Billions for billions

How the creative industry looks like in the accelerator GenerationS.

The creative industry is something that traditionally is very interesting for venture investors and at the same time puts them to a nonplus. "Humanity" of this business is one side of the coin. The second side is the prospects for future trade, future fashion, and social reality of the future will be determined precisely here, and there are global players in the game with sales volumes that exceed the potential revenue of a start-up in this area by many times. The more interesting and important it is — the power of good ideas erases these barriers.

The track of creative technologies is something that, apparently, is almost impossible to describe exhaustively in the framework of the federal accelerator GenerationS. However, all over the world, Creative Industries — venture projects with a potentially high share of intangible assets on the balance sheet — are not easily classifiable, like everything which has a high share of the creative and largely "humanitarian" component. It would be easiest to say that creative technologies are not so much a product of creativity (this is equally applicable to all venture projects), but rather technologies that are oriented towards creative potential as an "internal combustion engine". If e. g. a technological idea is the main thing in a technological start-up in the field of innovative composite materials, in a creative start-up it is a unique way to implement the creative potential of both its creators and clients.

Start-up as social technology

In 2017, the "Creative Technologies" track became a subject of special interest — despite the "technological" thrust of the federal accelerator, the project of exactly this particular track, the BOFT network of express printing of photos from social networks, received the first prize in the final. The fact that the creative start-up has sidestepped a lot of high-tech competitors in the race has caused some people observing the final to be sceptical, despite the fact that many large new companies — one of the best examples here is the Qiwi group are primarily built on organizational innovations, and technological innovations are important, but secondary. The jury itself had some doubts as well. A jury member Andrey Ivashchenko, the chairman of the board of directors of the High Technologies Centre "ChimRar", admits that he did not put BOFT in the first place in the vote: " Сompared to other finalist projects, an undoubted merit of the project is its market approbation which showed that people really need this service both in our country and abroad," says Ivashchenko, but specifies: "Innovation in the broadest sense of the word is something that no one has done before, and it turned out to be in demand as soon as it appeared, and the one who came up with it is a true innovator like the BOFT team. At the same time, I personally did not put the BOFT project in the first place, because for me the technological component of innovation is also important, which was undoubtedly more vivid in other finalist projects."

The GenerationS jury was not in the simplest situation, says Gulnara Bikkulova, development director at RVC. After all, all the three winners of the final received virtually the same scores following voting. "Nevertheless, the team that already managed to establish production in Russia, has a product, good marketing competencies and has shown great progress within the acceleration program in terms of ideas of scaling the project into new market niches, has won the contest running the competitors a close second" explains the ideologist of GenerationS. This year the jury members preferred a more mature project, which generally meets the criteria for selecting projects for international accelerators. For example, the American accelerator 500K which selects projects in Russia considers a revenue of $ 1 million as the main criterion. This is confirmed by the opinion of the delegation of international investors TechTour, which attended this year the GenerationS final and also noted a generally not very mature level of projects in Russia while mentioning unconditional attractiveness of technological ideas."

However, for the most successful creative start-ups, it is common to "break out of the ranks" and not succumb to formal classification. In GenerationS, within the Creative Technologies track, one may distinguish several directions. The first one is conditionally "urban": formation of urban spaces and social entrepreneurship. The second one is "media": it packs new media and an ecosystem of the entertainment industry. The third one is design & fashion. And the fourth — new technologies of retail trade. However, in fact, the directions of selecting start-ups for the accelerator is broader, and it is often difficult to say which of the directions of the "creative industry" should be attributed to this or that "industry" group. For example, automated systems of production and distribution of media content seem to be easily attributed to the "media" direction. Although it is obvious that in modern conditions, new media should have the same close relationship with the urban environment, and with the new retail. The same applies to new learning systems: what is it — social entrepreneurship, new media or entertainment industry?

The economy of things in themselves

The same questions are asked not only by the founders of start-ups for whom, strictly speaking, it would be very useful to constantly ask the question "Who are we?" and by the investors as well. The projects of the "creative track" group are brighter by definition (by purely social perception), they do not require large investments, but it is very difficult to assess their potential. The investment partner of GenerationS, the investment company KamaFlow defines itself as an "involved partner in the development of innovative and high-tech projects" while recognizing that it has virtually no fundamental limitations on project stages and sectors from which funds should be invested. Of course, there are preferences — IT, industrial innovations, microelectronics, especially at their early stages. However, this did not prevent KamaFlow, which itself is a kind of accelerator for start-ups (along with investments providing accelerating services with a reward in the form of a share of capital), from working with the CamomileQ project — an online system for training emotional intelligence and developing social competencies for women, and a number of unique start-ups at the intersection of the Internet and fitness.

Meanwhile, although gamification is one of the "hot" areas of the venture creative industry, we are not talking about any infantilism here. Despite the increased "humanitarian" component, creative industries are one of the most promising for the whole business and a highly competitive ecosystem. This is a very vivid and aggressive environment reckoning upon a very important role in the future of business. And profits that are easier to underestimate than to overestimate.

Dragorad Knezi from Publicis Communications Russia believes that an even larger process is behind the unfolding situation around the creative industry over the next decade: three huge groups of different trends are competing for the right to determine what this sphere will look like in the coming years. The first group consists of large international advertising groups that are directly interested in developing new skills and tools for working with such phenomena as "big data", neural networks, "artificial intelligence", technological innovations in training and communications, and in general everything that changes the "world of creativity" and makes it more high-tech and computerized. For them, new creative businesses in a broad sense are part of their future development. The second group is the "monsters" of the merging media and retail markets for tangible and intangible goods and services — including Google, Facebook, and Amazon. As Knezi states, they believe not without reason that the substantial part of the future "pie" of monetizing the development of the creative industry belongs to them. And finally, the third group is the third pole: the largest consulting companies see in the creative industry what their clients, owners of the world’s largest brands need, namely, opportunities. It is easy to realize that the point in the game of these three groups is not about billions of dollars in a conditional decade of 2018-2028, but of dozens and even hundreds of billions of dollars — and the battlefield is, among other things, the creative industry.

Half the kingdom for the unobvious

Each group and each trend have their own development trajectory. According to Dragorad Knezi, now it is already obvious that the major world advertising agencies, following at least the instinct of self-preservation, will gradually transform in terms of internal structures from clusters of expertise in creative communication into working platforms, incubators and accelerators for creative technological start-ups in the broadest sense. Their future task is to support the emerging initiatives in the creative industries, ensure their early acceleration and the same early monetization. Up to 70% of start-ups, according to Publicis, cannot implement their perfectly brilliant ideas because of problems with the business model and monetization of the product, providing then an "effective, native and seamless" integration of new communication technologies into ecosystems and operational business of giants — including large consumer brands.

Moreover, believes Knezi, due to the characteristics of the creative industry, the result obtained by the start-up is not always limited by cash flows. In many projects of the creative industry, the result of the start-up is, among other things, the result for the client in the field of Public Relations and even Government Relations. This applies, for example, to projects in the field of commercial and non-commercial "public venues", in the field of public digital infrastructure. Here, the effect of a major brand’s work with a creative technology project is not so much sales but rather GR and PR, details of positioning on the market, then converting to brand value are often more effective than revenue growth. As experts of Publicis note, in Russia this could work especially well — when the active investor of a creative start-up would not be an investor requiring a share in business, but a brand client placing a large advertising order in a media channel created by a startup — if the project itself at an early stage of launch fits well with the "DNA of the brand", then its brand, as a rule, has nothing to buy or directly invest in it — it would be enough to provide it with advertising contracts within the framework of a strategic partnership.

If in the Western creative industry there is a distinct sense of reinvestment, in Russia this does not exist for historical reasons, Knezi states. Venture in this area outside of Russia is another peculiar "casino for the financial market" — for those who can afford one successful project from one hundred invested, and which will pay off ninety-nine previous failures. In Russia, the venture market is still young and, as strange as it may sound, it is more healthy and more adequate in this part. For Publicis, says Dragorad Knezi, the search for new and more adequate models of investment in the creative industry is a rich resource that cannot be missed. Too many new opportunities to ignore.

Undoubtedly, both large brand owners and media megasites will exploit new technologies and try to do many things on their own. Nevertheless, the future is not predetermined even on the horizon of the next ten years — it is impossible to predict how the global transformation of the creative, media, retail and information business will end, and which configuration will eventually be sustainable. The future of the creative industry cannot and should not be predicted. How it will be imagined by thousands of people now implementing creative start-ups — this is the way it will be. It remains only to invent — it is quite hard, but well paid and interesting work.

By Dmitry Butrin

Source: Kommersant

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