Astound: Into the Mind of an Investor

Yesterday, we hosted several Toronto area investors at an Astound Salon in the exclusive Soho House. The goal of the night was to introduce them to the creative industry as a potential space for investment, which in turn would bring about new funding opportunities for producers and arts-oriented startups.

Andrew Fisher, Executive Vice President of Wesley Clover International was on hand to speak about unlocking the investment potential of the Canadian content industries. Duncan Cork, CEO and Co-Founder of film investment platform, Slated, was also present to talk about the future of private investment in the film industry.

What we were treated to was an evening of very frank discussion about the pros and cons of investing in the creative space. This included some of the following:

The Cons:

  • High Risk Investment: Creative products often require a large investment upfront with very little guarantee of a return. As in the famous words of William Goldman, “Nobody knows anything.” A success is very difficult to predict.  Cork points out that of the 500,000 films made every year, only 3% make a profit and 500 of those 3% gain theatrical distribution. This makes the creative sector a high-risk investment.
  • Unfamiliar Sector: Investors can’t treat the creative sector as functioning similarly to other industries. For example, there is no correlation between a film’s budget and its box office performance. However in other sectors, Fisher states that investors can pump in more money to improve a product’s profitability potential.
  • Differing Frames of Mind: Producers and creative content organizations don’t think the same way or share the same needs as businesses in other sectors. For example, Cork notes that filmmakers are often not profit-oriented which is problematic for investors. To find a common understanding between them and the investor, transparent communications and some business training is recommended.

The Pros:

  • It’s Fun: Investing in the creative industry can be fun and offers a great outlet away from the more monotonous sectors. These are projects the investors will likely become very passionate about.
  • Mitigating Risks:  Some of the risk factors associated with investing in the creative sector can be mitigated. Fisher notes this could include taking steps to ensure that the project has a reliable team and a viable business model in place. The investor should also be sure that they have a good understanding of what the various business functions and revenue sources are.
  • Profit Potential: Although the creative sector is high risk, there is profit potential. Sometimes a project which most thought would be unsuccessful can perform surprisingly well. Cork noted that betting on an outlier project can result in an unexpected success, as was the case for My Big Fat Greek Wedding (2002).

Although there are hurdles to overcome, we feel encouraged about the future of investment in the creative sector in Canada.

On October 19th, the CFC Media Lab will be hosting the ASTOUND Summit. This will be worth checking out once we release details. For more information about the ASTOUND Initiative, please visit www.AstoundInitiative.ca.