Behind the music: Funder pressure

I recently attended an event by Music Mind Exchange that addressed alternative funding for artists. One of the panellists was Paul Bedford of Ingenious Ventures, a private equity company that invests in media and entertainment ventures. In the past, Ingenious has supported acts such as the Prodigy and Peter Gabriel. "We've also invested in lesser-known artists, but only two out of 20 recouped," Bedford said. As Ingenious handles a pool of clients looking for at least a 15% profit from their investments, Bedford says they've now decided to move out of the recorded music industry altogether. "It's just not generating enough revenue and is way too risky," he explains. Instead the company has moved into live music, and not touring artists but festival brands.

Of course, Ingenious is not the only investment firm dabbling in pop. Power Amp Music still sees it as a viable area for business, though it tends to do multi-rights deals. It recently put £500,000 into Carl Barât's next solo album, which entitles them to a share of revenues from record sales, publishing royalties, touring, merchandise and sponsorship. Charlotte Church and Madness have done similar deals with the company. Yet, as you can see, these acts are already established. Artist manager David Bianchi says he only knows of one investor that supports new acts: private investment company Shamrock.

So, where apart from record labels can up-and-coming artists turn to get the help necessary to launch and build their careers? Brian Message of ATC Management, which represents artists including Radiohead and Rumer, says it's almost impossible to get banks to lend money for new music ventures despite the government's Enterprise Finance Guarantee scheme, which is making €2bn (£1.7bn) available to viable small companies without a credit history or collateral. His band the Rifles made a £100,000 profit from touring in 2009, which Message says should make his group a less risky prospect for investors (not to mention the fact that they have management with a proven success rate). Yet their application for a loan under the EFG scheme was rejected. This has led to two members of the band leaving, reportedly due to financial pressures.

"The creative industry has been one of this country's biggest exporters for generations," says Message, who's also the chairman of the Music Managers Forum. "But who's going to fund the future of our culture?" He doubts that banks will ever loan money to artists – no matter what the government says – so instead he suggests the government takes 1% from the EFG scheme and makes that €20m available as startup seed capital.

Or they can do what the Canadian government did. About a decade ago, Canada decided to loosen its rules on the radio industry by letting American radio stations buy up local ones. They worried that this would lead to more US artists being playlisted, so in return they demanded that a small percentage of advertising revenue would be invested in Canadian talent, partly as loans and partly as grants. At the time Canada was far down on the list of music-exporting countries, but within a few years it had jumped into the top five.

Message manages the Canadian band Metric, who took advantage of this scheme with a small grant. As they hit certain targets they got more money for tour support and studio time, which added up to C$450,000. The band didn't make it big until their fourth album, so this support was vital for them to keep going.

In the 70s and 80s Britain produced numerous successful artists, many of whom dominated the music scene all over the world without government support. How come they need it now? Well, ignoring the slump in sales of recorded music, both Bianchi and Message point to the simple issue of survival. Back then, you could survive more easily on the dole while you developed as an artist, with cheaper housing and rehearsal space available. These days, it's far harder to keep a band going if members have to take on part-time work to sustain themselves. And thanks to the speed at which bands rise and fall, time to develop is a luxury most groups can't afford.