Thomas Hoegh
Arts Alliance, Norway and UK

Investors are a strange breed. On the one hand they are excited backers of innovation and chasers of rewards. On the other hand they are carefully evaluating the various risks that could ban or reduce the desired outcome. In theory, this mentality goes across private funding sources, foundations and governmental funding bodies. The definition of reward varies, but for the purpose of this essay we will assume these definitions share attributes. Governmental and foundation funding sources are increasingly held accountable for programme performance and we can expect an accelerated fusion of private and public funding criteria, regardless of whether the sought-after return is creative, scientific, environmental, financial or a blend of the above.

As the reward is often hard to quantify in terms other than the financial, it often ends up being easier to focus on assessing the risk of failure and ensuring that the money is well spent. The core challenge for a successful venture/production/project is reducing the risk component, as the innovation part is always the preferred activity. Most creative people are messy and have a narrow view of what constitutes an orderly execution. Issues around logistics, contracts, accounting, marketing (not to be confused with public relations) and personnel management are often neglected. Most of the time this is for a very good reason: the passion to create and complete a project far outweighs the hassle of sorting out all the practical stuff. That tends to be postponed to the very end and is often not done at all.

One would think a firm like Arts Alliance would be investing in IP, ideas or scripts. Actually, we do not even look at these until the end of the assessment. We always start with evaluating people and their ability to execute. In most public funding situations, risk mitigation consists of a long CV, recognition and prior awards. How can an artist/technologist improve his or her chances of breaking into the public awards circle or obtaining funding from an investor? The answer to this question is best described through the 3 Ps. Superior quality is needed in all three areas:

People
Plan
Presentation

People

My assumption is that the target readers of this book are primarily artist/technologists; I will refer to them as the "source". Although the source is important, the "doers" are infinitely more valuable. Funders look for diversity and complementary skills and backgrounds across the team. Real management experience in complex process situations is desirable. Such doers are hard to find. Moreover, they are tough to recruit into a risky proposition. Most sources are only friendly with other sources - they even shy away from business types as a group that has 'sold out' or belongs to a different tribe altogether.

If it is any consolation, the feeling is mutual. Doers generally don't understand the value of the idea or why anyone (or enough people) would bother to pay money for the product or experience. This is precisely why you, the source, need them. The opposing view is the fabric of complementarity. From here I could swing onto a tangent on yin and yang, and perhaps elevate my doer's essay into something elegant that might spring from a source, but I think I will stick to the topic.

In selecting a team, try to recruit someone (possibly an advisor) who has done some of the technical aspects of your project before. Too much time and resources are wasted by re-invention of the wheel. An example of this would be a photographer who wants to create a slide show using a dozen projectors in synch with each other. To programme the projectors or the computer that runs the show, a somewhat complex process has to be learned. Instead of spending several days learning these skills, one could find a person who does this for industrial presentations. They may not contribute to the actual aesthetical experience, but it will allow the artist to spend more time and resources on the content. Penny-pinching has a tendency to backfire, as the same photographer may spend more having to rent space or equipment longer than needed to do it all him or herself.

Funders always prefer teams that have successfully worked together in the past. Experience in execution increases the tolerance for risk from the creative elements of the plan. A venture capital organisation can help a team to shift strategy, but lack of execution often means a change in the people involved to fix the problem.

Plan

A plan is a living document that describes in great detail what you intend to do. No cultural babble is needed, just the factual plan of the product(ion), marketing, budget, timeline, technical resources, team responsibilities and deliverables. It should be created and used to provide a common view of priorities and tasks. Agreeing to a plan simplifies decision-making during the production or budget period as well as providing management, the board or programme manager of your grant provider with a control tool. A well-enabled and accurate plan is a very good example of risk mitigation that is in the entrepreneur/technologist/artist's own hands. It should form the foundation of the presentation of the project/company.

Presentation

To convince a group of investors or a grant committee that your company or project is worth backing, you need to clearly communicate to them what they need to know in order to make up their minds. Unfortunately for applicants, the norm is to look for reasons not to invest/fund rather than reasons to back the proposition. The main reason behind that practice is a demand for speedy deliberations and deal proposals. The emergence of red flags signifies the questionable quality of the proposition and may justify a quick refusal.

This brutal reality is worth bearing in mind when creating your presentation. Your reader wants relevant facts and a clean (and simple) layout, nothing fancy. It will come as no surprise that a factual presentation of the people and a summary of the plan are essential. The more challenging elements have to do with analysis of the market, competition and risks associated with the investment. The details and verifiable facts you use to back up your arguments will reassure the potential funder that you have considered the potential risk to your success. If you are aware of the risks and describe them in detail, the reader is much more likely to accept your arguments as to how to overcome them. If they discover risks on their own it will work against you.

In writing your proposal, imagine who your readers are and what evaluation process your plan will go through before final approval. All stakeholders must be in favour for it to sail through. Here we have to address the investors and the public funding bodies separately. Angel investors or venture capital companies tend to invest in "walk-in" or "found" deals. The odds of getting through by mailing a plan to someone with no prior history or link to the person/company is about one in five hundred. A "walk-in" deal is introduced to the funder by a person s/he trusts. The best of such introductions come from managers of other investments by the person or group you are seeking backing from. You can often find a list of portfolio companies on the venture capital company website or search the web for press cuttings about the company's investments. Try to find a way to see the MD to learn from them and present your idea. Ask them if they know anyone who backs those kinds of deals. If they like you and your idea they are usually happy to make an introduction. It is always good to be known as a person who supplies deals.

A rejection is not necessarily a sign that the deal is a bad one. Very often firms are stretched for resources to evaluate deals or are fundraising themselves, or more frequently are focussing on a particular area and will not be too vocal about it for competitive reasons. That brings up the second category, the "found" deal. These are easier to manage from an entrepreneur's perspective, because the funder seeks you out for your skills or area of research. Unfortunately, very few venture firms outside science operate like that, but a number of angels are known to be looking around for embryos of companies that match their interests. Be wary of the lifestyle angels who have money, but often also have creative ambitions and want to be part of the "fun". Such a funder can be a real millstone around your neck, even if they have resources.

To succeed in obtaining public funding or grants, the same principles of understanding the process apply. However, the stakeholders are quite different. The programme team of the funding body is the first hurdle; they usually require a quick and inspiring introduction to embrace the project as their own. Once a programme champion has been won, the independent expert assessor is the most difficult hurdle to overcome. They require a detailed plan equal to the one described above, but they usually require a meeting with the applicant. Meeting face-to-face is advantageous. Be well prepared to present your execution plan and keep the product demonstration to a minimum. The committees of the various funding bodies rely on the recommendations from the programme officers and outside assessors when they approve or reject a deal.

Conclusion

To succeed in raising funds, you will need to convince the decision-maker that when they review the decision five years later, they will still believe it was a good decision. A failed project is not necessarily a bad decision as long as the risks were spelled out and understood from the outset. If you can convince a funder that there is a large market for your product/service and you know how to bring the customers in, then you are on a good path. For art projects, shared learning of new methods with peers or students is likely to be "return" ideas that appeal to funders. The tipping point always comes from a reassurance that the execution will be flawless. To get them to listen, a small taste of the art sets the ball rolling.

- continue to CH 22: Investing in New Media: Judging Criteria for Tools and Applicationsin the EC and International Markets

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