Kitchen-table companies score smash hits

It may not sound very rock and roll, but the kitchen-table inventor of a system that enables owners of LPs to both display the often iconic cover art of their favourite albums and play the records inside is certainly fulfilling a need for music fans of a certain age.

Andrew Heeps is a classic example of an entrepreneur using his own frustrations to produce a business. Like many music fans, the former music business marketing man had the problem of being unable to both admire and use his vinyl album collection. The solution also came in classic fashion – in a pub, with the idea hastily sketched out on the back of the proverbial cigarette pack.

Moreover, it is classic in that the idea is simple. Previously, displaying the artwork of a favourite album by the Rolling Stones, Pink Floyd or whoever generally meant removing the disc and then putting the cover in a conventional picture frame. However, Heeps' Art Vinyl has invented a frame that not only holds the thickest of albums but can be clicked open when you want to play the music inside and clicked shut when you want to put it back again – or swap it for another album. It's obvious when you think about it, but nobody thought of it before. As a result, it has won three patents.

Six years since the invention was tested via a stall in Spitalfields market, 100,000 units – at £39 apiece – have been sold to such customers as The Conran Shop, Selfridges and the O2 arena.

"The vinyl revival has undoubtedly encouraged music lovers to take a closer look at their album covers, but I think that in a small way, our business has as much fuelled that trend as benefitted from it," says Heeps.

This is just one example of how small businesses are helping change the face of the music industry. Spotify, the digital business that allows listeners to download music legally for free (or for a fee if they don't want adverts), is attracting considerable interest, but it's not alone. On the face of it, the £3.9bn-plus UK music business is dominated by goliaths; be they powerful bands and promoters, record labels or distributors. Yet behind the scenes, says music industry consultant Steve Redmond, the sector is more cottage industry than multinational monolith.

"Music is powered by a plethora of small, spin-off businesses that specialise in a single area of expertise and for them, as for many other entertainment and media small and medium-sized enterprises (SMEs), the lack of access to finance is their biggest barrier to further growth," he says. "If you don't have access to cash up-front, you can't boost your manufacturing output and without a decent output, many investment firms won't invest in you. It's a classic Catch 22."

Recent CBI figures bear this out. While the creative industries together account for more than seven per cent of GDP, and have shown consistent, above-average growth for more than a decade, their disproportionate reliance on micro-businesses and SMEs has left them vulnerable to the current squeeze on investment.

In common with many artistic entrepreneurs, Heeps has until now relied heavily on bank loans and family largesse to keep his firm afloat. With the huge US market now looking ripe for exploitation, though, he is currently in advanced talks with the venture capitalist community about a potential £400,000 cash injection.

Although the idea of going cap-in-hand to the producers of the television show Dragon's Den has crossed his mind a few times, Heeps adds that the real-life dragons he meets, whose search for new investment opportunities remains strictly off-camera, "are every bit as exciting as the telly version."

Impresario Harvey Goldsmith has been one of the country's top music promoters for more than 40 years. Along with Sir Robin Miller, former emap and HMV Group chairman, and Frank Presland, Elton John's manager, he sits on the executive team of Edge Investment Management, one of the country's leading specialist media and entertainment funds, worth over £100m, and a well-established SME talent-spotter.

With a broad portfolio of businesses in everything from live concerts and theatre productions to television character merchandising and online talent shows, such as 1Click2Fame, Edge founder David Glick argues that the recession could ultimately help rather than hinder small entrepreneurs.

"Entertainment has always been led by innovators, but the funding for breakthrough products and formats has traditionally come from the big boys; the publishers, studios and record companies," he says. "With these large firms no longer prepared to take risks, there is an innovation vacuum opening up right across the sector. Partnerships between small entrepreneurs and venture capitalists offering cash, mentoring and a unique black book of contacts now have a unique chance to fill that space."

Although live gigs are an important element of the Edge portfolio – it has funded concerts by such artists as Franz Ferdinand, Eric Clapton and Backstreet Boys – the real money to be made, says Glick, is in stretchable media properties such as the vampire yarn Twilight, which has morphed from print to film and television to merchandise spin-offs with comparative ease.

"Good content can spread massively from traditional to new media and whether it originates from a song, a book or a design, any entertainment product that can be re-purposed for other formats is of interest to venture capitalists," says Glick.

While, for example, selling a UK record to foreign markets once required local physical offices and the services of a team of expert staff, today's artistic entrepreneur, he says, requires little formal infrastructure aside from a computer with broadband.

"Sole traders and micro-businesses in our sector can and do distribute their artistic products around the world with very little support, and nowadays, it's more likely to be from their potting shed on the A3 than from a swanky office somewhere," he explains.

While Edge probably won't be investing in Art Vinyl on the grounds of scale – Glick's mission is to shift somewhere between £1m and £10m per investment – for creative entrepreneurs looking to make their mark on a broader canvas, he is only a phone call away.