Presentation on creative business financing challenges at Europrix 2008 in Graz.

1. Creative productions and financing:
Some thoughts and learnings
Tommi Pelkonen
Business Consultant
Finpro Hungary
November 28, 2008
/ © Finpro ry /
1

2. • Global organisation of international business and consulting
Finpro in brief professionals (~350 experts in above 40 countries)
• Works to help Finnish companies to succeed wherever they are
/ © Finpro ry /
2

3. • Global organisation of international business and consulting
Finpro in brief professionals (~350 experts in above 40 countries)
• Works to help Finnish companies to succeed wherever they are
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• Works to help Finnish companies to succeed wherever they are
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• Works to help Finnish companies to succeed wherever they are
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6. Introduction: learnings from megaprojects
It is not about ROI (return on investment), it is
about return OF investments!
/ © Finpro ry /
3

7. Introduction: learnings from megaprojects
It is not about ROI (return on investment), it is
about return OF investments!
/ © Finpro ry /
3

8. Introduction: learnings from megaprojects
It is not about ROI (return on investment), it is
about return OF investments!
/ © Finpro ry /
3

9. Introduction: learnings from megaprojects
It is not about ROI (return on investment), it is
about return OF investments!
/ © Finpro ry /
3

10. Introduction: learnings from megaprojects
It is not about ROI (return on investment), it is
about return OF investments!
/ © Finpro ry /
3

11. Introduction: learnings from megaprojects
It is not about ROI (return on investment), it is
about return OF investments!
/ © Finpro ry /
3

12. Introduction: learnings from megaprojects
It is not about ROI (return on investment), it is
about return OF investments!
/ © Finpro ry /
3

13. Introduction: learnings from megaprojects
It is not about ROI (return on investment), it is
about return OF investments!
/ © Finpro ry /
3

14. What are we talking about?
Project Finance: The financing of an asset where
debt service and returns on equity are derived
from the cashflows generated by the asset
/ © Finpro ry /
4

15. Financing as structure
Sharing future revenues may a new source of
financing also for digital media productions / © Finpro ry /
5

16. Financing as structure
Sharing future revenues may a new source of
financing also for digital media productions / © Finpro ry /
5

17. Financing as structure
Sharing future revenues may a new source of
financing also for digital media productions / © Finpro ry /
5

18. Reality: answering tough questions from financiers?
NOTE: Regardless of these, they may ALSO
have personal interest towards your project! / © Finpro ry /
6

19. Reality: answering tough questions from financiers?
• I’m afraid I can’t remember how this meeting was set up and I don’t
have any documents. Can you please remind me who referred you to
me?
NOTE: Regardless of these, they may ALSO
have personal interest towards your project! / © Finpro ry /
6

20. Reality: answering tough questions from financiers?
• I’m afraid I can’t remember how this meeting was set up and I don’t
have any documents. Can you please remind me who referred you to
me?
• Please give me your personal backgrounds and tell me the story of
how you know each other.
NOTE: Regardless of these, they may ALSO
have personal interest towards your project! / © Finpro ry /
6

21. Reality: answering tough questions from financiers?
• I’m afraid I can’t remember how this meeting was set up and I don’t
have any documents. Can you please remind me who referred you to
me?
• Please give me your personal backgrounds and tell me the story of
how you know each other.
• Do you really think you have the right experience to be the CEO of
the company after this possible deal?
NOTE: Regardless of these, they may ALSO
have personal interest towards your project! / © Finpro ry /
6

22. Reality: answering tough questions from financiers?
• I’m afraid I can’t remember how this meeting was set up and I don’t
have any documents. Can you please remind me who referred you to
me?
• Please give me your personal backgrounds and tell me the story of
how you know each other.
• Do you really think you have the right experience to be the CEO of
the company after this possible deal?
• Please tell me about the technology/solution/product/service/
production and the market you’re going after.
NOTE: Regardless of these, they may ALSO
have personal interest towards your project! / © Finpro ry /
6

23. Reality: answering tough questions from financiers?
• I’m afraid I can’t remember how this meeting was set up and I don’t
have any documents. Can you please remind me who referred you to
me?
• Please give me your personal backgrounds and tell me the story of
how you know each other.
• Do you really think you have the right experience to be the CEO of
the company after this possible deal?
• Please tell me about the technology/solution/product/service/
production and the market you’re going after.
• What segment of the market are you targeting and what is the
competition doing in that market segment?
NOTE: Regardless of these, they may ALSO
have personal interest towards your project! / © Finpro ry /
6

24. Reality: answering tough questions from financiers?
• I’m afraid I can’t remember how this meeting was set up and I don’t
have any documents. Can you please remind me who referred you to
me?
• Please give me your personal backgrounds and tell me the story of
how you know each other.
• Do you really think you have the right experience to be the CEO of
the company after this possible deal?
• Please tell me about the technology/solution/product/service/
production and the market you’re going after.
• What segment of the market are you targeting and what is the
competition doing in that market segment?
• Can you describe the technology architecture / production process
and whether any of your technology / solution / product could be
considered proprietary? Have you looked at the intellectual property
rights around your offerings?
NOTE: Regardless of these, they may ALSO
have personal interest towards your project! / © Finpro ry /
6

25. Reality: answering tough questions from financiers?
• I’m afraid I can’t remember how this meeting was set up and I don’t
have any documents. Can you please remind me who referred you to
me?
• Please give me your personal backgrounds and tell me the story of
how you know each other.
• Do you really think you have the right experience to be the CEO of
the company after this possible deal?
• Please tell me about the technology/solution/product/service/
production and the market you’re going after.
• What segment of the market are you targeting and what is the
competition doing in that market segment?
• Can you describe the technology architecture / production process
and whether any of your technology / solution / product could be
considered proprietary? Have you looked at the intellectual property
rights around your offerings?
• How much capital do you need to get started? How will you plan to
pay my/our money back?
NOTE: Regardless of these, they may ALSO
have personal interest towards your project! / © Finpro ry /
6

26. Reality: answering tough questions from financiers?
• I’m afraid I can’t remember how this meeting was set up and I don’t
have any documents. Can you please remind me who referred you to
me?
• Please give me your personal backgrounds and tell me the story of
how you know each other.
• Do you really think you have the right experience to be the CEO of
the company after this possible deal?
• Please tell me about the technology/solution/product/service/
production and the market you’re going after.
• What segment of the market are you targeting and what is the
competition doing in that market segment?
• Can you describe the technology architecture / production process
and whether any of your technology / solution / product could be
considered proprietary? Have you looked at the intellectual property
rights around your offerings?
• How much capital do you need to get started? How will you plan to
pay my/our money back?
• What valuation are you putting on the deal, and are you speaking with
other finaciers?
NOTE: Regardless of these, they may ALSO
have personal interest towards your project! / © Finpro ry /
6

27. What’s on financier’s mind?
And you had a humble wish that they would be sinceraly
interested about you and your production! :)
/ © Finpro ry /
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28. Multimedia producer’s concerns and trends
• Companies are small and even smaller
• Business is creative process driven
• Producer mindset determining outcome
• Finance is needed for development and implementation of creative
processes, productions and projects
• Competence and content key issues in assessment and evaluation
• Combining creative and other professional resources crucial
management challenge
• Individual insight must in hit driven business
• Messy business models
• Lacking knowledge and expertise to fullfill investment criteria
• Perceptions of the investors – lacking knowledge of creative
businesses
• Tailored financial tools not available - project development funding
is needed
Financiers, at best, know these and want
to see how you cope with them!
/ © Finpro ry /
8

29. Sources of finance for creative projects
Mandate: aim to understand each group’s
motives and needs for security on investment
/ © Finpro ry /
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30. Funding for digital media productions
Can you position your production into this
chain and struture? / © Finpro ry /
10

31. Hint 1: Pitch in a structured manner
Standardise & be ready to show them the money in max 10 min!
/ © Finpro ry /
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32. Hint 2: Use financiers’ lingua = numbers!
Express your ideas in form of: Show and know the number game_
• Profitability: Ability to • Balance Sheet
generate earnings/savings. • Income Statement
• Liquidity: Measures • Statement of Cash Flows
shortterm cash flow ability. • Changes in Financial
• Solvency: Indicates Statements
longterm financial health
and stability.
• Efficiency/Coverage:
Suggests how well things
are done.
Put some of that passion to digital media into
basics of business language!
/ © Finpro ry /
12

33. Hint 3: Understand the motives of your investor
Talk to stakeholders with their motives in mind
/ © Finpro ry /
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34. Hint 4: Convince them of you passion!
• Investors want to work with passionate entrepreneurs
they can trust on:
• Substance
• Ambition
• Managing productions / projects
• Track record
• Competitive edge
• Team of multi-talents
• Business-understanding
Show you passion - but keep science fiction out of the table :)
/ © Finpro ry /
14

35. SUMMARY: How to make your financier to
believe in you?
• The availability of funds depends on the ability to
convince providers of funds that the project is:
• Lead and created by a team of trustworthy & talented
people
• Technically feasible
• Ability to perform & deliver
• Economically viable and profitable (with right motive)
• You should talk their language - as much as they try to
understand what you try to offer for them!
• Develop your edge - not only conceptually and
artistically, but also in your business-orientation!
We know you can design excellent productions.
BUT: can you design also you finance structure and approach?
/ © Finpro ry /
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36. Remember: Do not think that financier = easy access to money
/ © Finpro ry /
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37. Remember: Do not think that financier = easy access to money
/ © Finpro ry /
16

38. Questions, thoughts,
comments...
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40. For more
information
tommi.pelkonen@finpro.fi
+36 -20 - 250 10 77
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