New financial instruments for SMEs, mid-caps and organisations from the Cultural and Creative Sectors
Client: Cultural and Creative Sectors
The Cultural and Creative Sectors (CCS) make an important contribution to economic output and growth across Europe. They span a wide range of activities, including audiovisual and broadcasting, print, music, visual and performing arts, heritage, design and architecture. CCS is also a significant source and user of innovation. New starts, SMEs, mid-caps and not -for- profit organisations play key roles in creating and maintaining cultural identities and diversity. However, the sector faces specific challenges in funding new activities and enabling growth; these constraints are linked to market failures at local, pan-European and global levels. The issues are being addressed through the EU's €1.46bn Creative Europe Programme (CEP), set up in 2014. CEP also facilitates access to debt finance for CCS SMEs through the Guarantee Facility that provides credit risk protection as well as capacity building to financial intermediaries.
In January 2018, The European Commission's Directorate General for Communications Networks, Content and Technology (DG CONNECT) commissioned SQW to undertake an 'Ex-ante evaluation of new financial instruments for SMEs, mid-caps and organisations from the CCS'. The study led by SQW, was supported by Visionary Analytics, Economisti Associati, and three expert associates: Emma Fau (EUcapital), Karen Wilson (GV Partners and OECD) and Neil Watson (Independent Consultant). The study involved reviewing literature and data on finance for CCS; mapping provision of supply-side provision of finance for CCS; an online survey of CCS firms; and an extensive interview process with equity investors and associations, CCS representative organisations, and financial intermediaries.
The study found that funding gaps and barriers persisted across Europe, both for loan and equity finance, and recommended that these are addressed through a mix of financial instruments and technical assistance under InvestEU. Alongside continuation/expansion of the CCS Guarantee Facility, these instruments could include co-investment with business angels through a fund structure (below €2m), and coinvestment with venture capitalists (above €2m), complemented by equity crowdfunding.
The full report can be downloaded here. For more information, please contact Osman Anwar.