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Five essentials investors look for in Creative Businesses

Following are the five essentials that creative entrepreneurs should focus on when approaching investors as highlighted during a recent pitching session with UK investors

1. Clarity of thought: Clearly articulate the core business idea focussing on what it aims to achieve. During the organic growth of the business, there is a tendency for the idea to expand and diversify which the entrepreneur feels compelled to cater to. However, it is essential to regularly re-focus to develop a growth strategy that is clearly in line with what the business had essentially set out to achieve.

2. Market knowledge: Clear understanding of the target customer and size of market the business is catering to. Does the market already exist or are you creating a market for your product or service? Is it a niche or mass market? If it exists, concentrate on one or two markets at a time while expanding your business. Know your competition well and their market share. The organic growth of your business can be the most sustainable option.

3. Team: Investors are always sceptical about one-man / woman businesses which are how most creative businesses are structured in the initial years. Build a team based on individual competencies which match with role requirements within the organisation’s structure. Clarity about roles and responsibilities, one’s ability to delegate is essential for smooth operation especially when you’re thinking about scaling up.

4. Building your brand & positioning it: Identify the core strength of your business and continuously reinstate that amongst your customers. Your existing customer base is crucial to your growth as word of mouth promotion is the most basic way to build your brand. Be clear about where you are now and where you would want your brand to be going forward. Collaborate with bigger brands to position yourself amongst the bigger players. Network and nurture relationships with those who will be your natural brand ambassadors.

5. Valuation of your business: Move away from only focussing on the qualitative analysis and success of your business. Focus on numbers and financials instead. This is essential as it will determine how much money you can ask for. Conversely it will portray the strength of your ability to get high enough return on investment for the investor.

For creative businesses, VC and private equity should not always be seen as the only source of investment as the rate of return is the highest when dealing with them. Please understand that they are business people who but naturally want to make the most of their investment. Government grants & schemes, banks, philanthropic institutions and foundations, corporate houses, family run businesses, and the quintessential ‘family, friends & fools’ are suitable options too. In each case, you will need to define a ‘hook’ and pitch your idea differently. If you’re profitable, plough that money back into your business and you may not need to look for outside investment. If you’re still keen to work with a VC, it might help to get them to mentor you instead. It is a good way for making them understand your business and see its growth. Their understanding of your capabilities & strength as an entrepreneur also helps to build a level of confidence & trust that is mutual. In future the same mentor can become your potential investor!

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India’s Creative Industries

Highlights 

  • Media and Entertainment is one of the fastest growing sectors inIndia. The entertainment industry estimated at about US$ 9.4 billion in revenues in year 2010 is expected to reach revenues of US$ 10.7 billion in 2011.
     
  • With the advent of new technologies such as 2G and 3G, and increasing mobile penetrationIndia’s music industry is scaling on a high note.
     
  • India is the largest film producing market in the world and one of the largest employment sectors in India. 
     
  • India is the third biggest Internet market, with over 100 million internet user base and the amount of time spent on the Internet for an average user in the country is 16 hours a week. According to Google estimates, 40 million users access Internet through mobile phones and download 30 million applications. New technologies such as 3G, broadband and mobile infrastructure are also helping in propelling this trend. 
     
  • The growth of the fashion industry in India is mainly driven by the growing exposure of domestic designers at international forums attracting a large number of international clients, launch of focused business education courses for emerging designers and the establishment of an industry association. Rising affluence has increased brand awareness among Indian consumers. The Indian textile industry provides direct employment to over 35 million people. 
     
  • Growing wealth and disposable incomes of the country’s middle and upper classes, facilitated by the growth in retail infrastructure for entertainment products and services, and the demands for creativity in business is all opening up vast opportunities for businesses in this sector.

 Copyright: India Brand Equity Foundation, March 2011 (http://www.ibef.org)

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