At the beginning of this year, the founders of Three Sixty Entertainment pulled off one of the largest angel fundraisings in the UK to stage a show that looks set to gross £10m in its first year. Co-founder Colin Wilkinson tells Growing Business how tearing up the business plan made the venture a show-stopping success
When they set about raising £2.75m in January to launch a production of Peter Pan in May, you’d have been forgiven for thinking the founders of Three Sixty Entertainment were living in Neverland themselves. Not only were investors recoiling from a global financial crisis, but after two years spent tapping theatre angels and sponsors for the necessary funds, Mat Churchill and Charlie Burnell had managed to raise just £85,000.
It would take a lot more to bring this particular vision to life – combining CGI with a spectacular tent that could project the graphics in 360-degree splendour around the audience, immersing them in the action.
Having already postponed a May 2008 launch by a year to buy some time, by November Churchill and Burnell knew they could be about to miss their chance to stage the show in Kensington Gardens, where JM Barrie is said to have met Sylvia Llewellyn-Davies’ sons, aka the Lost Boys, a source of much of his inspiration for the text.
After enlisting the help of serial entrepreneur Colin Wilkinson, he advised a complete rewrite of the business plan. “I get approached by lots of people wanting assistance in starting businesses. Many are pretty good and a lot of them aren’t,” says Wilkinson, whose eclectic career includes stints at Energis, Accenture and even starting up a video conferencing business with Noel Edmonds. He is now chief executive of Incubation UK, where he buys distressed companies and helps people set up businesses. “Every so often an idea is so good that I want to actually go and help make it happen,” he continues.
Churchill and Burnell certainly fell into this category. He spotted two “highly impressive individuals” with a phenomenal idea; but the deadline was tight. They launched their new investment proposition on January 5 2009. “There was a big sense of urgency,” Wilkinson recalls, and perhaps understates, given that they needed to raise £2.75m for their pre-revenue business at the height of the global economic meltdown. What’s more, they then needed to construct the tent, cast and rehearse the actors, market the production and sell tickets in time for opening night on May 26 2009.
However, three-and-a-half months later they had raised the funds from 58 angel investors – the largest number of angels to invest in a single round in the UK – and the show went on as planned. But raising this level of angel investment in near-record time was certainly no walk in the park.
Act two
“It wasn’t as if we had this magic formula and everyone flocked to us like the pied piper of Hamelin,” he says. “We probably spoke to 1,000 potential investors. I have a very wide list of contacts, as do my colleagues, and we went to angel pitches. We were working somewhere between 18 and 20 hours a day. At least once a week I was working right the way through the night, because when people in London were sleeping, we were calling LA and Australia.”
So how does a company that has raised £85,000 in two years suddenly generate £2.75m in three-and-a-half months? First of all, it became apparent that the funding model they had been pursuing was no longer viable. Churchill and Burnell had originally sought to raise half the money through sponsorship, and half from angel investors that specialised in theatre.
“In 2008, the bottom fell out of the sponsorship market,” Wilkinson explains. “I could also see that it was going to be a really tough call to ask people to invest in a single show in London that had to wash its face and then pay back profits. Not only that, you’re going after a very specific, small niche of the investment community in theatre angels.”
Selling the opportunity to invest in one show was a big gamble at the best of times, unless you had specialist knowledge to assess the quality of the script, actors and director. This limited their options to a small section of the investment community. However, Wilkinson saw that what they had was actually a straightforward business proposition: investors could buy into the Three Sixty Entertainment business, which would export successful productions around the world.
“I recognised that what they had was far more significant than a single show, and they saw the potential to tour this show around the world,” he says.
One of the major selling points of this new proposition was its scalability. If a show proved to be a particular hit somewhere, you could stay put, clone it and continue to tour the cloned show. “Then, of course, there’s the scalability of any number of classic children’s texts,” adds Wilkinson. “So you can continue the same pattern, which is to open in London – one of the best launch pads in the world for shows – and then take them on tour.”
Building on extensive market research already conducted by Burnell and Churchill, they could point to Warhorse, which had 99% box office capacity at the National Theatre, and the Harry Potter films as adaptations of other children’s texts with mass market appeal.
Not only did the new model give them a wider investor base to pitch to, there was also a stunningly successful precedent for this type of proposition to get investors hot under the collar. “The whole dramatic, chic urban tent and touring spectacular shows had been achieved successfully by the likes of Cirque du Soleil, where there are about 100 locations around that world that have that kind of capacity,” explains Wilkinson. “Just as they’d made modern touring circus their brand, we wanted to make the brilliant retelling of classic children’s texts for adults and a family audience our brand.”
Their research suggested that there would also be 100 viable locations for their business around the globe, with an audience capacity large enough for around 100,000 people to spend £60 per head (or equivalent in local currency) on a particular show.
What’s more, once a show has been produced it’s cost-effective to take it on the road, Wilkinson says. “Many of the actors will be familiar with the show and you’ve got all the moving parts. All you’ve got to do is spend money on your publicity prior to launch.”
Feet on the ground
However, when talking to investors about your business’ potential, you have to be able to back up these assumptions with hard data – ideally supplied by independent third parties. Wilkinson did his own due diligence before agreeing to get on board.
“One of the things I wanted to know was whether this market showed any signs of being alive in the way that others weren’t,” he says. So he found the one person in the UK who gets access to all box office data for West End theatres on a week-by-week basis. “While he wasn’t allowed to tell me anything about any individual show, he could give me up-to-the-minute – literally last month’s – trading records.”
The data revealed that, in the first quarter of 2009, feel-good family entertainment was up 2.6% from the same period in 2008, which itself sat on a stack of five year-on-year all-time records.
“To say that 2007, or even the first quarter of 2008, had record trading for theatre was useless. No one cared about that,” says Wilkinson. “Suddenly you had to rip up the rule book. All anyone cared about was what was happening now as the world was falling apart in front of their eyes. So my opening pitch was: ‘Isn’t it good to know that in this time of economic winter there’s this one sector that’s booming?’” Crucially, he could then establish credibility in his source, who had access to up-to-date information that was not generally available, and was then able to actually show them the data.