Head honchos at PE and VC firms may donate to museums and sit on the boards of dance and theater companies, but do the firms themselves contribute money to the arts? The days when artists had rich patrons are long-gone, but there must be some examples of PE and VC firms supporting the arts. But what companies would receive funding? How does one support the arts if there’s a rate of return to target (you know, because the arts is such a reliable source of income)?
That was the question that arose when news came of Beringea’s $3 million funding of the Detroit Institute of Music Education (DIME) a few weeks ago. The DIME deal seemed a solid answer to the question: perhaps PE and VC firms are now mainly investing in companies within the ecosystem supporting the actual pursuit of the arts, rather than directly supporting artists. But one data point does not make a trend, so in order to answer the question, we took a look at PitchBook data reaching back to 2010 to get a beat on the industry.
PE and VC firms have been more willing to invest in the arts in recent years. | Source: PitchBook
Defining the arts proved to be a bit difficult at first, but if painting, drawing, sculpture and literature can be taken as the broad categories, then all that remained to be done was to sift through the data and remove companies that were involved but did not directly contribute to the arts.
Combing through those results produces some interesting insights: the biggest deals definitely focus on the financial side of the arts, with the $600 million buyout of music licensor SESAC in January 2013 topping the list. And music appears to be investors’ primary focus, as nearly all deals in the arts since 2010 involve the making, management and/or monetization of music (counting music education as a roundabout way of making music). Companies like Splice, which provides a music creation platform, or record label and marketing firm Mirrored Media, account for most of the deals in the space.
Of course, there are a couple of contrasting notes to the dominant motif of music. Media Source, a company serving the library community, was sold by The Riverside Company in late-2011 to 21st Century Group, New Canaan Funding and RLJ Equity Partners. Even the famous Blue Man Group obtained $25 million in growth capital from GF Capital Management & Advisors in 2010. The most notable company in this category, however, did draw some inspiration from the musical scene: Art.sy, which recently received an $18.5 million Series B financing, collates high-quality images and information about art submitted by galleries. Similar to Pandora, the site employs algorithms to suggest other artworks to users based on what paintings they like.
On the whole, however, investors seem drawn to companies involved in music.
One of the more intriguing companies that popped up in the PitchBook search, apart from Art.sy, was BioBeats, which makes biometric software that sonifies and visualizes brain waves and heartbeats, letting users blend music with the pulsation of their hearts. The company is focusing on how to utilize this technology in healthcare.
BioBeats’ most-recent financing was in 2013, the most active year yet in the last few years for the arts, with 20 deals. In fact, from 2011 to 2013, the arts space grew steadily, from 14 deals to 20 deals, with nine already completed through the early part of April this year.
Featured image courtesy of Wikimedia Commons user Polimerek