Access to finance for the cultural and creative industries

Given our origins as a fund, spanning both cultural funding and enterprise support, we wish to continue our unique blend of expertise both in the arts and creative industries.

Venture capital investment is “patient money”, spotting business potential and providing capital and expertise to allow this potential to grow and produce a profitable business.  It’s immediate fit with the cultural sector – where most organisations are constituted as not-for-profit companies, companies limited by guarantee (without share capital) and often registered charities – is not apparent.  On first sight their constitutions appear to be wholly incongruent with their structure.

However, as pointed out in the recent report from Culture Central, “A toolkit for Smarter Cultural Investment in our Towns, Cities and Regions”, the need for new models of finance in the cultural sector becomes more and more acute:

This has often been mooted in the sector but has yet to be achieved at scale. The key fundamentals of this approach – the need for a return on investment and for securitisation (asset leverage) – have continued to be elusive but might represent the biggest potential for wholesale shift in the sector in a generation, similar to that achieved when the Higher Education sector moved to a student fee/loan structure, or social housing being provided by third-party organisations rather than directly by local government. Clearly the technical mechanisms of change are different, but the impact could be on a similar scale

For the purposes of this work we shall adopt the same definition of Capital as was used by “Capital Matters”[1], namely

[1] Bolton et al, 2008 p38

Capital is the money or resource that enables an individual or organisation to generate wealth of the initial investment in a new business.  Economists refer to knowledge and skills as human capital.  In this report we are concerned primarily with ‘working capital’ i.e. the sort of financial capital and organisation needs to meet day to day expenses and pay its bill when they come due and ‘development capital’ i.e. the money that an organisation needs to invest in its future development (for example in research and development for new products and services, the taking to market of new products and services and organisational capacity to deliver for example, by introducing new systems or processes).”

With a strong track record around finance and the creative industries, CAF can bridge that gap of specialised lending with sector-specific understanding.