The arts, creativity and finance: how will funding evolve?

Canary Wharf

Martin Smith, special adviser, Ingenious

It would be misleading to say that Ingenious finances the arts, although we are major contributors of philanthropic money, time and expertise to arts and education bodies. Primarily we are commercial investors, business builders and business operators, but we do collaborate with arts organisations in many different ways, both financial and non-financial. What we most contribute, apart from money, is leadership thinking and commercial skills.

Very few countries are allocating more public money to the funding of arts and culture unless they are very small and very rich (such as Norway and Qatar). We can (and should) argue about the direction of cultural policy and public funding in the UK, but the general trend is clear and is unlikely to be reversed in the foreseeable future. The future of the arts and culture sector, in the UK as elsewhere in Europe, will increasingly be about finding new ways of using public money to draw in private money in a variety of configurations, using a variety of instruments. This is one of the most important functions of subsidy: helping organisations to diversify their sources of revenue and thus become more resilient.

Being heavily dependent on public subsidy has never been a virtue in itself and has too often led to compromised artistic mission. For many organisations – and many producers – the transition from the kind of subsidy levels that existed in the peak years of the noughties will not be an easy or comfortable one. But there is a younger generation of arts professionals who are more comfortable with the development of complex collaborative partnerships and multiple funding streams.

Collaborative partnerships are easy in principle and usually difficult in practice. Trust and mutual confidence are always indispensable preconditions for success in a “hits and misses” world (film, theatre, music, galleries) where relationships can be – and often are – placed under enormous stress by the near inevitability of box-office failure at some juncture.

It’s central to our general argument on policy to recognise there are critical forms of artistic and cultural development that the private sector will not back because they are too early-stage and thus inherently too risky, as in story and script development and workshops. No film development fund ever made money to my knowledge!

This kind of activity brings sunk costs, which are invariably irrecoverable. Subsidy will therefore always be essential, at minimum, to enable this kind of “creative” R&D. This is by no means the only rationale for subsidy – or “investment” – but it is the most irreducible.

Alistair Hicks, art adviser and curator, Deutsche Bank

When we devised our art concept in the 1970s our priorities were to create stimulating working environments, to break down the ivory tower mentality of the office and to support the communities in which we work. Years of pursuing this means that we now have one of the best works on paper collections in the world. This not only achieves what we intended, but backs our claim that we are a bank that thinks about more than just money.

Separately, our sponsorship of the Frieze art fairs gives us a great way of entertaining our clients from around the world while supporting exciting events in London and New York.

It’s difficult to predict how the relationship between arts organisations and the financial sector will evolve, but it’s up to both sides to ensure that it does. It’s vital that we keep on thinking of new ways to engage with artists and give them a greater platform to make a richer world and question the way we do things.

Lex Deak, founder, Tendr

Crowdfunding and the involvement of fans and supporters in the funding of arts is on the increase. Away from traditional film financing we are seeing new platforms emerge with a specific focus on creative and arts-based projects, usually in exchange for rewards over equity. These platforms provide a new source of funding but also allow supporters to engage more meaningfully with the projects and creative process.

The future of arts funding in this space? It’s likely to be a well-considered mix of social, debt and crowdfunding. Across the major crowdfunding platforms there have been dozens of projects funded over the past 12 months. One of my favourites involved the funding of a new Happy Days production by Seedrs. Having said this, many arts projects do not have the collateral to secure debt funding, so equity may only be interesting to those backers with an emotional tie to the project. For now I would lean towards social and rewards-based crowdfunding as first ports of call.

It’s important to know your audience. For example, if you’re approaching a tech-focused VC for funding of a social/arts project with limited financial return, you’re talking to the wrong person. However, it would be wrong to think ill of the VC for not taking an interest. Ultimately, if you can secure backing from an investor that is focused on getting a return then you should expect this to be their main driver.

I would advise those in the arts seeking financial support to take the same approach as other sectors: create a robust business case. If the return is not purely fiscal, quantify the other benefits. If you’re planning to seek funding from the crowd, try to secure some funding prior to launch, to create some buzz and momentum. Engage your fans and supporters in the raise and make them feel part of the process. Keep a few horses running and consider a mix of different funding sources – and spend some time looking at the various tax reliefs that you can offer investors to sweeten the deal such as SEIS and EIS.

Theresa Lindsay, head of marketing, Hitachi Capital UK plc

Hitachi Capital Consumer Finance has supported the Own Art scheme since 2008, helping more than 30,000 people purchase more than £25m worth of contemporary art and crafts. We believe that the creative industry as a whole is incredibly important to the UK, stimulating ideas and innovation across all sectors of industry. Innovation is at the heart of our business, from finance to manufacturing, which is why we were happy to back this Arts Council England initiative, operated by Creative United.

The finance industry is more creative than people give it credit for and I would encourage the arts sector to work more closely with lenders to develop new ways for artists and buyers to access finance. In our experience, the more closely you work with the sector, the more rewarding it can be for both parties.