Explore the ScaleUp Annual Review 2020

Select a section to expand and explore this year's review..

Insight - Getting Creative

The Creative Scale Up pilot programme and the role of Angels in the scaleup  ecosystem

The Creative Scale Up Programme is a two-year pilot programme funded by the Department for Digital, Culture, Media and Sport. Three pilot schemes have run in the Greater Manchester, West of England and West Midlands Combined Authorities areas

The pilot programme addresses issues on both the demand and the supply side: how to build up the population of potential investors in creative businesses in the local areas and how to improve the investor readiness of these creative businesses – and then to connect the two. 

The programme came out of extensive work with the Creative Industry Council on access to finance on which the ScaleUp Institute and UKBAA sit and has been supported by an advisory group which includes UK Finance, Creative UK, the Digital Catapult, Edge, ICAEW, Innovate UK and other key players.

The programmes have been fully supported by the Metro Mayors who have championed the initiative from the get go – a key ingredient in scaleup ecosystem success. Mayor Andy Burnham when launching the Manchester programme stated “the Creative Scale-Up Programme will be an integral part of Greater Manchester’s support for the sector and will arm creative businesses with the necessary skills they need to succeed, ensuring we sustain the growth of this vital sector,” and Andy Street at the graduation of the first wave of participants in the West Midlands made it clear that the creative and digital industries contribute almost £4bn to the West Midlands economy.

In the three areas, cohorts of eligible scaling creative businesses were identified and received intensive and tailored packages of business support delivered through workshops, seminars, mentoring and dedicated peer support networks.  And while the Covid pandemic has changed the method of delivery of the programmes from face-to-face to online engagement, the feedback from both participant companies and investors has been highly encouraging – and many important lessons have been learned.

In parallel, an extensive review of the investor landscape has been conducted to understand and scope the opportunity for expansion and capacity building in the regional angel investor community. For this part of the programme, 20 angel networks representing more than 1,500 active angel investors and over 10,000 members have been interviewed. The networks were all based, or have significant investment activity, in the three Combined Authority areas.

The programmes

The response of the local creative scaleups in the selected areas was enthusiastic.  “We were over-subscribed and found huge amounts of ambition, across sizes and sectors,” says Nona Hunter, Creative Scale Up programme manager in the West of England Combined Authority.

The programmes took a flexible approach to participation, such as the numbers and job roles of staff in a cohort company who could participate. Not only did this widen and deepen their in-house knowledge base, it has reinforced the understanding of the importance of investment readiness and different options and opportunities available to support their scaleup journey.

“The Creative Scale-Up programme came at a key time for Global Grooves as we were working on a major capital project,” says Tom Northey, Development Lead at Manchester-based Global Grooves. “The programme provided rigorous, quality training from sector experts which we were able to share across our staff team. It helped us drill down into how we were articulating our growth plans and to whom. Perhaps most importantly, the programme allowed us to develop links with other creative businesses facing similar challenges.”

The encouragement of networking between participants generated new opportunities for innovation and business growth. “Creative businesses love to collaborate,” notes Fiona Latter, programme lead at West Midlands Combined Authority. “Peer networks have been absolutely vital,” says Nona Hunter.

Mentoring was a valuable component. The Manchester programme expanded its offer by linking activities with a local mentoring service which proved to be both popular and effective. In the West of England, a £6,000 budget for mentoring was available.

Impact of Covid

The translation of the programme to online delivery did open up more opportunities for engagement, both in terms of group sessions and one to one, making programme participation easier for businesses. Since moving online, “numbers on each workshop increased and we saw greater levels of engagement,” says Fiona Latter. “More businesses participated and the conversations were richer. “

In response, the programmes adapted their content. “We added new workshops on resilience and crisis management” says Fiona Latter, and, she notes, “interest in our workshops on value and pricing skyrocketed.”

The impact on participant companies Covid pandemic highlighted the varied composition of the sector. “There have been real success stories and some big problems,” says Fiona Latter. For example, she says, the gaming industry cluster in Leamington Spa has been doing “super well.” 

Some companies on the programme have been able to advance their plans and attribute this to their participation. “Due to the support from the Creative Scale-up initiative, I was successfully able to raise an additional £110,000 in seed funding for my business during the scaleup timeframe, and I can attribute this directly to the support of this programme as it gave me the commercial acumen and business nuance to be able to successfully pitch and close this round of funding,” says Rishi Kapoor at Paus TV, who participated in the Manchester programme.

On the other hand, the impact on sectors such as theatre and the live events industry has been severe. “We have seen some quite significant pivots,” says Nona Hunter, “and others have hit pause on their business.”

The role of angels in the creative ecosystem

Angels have a vital role to play in the creative ecosystem. However, the current regional angel market, outside of the Oxford-Cambridge-London golden triangle, is nascent. In the research and mapping of the three selected Combined Authority areas, total investment across all sectors from 20 networks amounted to £26m per annum – whereas one syndicate alone in Cambridge invests around £30m annually.

Yet over 50% of all scaleups using equity finance rely on angel investment as a key part of their growth and initial seed investment, according to ScaleUp Institute analysis. 

Furthermore, the regional angel networks have an appetite to invest further in the creative sector. 

In order for this to happen, they believe it requires:

An increase in the number of investor-ready businesses

The majority of networks believe there is a lack of investor-ready businesses in the creative sector and want to see programmes that address this

Scaleable and commercial propositions

This tends to lead angels towards screen-focused and platform-based sub-sectors such as gaming and media tech ahead of other creative sub-sectors. This reinforces the need for investor readiness among all sub-sectors.

More lead angels with creative sector expertise

Sector specific investments are largely driven by knowledge of the sector and all angel networks agreed they need to build up greater knowledge of the creative sector; they want more lead angels and sector expertise in their network to foster more investments in the sector.

Moving forward

While the pilot concludes in 2021, a number of local initiatives have already emerged as a result of the Creative Scaleup pilot scheme.

  • Twenty networks have expressed their interest in developing their knowledge of the creative sector and expanding the number of both new and lead angels from the sector.
  • A growing number of angels with significant expertise within the creative industries are being identified, who have the capability to become leaders and share knowledge and networks to help mobilise and build capacity.
  • Minerva, an existing network in West Midlands, is now turning its attention to opportunities to invest in the local games industry as a result of their engagement with the Creative Scale Up pilot.
  • Watershed in West of England is seeking to gear up a new angel network as a result of the Creative Scale Up pilot.
  • In Greater Manchester, a series of investor briefings is attracting new and existing investors to consider the opportunities presented by the creative industries and its sub-sectors.
  • The mobilisation of an investor capacity building toolkit is under way, which will feature enhanced data and insights about the creative industries and interviews with leading experts, investors and founders. 

“Angel investors form a vital part of the equity supply chain for scaling creative businesses,” says Jenny Tooth OBE, CEO of UKBAA. “However, we know from the mapping that UKBAA and the ScaleUp Institute have carried out across the three pilot regions that there is a need to build further capacity for angel investment generally and specifically to invest in scaling creative businesses.”

“The approach that UKBAA and the ScaleUp Institute are taking is to bring national good practice alongside the experience of local players in the target pilot regions to create an effective connected finance ecosystem for scaling creative industries. We will also seek to integrate these actions with relevant national policy initiatives in relation to innovation and investment including Innovate UK and British Business Bank.” 

“Drawing on UKBAA’s existing experience in providing education and support to build angel investment capacity, we are working with the ScaleUp Institute to develop a new bespoke toolkit to increase engagement and skills among existing and new investors on investing in creative industries. This will combine both detailed market intelligence and peer to peer knowledge and insights on creative industries and the specific subsectors, drawing on existing investors, industry experts and successful founder case studies.”

“The pilot programmes and research have shown the vital correlation between, and the need to link, the demand and supply sides of the equation,” says Stephen Pegge of UK Finance, who chairs the advisory group of the programme. “It sets a template for targeted and joined-up support for a sector which can build greater capacity for scaleup businesses in one of the key high potential areas of the UK economy.”