Is money the necessary evil or the gateway to the artistic freedom on creative industries? How creative content could be transformed into revenues? What should change in Finnish film and television traditions in order to succeed globally? How about the gender inequality on game industry on this era of #metoo and demand for responsible investing? Timo Argillander, co-founder of a venture capital investment company is here to bust the myths of the working methods of creative industry.
IPR.vc is a dynamic 3-year-old company specialised in risk investment in European digital media content. More accurately, company invests to film-, tv- and game productions, which have international market potential. The first investment fund of IPR.vc is 20 millions and the second one will more than double the sum. The investors are institutions, for example, pension insurance companies.
The challenge of Timo Argillander and his partners Tanu-Matti Tuominen and Jarkko Virtanen is to understand the content production processes, see the growth potential, understand the mechanics and the value of creative industry and to translate that to the language of finance, where only numbers, excel spreadsheets and profit expectancies matter. Luckily they don’t work alone, instead they have a network of experts to give consultation on the investment targets.
What the fund?
“Venture capital investment company works in a way where institutional investors invest money in the fund and our company is a management company who makes the investment decisions on behalf of this fund. We have to invest our own money as entrepreneurs into the fund as well, so that there’s also our own stakes in the game. But most of the money comes from different institutional investors such as pension insurance companies”, Timo explains.
The company operates on two sides: finding good investment targets and good investors. The fund chooses the targets upon the principle of venture capital investment. The ground rule is that one third of investments fail, one third brings you back your money and one third makes a good profit.
So, what is so special about this? ”We introduce to investors the idea that investing to the contents provides value. We are bridge builders, because we understand how the content business works, but we have to articulate this into investors in a financial language they understand. The reason for existence of our business is to create international success stories. In addition we want to show that investing the content is a good business. These two things guide our work. We have fans in the world that admire our way to approach the issue: a combination of eagerness and cool analysis”, Timo enthuses.
How do I get money from the fund?
“Venture capital investor invests in people. We have to discuss and find an understanding, if the people are really willing to make it; do you dare to dream big?”, Timo starts.
When evaluating the investment target options, IPR.VC reads through the project plans and evaluates the content to determine how visible is the international potential; what kind of financial partner and network is seen on an international level. Business dynamic is different with games: no profit is guaranteed because there is a lot of international competition.
The basic rule of mobile game business is that the productions are done internationally and include high risk. The novelty value that might interest the investors could be, for example, the learning games that are genuinely entertaining.
How a student of creative industry can be prepared for international business?
Metropolia University of Applied Sciences is the biggest UAS in Finland which offers studies in culture and creative industries. Timo has a few mind drills for the students: “When you make productions, the basic logic of business is that you create contents that touch as many people as possible. When you make it in a smart way, you’ll get a good financial remuneration. When you make a good financial remuneration, it augments the possibility to make independent decisions and be less dependent on financial support from the outside. And when the producer has its own capital, you have more influence on what you do. The economy is a tool for freedom. Partly it is about learning and understanding, that you take the entrepreneurship as a practical skill, not as an ideology.” Timo sums up.
Another issue is knowing people. ”Networking”, as you might have heard the term too many times.
“That you really know and drink red wine for example with the French… And then when you need someone, you can call a contact if they know that someone who might be able to help. We have good quarters in Finland, that promote Finnish internationalization. Everybody should think whether they could do an internship or participate in an event abroad in order to expand personal network. Contacts are born only through visiting different places and talking with people. Finnish usually have a positive reputation, we are nicely neutral”, Timo has observed.
The content and values are key to success
The most critical work of a venture capital investment company is to find the investors. Of all IPR.cv investment products the detective series Sorjonen has experienced a success beyond all expectations, with the profits climbing above the forecasts. “We are nicely winning here, we are making second and third seasons. There was only YLE’s presale in Finland, and then we were selling all big European countries with good contracts, and with a reasonable Netflix deal with some large markets. When series release a second season, it boosts the sale of the first season”, Timo sums up a practical example of success. At the same time, he challenges the Finnish producers: “We still have that way of thinking that an international profit is a nice bonus, when it should be the other way around: it should be the main reason why even start a production. In financing many still sell the streaming rights to some countries beforehand, even though it reduces the final sales potential and may drive away the interest of investors. We have public institutions that finance, but they are not clients. Production companies still use too often excels for financial budget, not for predicting sales.”
In the productions of the creative industry and even in the end products among games and film & tv the gap between genders is quite visible with male majority. Ethical investment is the trend. How responsibility issues affect choices of investment targets? “Before the investment decision we make sure that the company is committed to responsibility issues and it must be realized as real acts, not only as formality. It means that they are committed to follow the regulations of labor legislation and contracts, health service, control of environmental risks and so on. We want to develop the company from our part. There are three important things according to the field: one is the responsibility of contents. We do not invest in first person shooter -games, for example, because basically people shouldn’t be shot, especially not in a VR-environment. Second thing is that we are working to prevent harassment; we require a commitment to the rules and regulations of that field. Third thing is that the equality progress in the field is slow. Only 19% of the key persons in our investment targets are women, and this needs to be studied more carefully”, Timo worries.
What should those in minority do to enter the industry? Timo ponders carefully: “We are searching for investment targets of high risk. Based on common understanding women take less risks, however, this is not about taking crazy risks, but more about abilities to work well and go far. For female students I wish that I can put my words well: we need border offenders, don’t stay in the traditional, prevailing role expectation, that you couldn’t take risks and succeed internationally.”