//Sapere Fund 2.0

EXECUTIVE SUMMARY

In 2009, Wedgwood Circle will launch a capital round of $360,000 for Sapere Fund 2.0, which will focus on the creation of cultural artifacts in three important entertainment sectors: music, short films, and graphic novels. The Fund will utilize Program Related Investing (PRI), which provides a tax-deductible instrument for investors to deploy capital, and allows financial returns to be reinvested and redeployed rather than distributed. Sapere Fund 2.0 also provides foundations the opportunity to participate in important, “double bottom line” projects with a smaller minimum investment and more compressed time horizon than traditional Wedgwood Circle deals, while enabling Wedgwood Circle to leverage and empower its Sector Liaisons and reach more deeply into the artistic communities we serve.

BACKGROUND

In 2008, several members of the Wedgwood Circle capitalized a $200,000 “patron” pool of investment capital, called The Sapere Fund, to support believers in the commercial music sector who are called to be “in the world but not of it.” Sapere is the Latin root word meaning “to taste”, “to know”, and “to perceive.” Utilizing the networks and experience of Wedgwood Circle’s music Sector Liaisons (acclaimed producer/artist Charlie Peacock and the leads from bands Switch Foot and the Fray), approximately 30 artists were invited to submit business plans identifying critical areas of investment to further the commercial viability of their careers. Approximately 25 artists were funded, and a gathering was facilitated to give them a community and a foundation to equip them to be “in the world, but not of it”.

MISSION

Building on the success and lessons learned from the initial Fund, in spring 201 0 Wedgwood Circle will launch Sapere Fund 2.0 with an initial capital raise of $360,000. This new Fund will seek to generate economic and social returns through “micro-investments” of approximately $1 0,000-$50,000 in three key entertainment sectors: music, short films, and graphic novels (long form comic books). The investments will focus on cutting-edge products that can quickly enter the cultural mainstream and generate economic and social returns comparable to traditional angel investing.

NEED

“Micro-capital” for small-scale projects in such sectors as film, television, comic books, videos, music, etc., is very difficult to come by. Yet it is arguably at this very early stage and less structured level that investors can have the most impact upon a young artist’s career and hence his or her impact upon the culture. Wedgwood Circle’s primary investment focus has always been and will continue to be investing in established companies across various entertainment and culture sectors, seeking returns that would outlast any one particular product or artist. Yet, there is a broad swath of cultural innovation and entrepreneurship occurring just below this stage—at the level of the individual artist/culture creator, which up untll now Wedgwood has had no means of encouraging and supporting. Through Sapere Fund 2.0, we seek to take advantage of the many attractive opportunities we have identified through our Sector Liaisons to reach more deeply into certain sectors, developing relationships with individual artists and supporting discrete, carefully defined projects.

THE INVESTMENTS

Investments in Sapere Fund 2.0 will be focused on cutting-edge cultural artifacts that can quickly enter the culture stream, and are designed with the highest probability for creation, production, distribution, and return within one year or less (although with the possibility of “long tail” ongoing returns as well). Unlike the first Sapere fund, Sapere Fund 2.0 will be a “fund of funds” that will invest in 3 to 5 projects in each of three key strategic sectors (music, short films, and graphic novels). Investments in the Fund can be made by individuals, corporations, or foundations, and will be tax-deductible. Through a non-profit structure called Program Related Investing (PRI), any returns generated by the Fund will be deposited back into the Fund, with subsequent deployment into existing or new cultural efforts.

INVESTMENT MANAGER

Sapere Fund 2.0 will be managed by Wedgwood Circle staff, overseen by its senior advisers, and guided by Wedgwood Circle Sector Liaisons. What distinguishes the Fund from Wedgwood’s traditional deal flow process is the degree to which the Sector Liaisons will be involved in actually identifying, implementing, and overseeing project opportunities. While the investment process will be supervised by Wedgwood staff and advisors according to our traditional values and philosophy, the real impetus for each of these projects will come from key leaders “on the ground” in each of our target markets. Through Sapere Fund 2.0, we seek to give those who are best positioned to identify high potential early-stage micro- investments the flexibility and resources to take advantage of these opportunities.

BENEFITS TO INVESTORS

We believe Sapere Fund 2.0 will be attractive to investors and foundations with a passion for cultural impact. Among the benefits to the Fund’s investors are the following:

lower minimum contribution than would normally be the case for an investment pool or a single venture investment
greater diversification versus investing in single deals — risk is spread across multiple, small projects in multiple sectors
innovative use of Program Related Investing to deploy investment capital efficiently so that profits can be re-invested back into additional culture-creating and culture-supporting projects, producing a self-perpetuating culture investment vehicle
creation of tangible cultural artifacts (music, short films, and graphic novels) that offer a high likelihood of distribution within a very short timeframe;
access to much earlier stage projects than heretofore possible under Wedgwood’s traditional venture funding strategy
out-sized economic returns vis-à-vis traditional investment benchmarks

BENEFITS TO WEDGWOOD CIRCLE

Sapere Fund 2.0 is an innovative approach to strategic cultural engagement and creation. It will enable Wedgwood Circle to:

leverage the unique industry perspective, skills, and professional relationships of our Sector Liaisons and to further extend our reach within the various cultural spheres we seek to influence
help Wedgwood Circle attract investors who may have been deterred by the omplexity and due diligence often associated with traditional venture investing
operate within our existing foundation infrastructure. We expect Sapere Fund 2.0 will complement the current mechanism of deal flow facilitated by the Wedgwood angel effort, and that it will serve as a valuable “teaching tool” to inform the creation of a for-profit culture fund in the near future.
mentor developing artists and empower Sector Liaisons with hard to find financial capital
provide a “self replenishing” fund of capital that will be reinvested in the culture for the common good

INVESTMENT CRITERIA

With the guidance of Wedgwood’s Sector Liaisons, we have identified what we believe to be compelling, well-articulated sector specific strategies through which the Fund can make micro-investments in specific, tangible culture products. All of these projects can be completed and produced in a relatively short time scale—as little as 9 to 12 months after capital raise/deployment—and can be expected to be distributed into the culture within one year. The key criteria the Fund will use to select specific strategies include:

potential to shape the culture broadly beyond existing niche markets of the faith community; the products will be for the common good
potential to seed the next generation of successful culture creators through leverage of Wedgwood’s Sector Liaisons
compressed time arise in for the creation, distribution, and revenue generation
investment minimums that are small in comparison to other sectors (e.g. film, fashion) and suitable for this phase of the Fund’s development
potential to offer long tail, revenue-based returns, measured in years
potential to offer cultural returns, measured in decades

INITIAL ALLOCATION

Wedgwood Circle hopes to raise an initial capital round of $360,000 with investment units of $5,000. All investors contributing $50,000 or more to the Sapere Fund 2.0 will be invited to redeployment strategy meetings. Sapere Fund 2.0 will be allocated as follows:

Music $100,000 (2 to 5 at $1 0-50,000 each)

Short Films $150,000 (3 to 5 at $30-50,000 each)

Graphic Novels $50,000 (3 to 5 at $1 0-20,000 each)

Overhead/Management $60,000 ($30,000 for artist retreat)

MEASURING SUCCESS

The success of Sapere Fund 2.0 will be determined by

social/cultural returns, as measured through such indicators as distribution, audience share, web hits, etc., as well as critical reviews;
financial returns, including the Fund’s overall performance relative to traditional investment benchmarks;
strategic returns—in particular the degree to which the Fund furthers Wedgwood’s overall mission/reach and enhances cooperation within its cultural communities.

SECTOR LIAISONS

Sector Liaisons are prominent and accomplished artists within each sector who serve as conveners, connectors, consultants, and advisors to Wedgwood Circle within their area of expertise. The Sector Liaisons are responsible for finding deals, facilitating community amongst the artists, presenting deals within their sector, and shaping the sector investment strategy. Along with investors and others in Wedgwood, Sector Liaisons also help identify best practices to help guide investors toward opportunities with the greatest financial viability and creative merit. The liaisons will include representatives of the sector’s investment, business, and creative communities. Sapere Fund 2.0 will leverage the expertise of the Sector Liaisons by sourcing and structuring viable investment opportunities.

MUSIC

Charlie Peacock – Musician, Producer, and Sony/ATV Music Publishing Consultant
Isaac Slade – Lead Singer, The Fray
Jon Foreman and Drew Shirley- Lead Singer and Guitarist, Switchfoot

FILM SHORTS

Carter Pilcher – Chief Executive, Shorts International
Tim Washer – Comedian and Writer, The Late Show with David Letterman and SNL

GRAPHIC NOVELS

Doug Tennapel – Creator, Earthworm Jim
Jim Krueger – Writer, X-Men and Justice Leaguedeeply into the artistic communities we serve.