative potential of the region through a rich agenda of initiatives and occasion to pursue the objective of the pilot action.

The report Arnhem made during the development of the pilot action has been is actively brought to the attention of the Gelderland Valoriseert platform team and to the Dutch Fashion & Design Center Foundation, which will both take care of promoting financing instruments among its network of contacts. Also, a method to collect information about “desiderata” of creative people connected will be designed in cooperation with the City of Arnhem. The pilot report will also be used for the studies that local development agency are carrying about creative companies and their importance in the region.

An international meeting for informal investors and Oost NV will be organized in Arnhem in October with the participation of H-FARM, in order to discover more about the way they combine making financing available for creative entrepreneurs with scouting & screening, coaching & training, and providing housing for innovative start-ups.