QUT Creative Enterprise Australia (CEA) last week announced a new $1.2 million investment fund exclusively for startups in the creative industries.
On hand to officially launch the fund on Tuesday morning at QUT’s spectacular Room 360 was Brisbane Lord Mayor Graham Quirk.
“Creative industries are an important driver of our city’s future economic prosperity, which will be recognised as part of Council’s soon to be released Creative Brisbane Creative Economy 2013-22 framework,” said Cr Quirk.
Dedicated to funding startups in design, fashion, animation, digital media, film and television, music, gaming and software development, the scheme invests up to $25,000 at the pre-seed stage and up to $150,000 at early-stage. The managers of the fund, which will run over three years, are looking for a ten-fold return on investment.
At the fund launch, Anna Rooke, the CEO of CEA, noted: “The creative industries employ more people in Australia than the mining sector, and this employment contributes more than $35 billion to Australia’s GDP.”
According to a recent snapshot of the Australian creative sector released by the ARC Centre of Excellence for Creative Industries and Innovation, employment growth in the creative industries is outstripping the broader economy by 40 per cent. The report attributes this growth to the rise of digital technology.
Rooke and her CEA colleagues, it seems, are right to feel optimistic about the creative industries sector. Timing is everything, and the timing of this fund couldn’t be better.
Fund committee chairman, John Hummelstad, explained at the launch that a range of different investment options, including loans, would be available to successful applicants due to the diverse range of businesses who will likely apply. This means that the application process is necessarily a little trickier to navigate, and potentially lengthier, than seed accelerators that offer cookie-cutter terms. In this respect, the fund has more in common with The Experiment Fund based at Harvard, than Startmate, Y Combinator or Techstars, for example.
Prospective applicants should be conscious of the following points. None of the following is a problem, per se, but it never hurts to go into something with your eyes wide open, particularly because the advice provided to CEA fund applicants is quite different in some respects to other comparable funds and programs.
- The fund is open to any Australian startup in the creative sector. No QUT affiliation is required. That’s great news.
- The CEA fund is a seed fund, but not a seed accelerator. Successful applicants will not be admitted into the program as part of a cohort. Investments will be made on demand. There are no associated “demo days”, or “startup school” activities. The form of investment will vary depending on the type of startup. This has pluses and minuses. It’s more flexible, but also potentially more complicated than applying to a program with more-or-less fixed terms.
- This is not a mentor-driven program in the way Startmate and others are. CEA’s role is purely as investor. To quote the CEA fund website: “CEA provides funding to successful applicants as an investor, not as an advisor. We will not advise you on structuring your enterprise… Any assistance that CEA gives you is only for the purpose of satisfying CEA’s requirements as an investor, and is not to be taken as advice to you or any other person.”
- CEA fund applicants must have incorporated their business prior to progressing investment discussions. This tallies with the fact that the CEA fund is purely an investment scheme, so it follows there needs to be a legal entity in which they can invest. But it differs from the policies of other funds and accelerators you might be considering applying to, so give this some thought.
- Along with an existing business plan, cash flow projections and disclosure of prior bankruptcy, the pre-seed application form requires you to submit financial statements for the previous two financial years. These requirements are somewhat heavier compared to some of the other better known seed investment and accelerator programs. Submission of these details upfront enable the shorter two-to-three weeks decision timeframe compared to the early-stage fund. The early-stage application form does not currently ask for financial statements or a business plan, but these will need to be submitted at a later point in the early-stage application process.
- For the early-stage fund, the turnaround time between application and investment will be between three and five months. A lot happens in five months at a truly scalable startup. The stated reason for the lengthy consideration period in the fund’s FAQ is that it takes time to prepare a “robust business plan and supporting materials”.
Business plans, it appears, are front and centre when it comes to this fund. Hummelstad, fund chairman, has had a long and distinguished career investing in software startups, formerly heading the Asia Pacific arm of IBM’s Venture Capital Group, which works with venture funds to help identify and position their portfolio companies for acquisition by, or partnership with, IBM. With that kind of background, where later-stage VC-backed startups are angling for acquisition by the likes of Big Blue, SAP and Oracle, it’s no wonder Hummelstad is quick to highlight the importance of a good business plan, just as he was at the fund launch.
Yet, the fund aside, CEA is arguably at the forefront, in Queensland at least, of advocating for a change in the way businesses are created, and in the tools and artefacts used to document thinking around business models. For the second time in as many years, CEA is bringing Patrick van der Pijl, CEO of Business Models Inc, to Brisbane for the Creative3 forum. Van der Pijl, like Brad Feld, Steve Blank and Alex Osterwalder among others, argues that, for early-stage startups at least, the time for business plans has come and gone.
“I think we need to challenge the status quo,” said van der Pijl at Creative3 2012. “I think we need to think different when it comes to the design of business, because writing a business plan is not interesting, you don’t get any energy from that. When you design business models, it’s much more interesting, it’s much faster, and I think if you love what you do, then you are more creative and more productive, and we’re able to design a better business.”
That might depend, though, on what goes into a business plan, how you test it, and what you do with it.
The Creative Enterprise Fund represents an excellent opportunity for entrepreneurs in the creative sector to access startup capital. Acceptance into the fund will mean, not just a financial investment, but the ability to leverage the networks and experience of Anna Rooke, John Hummelstad, CEA Chairman and former COO of Sony BMG Michael Smellie, QUT Enterprise Holdings Chairman John Puttick and others.
Rooke told us that applications from eager creative entrepreneurs are already flowing in. You can apply to the fund online at http://www.creativeenterprise.com.au/investment.