Creative producer Nick Sercombe eschewed the traditional broadcaster-financing route for his £1 million per hour animation series Hungry Hamsters, instead courting City financiers. Sarah See Toh finds out how he did it.

Article first published: June 2010

Hungry Hamsters are an animated team of hamsters that Nick Sercombe created who undertake missions each episode to save animals. Think of it as Dad’s Army meets The A-Team in a bat cave, with the voices of Brian Blessed and Alice Cooper, among others. It’s an expensive show to make – it costs almost a £1 million per hour. That’s the sort of sum that gives broadcasters heart attacks – unless you come along with a trolley full of cash or someone who’s prepared to underwrite it. 'Even the BBC is unlikely to take a risk on a property such as this unless they can make a lot of pre-sales,' says Sercombe. 'So I’ve had to fund it in a completely different way, which has given me the option of licensing it to broadcasters around the world, and of course anyone who wants to do the merchandising.'

It has cost £500,000 so far to get it developed, which has come from a number of seed investors, mainly from the City (London stock exchange), who specialize in TV or film business. A lot of the investment has been through the Enterprise Investment Scheme (EIS), which it allows people to invest in a company (with certain restrictions on the amount they can put in) and claim tax relief. There are various quirks, but should the company fail, there’s a safety net and a lot of the investment can be reclaimed against tax. It’s never a reason to invest, but it’s certainly an added bonus. You need something to encourage investors, as Governments don’t want to support you – they think the TV industry’s healthy enough. Nick has put a lot of money into Hungry Hamsters himself, as has the Danish studio animating the project, Krogh Mortensen.

The second stage of finance has been private equity. There’s one principal investor, who is English, but lives abroad. There are other investors coming in at a later stage with larger amounts of money and we have to produce a model that will reflect the repayment of the investment. 'We must give them a high return to reflect the fact that it’s a high risk venture. The only way we can do that is by devising and selling Hungry Hamsters as a family entertainment show, not just a kid’s show, so that it sits in an early evening or late afternoon slot at the weekend. What we call a shoulder prime time slot,' says Sercombe.

'There are business angels who will only invest in film or TV, and over the years I have built up a small network of these. Quite often if you bring in one, others connected with them will invest as well. This also gives them a safety net because should you require more money, you are not just calling on one or two people, you might be calling on ten, and the risk is spread across a number of people. Normally, they’re high net worth people, and this would be right at the edge of their portfolio; when everything else is safely locked up, they might use that last five or ten per cent as a high risk investment.

With Hungry Hamsters I set up a vehicle to produce and exploit the intellectual property. To attract investors, I give them a share in that company. So in that respect they will always have part of the ownership. Traditionally in film and TV, investors loan money to the production and you split the profits with them afterward. But this way they have ownership across the entire project. The object is that some day we have to sell that company – to a body within TV itself. Or you have to look at another exit route (which would fill me with dread), and that’s floating the company. But this is the way you give these guys a return on their money. And hats off to the guys who are willing to take the risks, because if you go to the bank, believe me, you’ll be shown the door very quickly.'

'So all the investors have an interest in every part of Hungry Hamsters. They could be exploiting the music, soft toys, games. We have to be careful how we lay out the licence and merchandising, because we don’t want to sell too early, and part of the reason we bring in investment from the outside is to give us choices – for instance, we haven’t decided on our UK broadcaster yet. The two main broadcasters love Hungry Hamsters, and will want to do something, but we are now going to sell it to them until the moment is right. The broadcasters like this too, as the longer process goes on, the more they get to see what they’re going to buy. So their risk is diminished and they know where they can schedule it. The same is true with licensing and merchandising; we wait until we get to the right point before we issue any licence in the territory. 'We want it to be lead by TV broadcast, and then we can go with the DVDs and toothbrushes. We can just put it out to an agency to handle that. We’ve got Hungry Hamsters to a place here the finance is nearly in place, but it all takes time. People are investing a lot of money and we all want to make sure that everything is done correctly.

Sarah See Toh Sarah is a freelance writer and animation specialist living and working in London.