Patrick Bradley portrait

The ISCF Audience of the Future Challenge Investor Accelerator fund is set to support significant innovation in the rapidly-expanding UK immersive tech sector. With figures suggesting that British companies are already responsible for producing almost one-tenth of the global market for immersive content, this development promises support to innovators, creators and technologists to create new products and services through immersive technologies.

Its contribution will help to fill a gap in what’s been missing to date according to a key player in this sector, Patrick Bradley, who launched London-based VC firm Station12 four years ago.

Why the fund is important

“Anything that enables businesses to start to take advantage of new technology coming into the marketplace is excellent news,” Patrick says. “There is a lot of tech funding out there at the moment but what’s missing is a content application fund that sits on top of that technology.” The fund, he explains, will afford companies additional firepower to mitigate the risk taken by private investors, with the potential to encourage additional investment.

Tech for tech’s sake is pointless, what counts is a wider proposition to draw the audience in. “Nobody will visit a streaming platform like Netflix or Amazon unless they want to watch the content,” he continues. “If we can encourage more businesses to learn how to use immersive technology to create a value proposition – whether that’s in media, education, learning or training – then that’s great because that’s where the value is, that’s what people pay for.”

And in a sector with huge cross-over potential, where content isn’t limited to core industry companies but can be utilised across, for example, training, automotive and insurance, there is a massive opportunity for the sector to find new revenue streams by using its skills cross-platform.

Patrick fully understands this landscape, having worked his way through the ranks of media and entertainment into finance and investment. A City lawyer who moved into operational executive roles in music, TV and film at PolyGram, Liberty Global and Universal Studios, he later worked as CEO of Ingenious Ventures, the largest media investor in Europe, before setting up Station 12 in 2014.

Station 12 was born out of the desire to merge a continued investment interest in media and entertainment with education and learning, because he believes that content, experience, education and learning are all beginning to coalesce.

“Today a lot of learning is found through live experience and content, that’s how people access it, and it’s something in terms of human behaviour that is spreading throughout the world,” he says. New technology is constantly enhancing audience ability to access content, as well as changing the quality of how they enjoy and interact with it.

Key trends in the market

Live events and experiences are very strong in this sector he confirms. “We’re seeing lots of different propositions around this, things like bingo and crazy golf, which is expanding unbelievably rapidly; people are looking for new experiences and fun.”

And while some claim the music market is saturated, that has not been his experience. “We’ve got a very successful participation and live event that we’ve built from start-up. If you get it right, you can make very good returns in this area because people love that live experience and are willing to pay for it, it is something that can’t be replicated.”

In terms of Station12’s specific interests, they have identified several markets with potential for growth, including a television rights distribution business serving the demand for quality content from the proliferation of new platforms worldwide. “It’s a good example of a business based here that’s driving its revenues off international sales,” he says. As is a sports education business driven by the Premier League; a business school where overseas students and executives can learn how the club system works within the clubs themselves, where content meets experience meets learning.

All of their investments are based in the UK but to achieve scale, all of those UK businesses must have international reach. “We know through this sector is that it’s a global business – think of the reach of British music or British television – the scale of it is being driven by audiences outside the UK. In everything we do, the scale comes from international expansion and that is very much a feature of the sector we’re involved in.”

A strong UK investment market

Despite nationwide Brexit-fuelled fears of uncertain times ahead, he’s very optimistic when it comes to the strength of the current UK investment market.

“Within our sectors we don’t think Brexit is going to have a great deal of impact because our consumers are out in the wider world. I don’t think Europe generally has been that important to us. I know some of my colleagues in media and entertainment might disagree with me on that, but I think Asia and the US are more important.”

Applauding the current levels of innovation in the UK – “lots of start-ups, plenty of talent” – he sounds a note of caution when it comes to keeping that talent, “because talent is mobile and will move to access to capital and opportunity. Access to additional capital is important to lock that talent in, particularly in this new emerging space where we should be showing the world how good we are.”

In fact, Brexit is creating advantages in this new world he says, drawing attention to “places like Pinewood Studios, which are packed because the pound is so low. You also have massive content investment coming in from Amazon and Netflix – that’s not all coming to the UK, but UK producers are benefitting from it.”

Trends in international investment

He identifies several trends in international investment, explaining that some overseas investors see the current UK position as a value opportunity, taking a long-term view. He agrees that some investors have switched off – “certainly some of the institutional investors that we might approach to source funding have, but others have switched on, so it’s sort of a mixed landscape”. The bleakest picture is in the area of family office investment, where he confirms that many have a negative view of the UK and are waiting to see what’s going to happen.

The challenges ahead

“The biggest challenge for investment within the immersive technology sector is monetisation and creating audiences. The jury is out in sense – we need to see how well the Oculus headset did over Christmas for example, because the adoption of that technology by the mass consumer is going to drive monetisation.”

While he identifies a growth factor in mixed reality monetisation in the area of ticketed live experience, the big question is around consumer adoption of the hardware. Acknowledging that the consumer market might be difficult, he points instead to the B2B potential in terms of training applications, which he thinks will expand quicker.

“I think the market will develop and grow. The whole nature of immersive captures several different applications, it’s not just about the headset. What we’re interested in is the live market experience, the type of content Punchdrunk Theatre is developing for example, where you are in among the actors, having a mixed reality experience. The Audience of the Future grants has also supported some very interesting short-form content at the National History and Science Museums using dinosaurs and robots.”

How to support a thriving UK eco-system

Pinpointing a number of key factors, Patrick welcomes the government initiatives and money coming through bodies such as Innovate UK, enabling new technology to be demonstrated, piloted and utilised. Also important are the EIS and SEIS tax breaks to encourage private investors.

While acknowledging that the government “generally gets it”, he does highlight a shortfall in encouraging institutional money, such as pension funds, into early stage investment – “there is still a shortage of capital in the early stages”.

And though many claim the attitude to risk in the UK is wrong, he disagrees. “I think that’s a lazy explanation because actually if you are the manager of a pension fund, you’re not paid to lose people’s money or take risks with it.”

The answer, he suggests, may be through taxation or other incentives to attract that early-stage investment, while also addressing the investors’ needs. “We can’t say you have a bad attitude to taking risks if it’s not your job to take risks. Instead we need to work with government to ensure there is a proper framework for that money to come into the market.”

There is also inequality in market size, which poses immediate disadvantages for fledging UK companies as opposed to their American counterparts, all competing on the same international platform.

“If you look at the venture capital sector, the US is the largest and the UK is probably number two in terms of funds raised. If you’re a UK start-up you might raise, say, between £750,000 and £2m and think that’s a good amount but those guys in US are raising 15m and a lot of that is going into marketing so they’re going to blow you away.

“In addition, the US has a homogenous market of 325m people – we don’t have that. As a US entrepreneur, if you fail in that market you really are rubbish. In Britain we have a very small market, so it’s tough to scale out of it and build an international business. If you’re in America, you don’t even have to come out of America – you’ve got a massive one country, one market, one currency opportunity.”

What does the future look like?

“If I knew what the immersive tech sector was going to look like in five years’ time, I’d be very rich.”

Pointing to the progress of technology in, for example, the music business, from vinyl and cassettes into streaming and downloads, he knows the technology will continue to develop and enhance the opportunities available – stating the picture in five years’ time will be very different to the one we have today.

In-home entertainment is one clear direction we are moving in, he says, driven by streaming and people wanting to consume more at home. This will also enable the development of immersive tech, with consumers in a safe, enclosed environment where they feel comfortable.

Further reading

Words by Bernadette Fallon

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AotF, Audience of the Future, competition, Funding, funds, investor, Investor Accelerator