Gary Collins, CEO of Red Rock Entertainment, Anna Sofat, Anthony Willis, Daniel Rodwell and Lucius Cary came together at the GB Investments EIS Roundtable in London. They discussed alternative investment providers, the distinct tax advantages to investing in EIS and SEIS and the firm attraction to the returns and personal nature of investing in early stage companies.
Gary Collins, says it is not just the returns that attract investors to the film industry but the chance to take advantage of other perks. ‘We’re in a unique position from a film point of view. We try to encompass a lot more engagement,’ he says. ‘I [have] had people on set, they were extras [in a film] in fact. Once they’ve invested in one film, we invite them to screenings of other films, [to have] photographs with the star…we get them to meet them. They wanted to put money in [to films].’

He says one investor was a fan of the now-deceased John Hurt, who starred in many films including playing John Merrick in The Elephant Man, and the actor had dinner with them. ‘We like to engage people as much as possible,’ says Collins. ‘We have seminars, [with] actors, directors and producers [there]. There will be a film accountant who will talk about the tax side of it [but] I tell my staff: ‘you don’t sell this for the tax benefits’. ‘That’s an additional [tax] benefit to help protect your investment. I tell them not to talk about the relief. It’s in the paperwork, and they see it, but you don’t say: you’re covered if you lose money’. That’s the wrong way to get people to invest. We look at each film we do, and we genuinely believe each one will make money because of our [investment-picking] criteria.’

All guest speakers at the round table

Looking to the future, SEIS has made a huge impact on early stage investing. According to government figures, in 2014/15, 2,290 companies received funding through SEIS, raising £175 million of funds. This is an increase on the 2,110 companies that raised £171 million under SEIS in 2013/14. Of the money raised in 2014/15, 1,800 of the total number of companies were raising money under SEIS for the first time, representing £152 million of investment. The sectors that have benefitted from SEIS, in particular, are hi-tech and business services sectors, which took 62% of the amount of SEIS investment received. Since SEIS was launched in 2012/13, a total of 4,775 individual companies have received investment via the scheme, and a total of £433 million has been raised. Over half, 56%, of companies received an investment of over £50,000 in 2014/15, although this is down from 60% of companies in the previous year. The total sums raised are not to be sniffed at, and it is not only companies that are benefitting. A total of 8,150 investors claimed income tax relief through SEIS in 2014/15; an increased from 7,795 investors in the year before. The majority of investors – 58% – claiming the relief invested £10,000 or less, and investments of over £25,000 contributed 61% of the total amount of money raised through SEIS. While it is broadly agreed that SEIS is helping boost the economy, grow start-ups and provide an attractive investment opportunity for clients, it is not a perfect economic solution.
Gary Collins, says limiting SEIS investment in a particular company to just £150,000 was not enough for many businesses, and this lack of funding can lead to a company failing – exactly the opposite of what SEIS is trying to achieve.
‘I think SEIS needs to increase [the investment limit] to the £250,000 level,’ he says. ‘The cost of some start-ups are increasing dramatically – sometimes the £150,000 won’t cut it. You create more risk because you’re not funding it enough in the first place. It will probably fail due to lack of funding: some businesses need extra.’

GBI INVESTMENT ROUND TABLE.
Round Table, Gary Collins CEO of Red Rock Entertainment.

Who’s responsible? When it comes to investing in alternative investments, it is clear that clients need to feel comfortable taking a higher level of risk than they may have previously. However, the adviser also needs to feel comfortable that the client can stand the losses that are inherent in investing in early stage and startup companies. After
Gary Collins, Managing says clients should not invest in EIS and SEIS just through lack of choice in other investments and warned that many alternative investments have been problematic. ‘In the unregulated market, there is so much stuff out there that is never going to work,’ he says. ‘People invest in things through a lack of finding other things to invest in – they go and find it themselves.
‘When you look historically: carbon credits, student accommodation, and diamonds – nobody ever makes money on those. ‘There are alternatives that are riskier, but they do produce a return. In any portfolio, there has to be a small element of risk.’ Soft says that there is an element of risk but that it was the advisers’ job to determine whether a client can handle the risk and the losses that they could incur. ‘There are those that can afford to lose money and take that risk for that high return,’ she says. ‘Other clients, given their overall wealth, I can allocate 5% to high risk, but what difference is that going to make? I have to ask what impact it will have on their lifestyle if something goes wrong.
Red Rock Entertainment works in conjunction with UK production companies to raise funds for independent film and television projects. In the last year alone, 11 film and TV projects have been greenlit, involving A-list UK actors such as Timothy Spall, John Hurt, and Stephen Berkoff.

Red Rock Entertainment works in conjunction with UK production companies to raise funds for independent film and television projects. In the last year alone, 11 film and TV projects have been greenlit, involving A-list UK actors such as Timothy Spall, John Hurt, and Stephen Berkoff.

 

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