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Ingenious spices up VCT market

Ingenious Ventures, the private equity arm of specialist media finance business Ingenious Media, has established a music venture capital trust which has Simon Fuller the brains behind the Spice Girls and Pop Idol on its board of directors.

Ingenious Ventures was founded in 2000 and has invested in the entertainment industry through partnerships. In April 2001 it established Ingenious Ventures LP, a limited partnership investing in five companies including Simon Fullers 19 Management, which launched the careers of Will Young and Gareth Gates.

The Ingenious music VCT will co-invest in new talent alongside record companies through companies set up specifically to develop and promote each artist. The directors believe that although there is no guarantee artists with a recording contract will be successful, they will have got that far only because they have talent and commercial appeal.

Up to 1m will be invested in each artist and companies within the portfolio will have principal rights over some or all of the recording, publishing, image and merchandising. The main source of revenue will be through distribution agreements with record labels in exchange for royalties.

To minimises risk, Ingenious will invest only when the companies set up to promote each artist have negotiated a contract with the record company for minimum royalties of at least 70 per cent of the initial investment. The artist will get a share of the royalties after the investment costs have been recouped, and they may also have shares in the company promoting them.

This VCT offers a ground-floor opportunity to invest in new talent and insisting on minimum royalties of at least 70 per cent of the initial investment is a sensible strategy given the high risks involved. However, higher than average risks remain as the success of performing artists is uncertain and often unpredictable.

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