Investing in UK’s film, TV & game producers: UK Creative Content EIS Fund in association with BFI

Investing in UK’s film, TV & game producers: UK Creative Content EIS Fund in association with BFI


Hello, I’m Alex Davies,
founder of Wealth Club. Today I’m with John Glencross
of Calculus Capital to talk about the
UK Creative Content EIS Fund. [Music] The UK Creative Content EIS Fund –
it’s a new fund, tell me about it… what does it do and
how did it come about? We have partnered with the BFI, who did go
through a very robust process to select who they would partner with, in order to make EIS
investments into the most promising companies creating the content which is sold to the Netflix, the Amazons, the BBCs etc., which is the means by which that highly
competitive industry competes for viewers. Global demand for quality content is off the
scale – literally off the scale – because you have so many different platforms,
from the streaming services like Netflix, to the broadcasters, the YouTube, the Amazons,
all requiring proprietary content to compete for users. If you look
at the streaming services, they are going to commit
$50-60 billion to original content. [Music]>That’s wonderful, isn’t it?>It is perfect! [Music]>I am ready to serve you
because I love my people!>Job done… Nice work, lads. So it’s very different from what you’ve
done before and made your name in. Why have you got the experience to do it, or
what changes have you made to ensure you do? Well, I think what was important when the
BFI was looking for whom to partner with was they wanted a growth investor – we have for
20 years been a growth investor. They wanted somebody who had a reputation of operating
within the spirit of the legislation, because clearly it’s very important to them that investment
is done in the way that not only meets the letter but the spirit of the legislation.
We’ve embraced many industries over 20 years, but obviously there are particular characteristics
and we have appointed a media firm called Stargrove [Pictures], who are very
experienced in the content sector, to be our strategic adviser,
our strategic consultant in this area, to help us identify the opportunities and to
evaluate the various opportunities. So we’re working with
experienced media advisers. So can you give us a flavour of
the types of companies or projects you’ll be
investing in? Well, yes – it’s early stage, obviously
I can’t name names, but we are already quite a way down the line with a number of
companies where I think you would recognise some of the names
connected with those companies. It’s… Our investment criteria are we want
companies which have experienced individuals who have shown a past track record of selling
their content, of getting their programming commissioned, whether it’s a Netflix, a BBC,
or to Europe or the Far East. So we want experienced individuals, we want a slate of projects
at various stages of development. We are not about investing in a project, we are about
investing in the companies that create the content for this industry, and we want a slate
of projects that they have at various stages of development. And we want a
multi-platform strategy. This is not about investing in films, this is investing in companies
creating the content for the various platforms that exist today. And clearly when you look at
the money being being spent by the streaming services, the response of the
traditional broadcasters etc., and also the way the Googles and the YouTubes
and whoever are responding, we’re looking for multi-platform strategies
capable of accessing or to providing content into different parts of
that distribution industry. So if I invest, what exactly
will my money go into, in terms of what will
that money be used for? Well that money will be used by companies
to develop their projects, to develop the scripts, to employ the individuals, to plan the projects
and to an extent to launch those projects, and to be able to market them to the distributors, the Netflix, the Amazons, the Disneys etc., the BBC, the ITVs. So it is providing
growth EIS investment to growth companies in this sector in order to grow,
create and develop their product, and to scale. And does it rely on these companies having
a hit for me to make my money? No, I mean, you know, a hit is good,
I mean many of the people we’re dealing with have already been connected with
programs that have been very successful in the market. This is about those companies growing
and scaling. I think one of the things that perhaps is little-known is just how active
the M&A market is in these companies. Going back for a number of years,
there is a very active M&A market and that’s obviously where
our investors will get their exit. That M&A market is both larger players
in the industry aggregating – which is a tradition, you know, it happens
in all industries, you get vertical integration – you will get people like Netflix
acquiring companies, you will get the BBC acquires companies,
production companies, companies that create product – ITV does,
the European distributors do. So you have a very active M&A market,
you then actually have the larger private equity houses participating
in this sector – Lloyds Development Capital, which is a level above us in terms of where
they operate in the market, and if you go up to the top end you will see names like KKR, another
of the global players in this sector. So there’s a very active M&A market, there’s also
seeing the larger private equity houses investing at the larger level. We’re very happy, we’ve
done it in the past and in other industries, we’re very happy to be part of the food chain
where we have been taken out by a larger company, by a larger private equity house that takes
that company to an even higher level. So it’s a very, very active exit market, and that
is how our investors will have their returns. And how long would you expect to be invested? It normally takes three to four years for
companies to get traction, to be able to achieve the value that we’re seeking. So our
investment horizon is four to five years, which is actually in line
with EIS investing in general. And why would – because you talk about the
mergers & acquisitions, why would another company buy
one of these? Is it for the IP, or for their future potential
at producing things? Well it’s both, and in a way it was ever thus –
I mean, big companies buy the small creative guys. You will see the big advertising agencies
buy the the new guys on the block who are creating the waves, who are creative, and
you see it in other industries as well. So I think the reason why they are buying the
companies that are creating the product, successfully creating the product for today’s market, also
I mean if you have a series, and it’s going to be commissioned for repeat series,
you actually have future revenues that you can see from your existing IP.
So I mean we shouldn’t overlook the value of the IP in these companies
to the acquirers. And how risky is this? Well I think it’s interesting, we have a portfolio approach, we have companies that will have multiple projects at different stages of development, we require them to have a multi platform strategy so they’re not just, you know, we’re not just
trying to have a successful independent film, we are looking
to provide the content required by the streamers, the broadcasters, everybody,
which is tens of billions of dollars of demand for proprietary content. So we have a portfolio
approach, we have very developed investment requirements in terms of a slate of projects,
in terms of multi-platform strategy. So I would say it is actually no
greater risk than any other sector because we are not about investing in projects, we
are about investing in companies to supply content to a global industry, to help them
create, grow, scale. So I think it’s very much within the
mainstream of EIS investing. And what sort of returns
would you be expecting? Well we are saying we’re aiming for 2x –
excluding all tax reliefs, obviously – but I mean my feeling is that we can do better.
But we’ve never been somebody to offer, to talk up returns and then disappoint. Our
aim is to deliver what we say and deliver more. So we’re talking to investors, we‘re
guiding to 2x, excluding all tax reliefs. And so why should I invest in this EIS
if I’m going to do one this year? Well it’s a very good question – the
minimum investment is £10,000, it is a new product being offered by a very experienced
manager, in conjunction with the BFI, who are central to the creative industry in this
country. It’s something that advisers can talk to their investors about. Most of
the product, it seems to me when I look at EIS offerings, are pretty much what
was there last year, all people offering similar products that I have yet to know who they are.
So I think when you have, when you look at the dynamics of this industry, where you
look at the way that demand is going off the scale, when you look at the UK’s ability to
provide that, to meet that demand globally, and you have strict investment criteria in
terms of the nature of the companies, and it’s a different product in terms of what
it’s investing in from an experienced manager who has shown over 20 years, I believe, that
we can get to grips with many industries. And we are supported by some of
the best people in the industry. John Glencross of Calculus Capital,
thank you very much. Thank you Alex. [Music]

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