So three key sources of finance for creative companies have all but disappeared and as a result crowd funding has emerged to fill that void and help democratise which companies get off the ground. The model seems to work particularly well for creatives, as instead of trying to convince one or two rich investors who probably don’t understand your sector, you can instead appeal to thousands of potential fans who absolutely do.
For many creatives, crowd funding simply seems more accessible than a room full of angels or a bank manager. If you look at most Business Angels, they’re traditionally white males in their fifties, wearing expensive suits and attending pitching events at hotel suites in North London. To me, that has always seemed quite outdated. You can imagine how any type of newcomer to that environment would feel intimidated or even put off entirely.
Crowd funding has helped tear down those barriers, especially for the younger generation who are perhaps time-poor and inexperienced. These people can now review and approach investors online in a ‘comfortable’ digital setting – so of course the businesses that get funded are going to be more diverse.
Moving investment away from banks and angels is particularly good for creative businesses, as within those circles they seemed to have earned an unfair stereotype of being particularly high risk and unprofessional. I’ve no doubt that creative companies are as likely to offer a good return and exit on investment, but there is a disconnect in communicating that to traditional investors.
There’s a lack of understanding about how creative-led businesses deliver ROI. While part of that is on investors, it’s up to the company looking for investment to find a way to demonstrate it. Too many people overcomplicate what they’re doing and so having a very clear proposition is vital, particularly for the ‘misunderstood’ creative company.