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THE CREATECH REPORT 2021

Mapping the intersection of technology and creativity

Part 1 Investment

 

Commissioned by the Creative Industries Council (CIC)

The Creative Industries Council is a joint forum between the UK creative industries and government. Set up to be a voice for the Creative Industries, the Council focus on areas where there are opportunities for, and barriers to, growth for the sector, such as access to finance, skills, export markets, regulation, intellectual property (IP) and infrastructure. Council members are leading figureheads drawn from across the creative and digital industries including computer games, design, fashion, music, arts, advertising, publishing, film and television. The council is co-chaired by The Rt Hon Oliver Dowden CBE MP, Secretary of State for Digital, Culture, Media and Sport (DCMS), The Rt Hon Kwasi Kwarteng MP, Secretary of State for Business, Energy and Industrial Strategy (BEIS) and Tim Davie CBE, Director General, BBC.

Find out more at www.thecreativeindustries.co.uk

In association with Digital Catapult and Moore Kingston Smith

Digital Catapult

Digital Catapult is the leading authority on advanced digital technologies and the only innovation organisation with a specific remit for the creative industries on behalf of UK government.  Digital Catapult has been a key partner of CreaTech since its inception. 

Digital Catapult’s internationally recognised programmes and facilities are helping creative organisations to develop, adopt and embed advanced digital technologies that drive innovation, productivity and competition. It’s not just immersive tech that’s making a difference: applications for IoT, 5G, distributed ledgers, AI and machine learning are just as prevalent in the creative industries as they are in manufacturing, helping to drive the emergence of tech in the sector and open up new markets and business opportunities. 

Find out more at www.digicatapult.org.uk

Moore Kingston Smith

Moore Kingston Smith is committed to helping put CreaTech on the map as a unified sector, recognized internationally for its innovation, collaboration and creativity.

As the only firm of accountants and advisers with a dedicated office of over 100 media specialists, we proactively support independent media businesses throughout their life cycle. From a corporate finance perspective, this involves preparing CreaTech businesses for, and advising on, funding rounds and ultimately sales processes.

In an industry that powers on innovation, there is considerable opportunity for CreaTech companies to leverage R&D tax credits. In addition to our accountancy and tax compliance services, our team helps clients make the most of this scheme.

As commercial partner of www.thecreativeindustries.co.uk, the official website of the Creative Industries Council (CIC), and an associate partner of the CIC CreaTech programme, we are fully integrated in the drive to help the CreaTech sector thrive on both the national and international stage. Consistent with CIC’s commitment to providing a unifying platform for the sector to demonstrate its extensive investment potential, our purpose is to bolster CreaTech businesses through access to our strategic advice that supports them maximise their growth.  

As a member of Moore Global - a network of accountancy and advisory firms in over 100 countries – Moore Kingston Smith is also excellently placed to provide support to global CreaTech businesses, or those looking to expand internationally.

Find out more at www.mooreks.co.uk/media or contact Rob Husband, Partner, Moore Kingston Smith, rhusband@mks.co.uk

 

Executive summary

The UK has long been renowned as a shining light in the global tech ecosystem, and, equally, seen as a preeminent creative force in the world. 

Creativity and technology have, however, never been inextricable. This briefing is the first part of a two stage report mapping CreaTech - the intersection of creativity and technology. This stage will focus on the industrial definition of CreaTech, drawing on firm level data to bound and explore this emerging area of the UK economy.

For definitions of key terms used throughout the report, please see our Scaleup Glossary.

 

Key statistics

  • CreaTech companies in the UK raised nearly £1bn in VC investment in 2020, a 22% increase from 2019
  • The UK is third in the world for CreaTech VC investment, behind just the US and China
  • CreaTech investment constituted over 9% of total tech sector investment in 2020, compared to 6% in the US and China
  • CreaTech companies raised more than Energy tech in 2020, with just under £1bn, compared to Energy tech's £846mn
  • CreaTech VC investment represented approximately 25% of that invested in Fintech in 2020
  • Artificial Intelligence and Machine Learning based companies received the highest proportion of CreaTech investment in 2020 with £478mn raised
 

Forewords

Minister of State for Digital and Culture

Caroline Dinenage MP

The creative industries make a huge contribution to our country, both culturally and economically, constantly finding new ways to engage audiences, create jobs, and generate investment.

Whilst the UK is a European leader in the sector, this is a position that we must not take for granted as we strive to become leaders on the world CreaTech stage.

We will continue to work hard to encourage and enable the growth of CreaTech and I welcome the role The CreaTech Report 2021 will play in helping us to better understand this fast-growing space.

As almost £1 billion in investment clearly demonstrates, CreaTech will play a vital role as the UK builds back better from the challenges of the Covid-19 pandemic.

Chair, CIC CreaTech & Director of Marketing Strategy, IPA

Janet Hull OBE

Lesser known than FinTech or EdTech, CreaTech is the intersection of creative and tech industries where artificial intelligence, algorithms, and specialised software are transforming creative products, services, and business processes.

The term encompasses both the application of technology to creative industries, and the co-creation of tech products and services to improve ways of generating and experiencing creative output.

The CreaTech Report 2021 commissioned from Tech Nation by the Creative Industries Council (CIC), in association with Digital Catapult and Moore Kingston Smith, provides an evidence base for tech companies and leaders to develop their understanding and strategies to take advantage of the growth opportunities enabled by CreaTech.

The report is the first stage of research that will also look in greater depth at CreaTech’s impact on UK jobs and skills.

 

What is CreaTech?

Creative technology (CreaTech) is used to describe new tech that seeks to improve and automate the delivery and use of creative services. CreaTech is utilised to support both companies and consumers better manage their operations and processes by applying specialised software and algorithms that are used on computers, smartphones, consoles and other Internet of Things devices.

Figure 1 Illustration of the interface between creative and tech industries, CreaTech

(Source: Tech Nation, 2021)

This report looks at CreaTech companies through an industrial lens - where companies are described as operating in both the creative and tech sectors.

Put simply, we are looking at the interface of tech, and creative industries - which captures both the transformation of the creative industries by technology, and the co-creation of new tech products and services for creative outputs, processes, products and services.

Sectors that fall within this analysis include Design, Crafts, Music, Museums, Fashion, Film/ TV/ Radio, Music and Entertainment, esports, Marketing Tech, Architecture, Augmented Reality, Virtual Reality, Adtech, Gaming and Media.

 

UK overview

Despite tough economic conditions for creative enterprise, CreaTech companies raised a record £981.8mn in 2020.

There were several notable deals within CreaTech including Moonbug, a digital entertainment platform raised £95mn pushing their total investment to £209m illustrating the resilience of this area of activity.

Figure 2 VC investment in UK CreaTech companies from 2017 to 2020 (£mn)

(Source: Tech Nation, Pitchbook, 2021)

Since 2017 CreaTech companies have seen steady growth in investment which started to show real promise in 2017 with £499mn raised, increasing by 50% in 2018 to £759mn and reaching £981.8mn in 2020.

These CreaTech deals were across several areas of activity including Artificial Intelligence (AI) and Machine Learning (ML), Technology, Media and Telecom and Mobility Tech. A company may be in more than one area of activity - definitions do not separate companies but rather companies can be intertwined and be a part of multiple spaces.

Case study

Cutting edge CreaTech

Aleksandra Pedraszewska

VividQ

VividQ is a deep tech company with world-leading expertise in computer-generated holography. Our technology stack powers next-generation displays for augmented reality wearables, automotive head-up displays, and consumer electronics.

Read More

Click to read more

Figure 3 Map showing investment in UK CreaTech companies by area of activity in which they operate

(Source: Tech Nation, Pitchbook, 2021)

Artificial Intelligence and Machine Learning companies received the highest proportion of CreaTech investment in 2020 with £478mn

This highlights the importance of deep tech as a prominent driver of innovation within the CreaTech space. This huge influx of investment went to companies such as Edited which raised £22mn for a platform which AI to develop real time analytics for retailer decision making. Technology, Media and Telecom (TMT) companies raised £440mn whilst Mobility Tech companies raised £285mn.

Augmented Reality (AR) and Virtual (VR) companies combined to raise over £130mn showcasing growth in reality platforms.

Domestic and US investors accounted for 82% of CreaTech investment in 2020

Figure 4 Proportion of investment made into CreaTech companies by source country (2017-2020)

(Source: Tech Nation, Pitchbook, 2021)

Between 2017 and 2020, 64% of investment came from UK investors. In the same time period, 19% of the Deals came from the United States, 2% came from Germany and 1.4% came from France.

The top 10 investors in UK CreaTech by number of deals conducted are:

  • Ascension Ventures
  • SFC Capital
  • Downing Ventures
  • Innovate UK
  • London Co-Investment Fund
  • Octopus Ventures
  • Mercia Asset Management
  • Scottish Enterprise
  • Force Over Mass Capital
  • Founders Factory

Regional CreaTech investment has been generally resilient through 2020, though some regions witnessed sharp reductions in VC funding

Figure 5 UK clusters of VC investment in CreaTech companies

(Source: Tech Nation, Pitchbook, 2021)

  • Companies in London received £486mn in VC investment, an increase from from £352mn in 2019.
  • The South East of England raised £24mn from 11 deals.
  • The East of England raised £13mn from 5 deals.
  • Scottish CreaTech companies raised £7.5mn in investment, an increase from £4.6mn in 2019.
    

Next Steps

This briefing is the first of two parts, and focused on investment.

The second part of this research project will explore CreaTech employment, jobs and skills, and dive into opportunities and challenges for the future growth of this dynamic, and emerging sector.

In exploring CreaTech through multiple lenses, the blend of creative and tech industries, CreaTech products and processes at a firm level, and the use of creative and technical skills in a role, we hope to provide a thorough examination of this emerging area of the UK economy, and outline mechanisms to support its continued growth.

 

Methodology

The data sources for this research were Beauhurst and Pitchbook.

To explore CreaTech companies using both data sources, a number of key terms were used. They include Design, Crafts, Music, Museums, Fashion, Film/ TV/ Radio, Music and Entertainment, esports, Immersive and promenade theatre, Marketing Tech, Architecture, Augmented Reality, Virtual Reality, Adtech, Gaming and Media, Gamification, and 3D printing.

Beauhurst is data platform which allows access to over 7 million UK registered businesses, and a subset of this, 30,000 UK tracked startups and scaleups. The platform shows all the UK high growth companies ranging from those using venture capital to crowdfunding. Beauhurst collects key information including sector, company description, stage of evolution and financial statistics.

Pitchbook data was used to analyse emerging trends in technology. Pitchbook is a data and financial software company. They collect data using over 650,000 web crawlers capturing relevant information from news articles, regulatory findings, press releases, websites and other sources. They use natural language processing to filter out all irrelevant data while having a Quality Assurance team manually review the data and a research team which validates the data with the source.