Welcome back, rear reader! What you are reading is the second half of a two-part series on how to find money for movies. Even if you don’t have any interest in crowdfunding, I recommend reading the first half of “How to Find Money for Movies: Fundraising” before you proceed. Not only did we clear up some widely misunderstood terms when it comes to money, but we also talked about...DISCLAIMER: Under no circumstances should you take my advice when it comes to money. Why are you listening to people on the internet?
Are we all on the same page now? Ok.
When we say the words “film finance,” we are referring to any situation in which a filmmaker enters into a business agreement that empowers another person to make money from the success of their film in exchange for paying any portion of the film’s production cost. Within that definition, there’s a handful of options for filmmakers, and each one comes with its own ethical and legal limitations. Consulting a lawyer and doing plenty of research are both important steps when it comes to deciding how you want to proceed with your motion picture financing. There are two options, as I understand it: investment capital and structured financing.
Finding investment capital isn’t just about walking into the magic investor room with a bunch of clever answers to any questions that might come up. Anybody can offer investors the possibility of making money, and there is a sea of people already out there on the internet trying to do precisely this very thing. Ethically and legally, more is required of us.
Private investments are those investments that are not traded on public markets… so unless you’re selling stocks on Wall Street, you are very likely selling a private investment. Such investments are regulated by the Securities and Exchange Commission simply by auditing them anytime the SEC notices that something’s up. If you sell a bunch of fake investments to desperate or hopeful would-be investors and then run for a non-extradition country, you are probably never getting caught. On the other hand, you know that person we all wish we were? You know that frustrating person who somehow got a bunch of people to invest in his movie without really knowing what he was doing, right before his super cheap indie horror flick inexplicably grossed hundreds of millions of dollars and generated a boatload of press?
Good luck keeping that guy out of jail. Don’t be that guy.
Figure out what the Securities and Exchange Commission actually needs from you (Regulation D of the Securities Act of 1933 is a good place to start looking), and then give it to them when they ask for it. Cutting corners here makes you a test case for any SEC investigator who want to prove they can catch the bad guy, so don’t go looking for shortcuts. While these rules may not always be the most efficient way to run a business, they were written in order to protect investors. Please remember that, and respect them accordingly.
Because your investment isn’t traded in an open market, like a stock would be, investors can’t just sell your investment anytime they decide they don’t like where things are going. When an investor hands you money, you’ll use that to build sets and pay actors and do all kinds of other things that can’t be refunded if the movie’s no good. All that investment capital is gone until the film itself generates revenue. This is an investment condition we call “illiquidity,” because liquid assets can be turned into cash at will. If an investor is going to make an illiquid investment, that investor needs to get paid a lot more than they would be for making a liquid investment they can bail on anytime they like - such as an investment in the stock market.
Being in the film industry doesn’t make an investment inherently risky. Anyone can buy stock in a film company, and it’s fundamentally no more risky than any other stock. What makes a film investment risky is the fact that a million things can go wrong, paired with the fact that none of them are in the control of the investor. Just because a thing can go wrong doesn’t mean it will, and just because an investment is risky doesn’t mean it’s bad - although many of them are, and most investors don’t make investments as risky as this. Your job here is to find one that will, and to show them an investment that’s likely to succeed in spite of - and indeed because of - all the crazy things that can happen.
In any high-risk environment, success comes down to a matter of habit. If you’re hiring mercenaries for a “smash and grab” job, you don’t hire the self-proclaimed genius with the most exciting or innovative plan. Under no circumstances would an investor send their own kid on a mercenary job to rob some bank in a violent, war-torn nation. Hire the people who have been living under constant gunfire for the last ten or twenty years. Hire stone-cold, badass soldiers with the muscle memory to find cover and concealment the second they hear gunfire.
Don’t value potential, is what I’m saying. Value experience and habit. Don’t look at talent, whether it’s your own or someone else’s, as the promise of a strong return on investment. Transform yourself into a warrior showperson, with so many strong, successful showbusiness habits that you routinely make great decisions purely by accident. Building investments that truly provide a strong likelihood of success begins with building that likelihood into yourself.
Once you’ve done that, start refusing to work with sloppier people than you. Stop working with people who compromise your investment. Fire the saboteurs. All of them. Renovate your professional standards at every opportunity.
People invest with people, so have the best people on your team. Why would you want to work with anyone else?
Meeting investors is hard. Whether or not you should spend money on “names,” or whether you should produce your film on a microbudget, or whether you should stick to a specific genre, is ultimately just a question of what serves your business plan and your personal strengths. None of these decisions will make networking any less of a giant pain in your ass.
What will make networking easier is building the habits themselves. When people know you to be a reliable leader, they want to introduce you to their financial contacts because they expect that introduction will either make them useful or make them rich. Becoming the best showperson you can be will naturally transform you into someone who meets investors more easily.
Two things make this kind of financing very much worth the effort. Provided you take the time to find an investor who trusts your expertise and vision, your business can be built according to your standards for what is right and what will work. Creating something that’s not tied down to the mistakes or faulty judgments of the industry at large is the first big point in favor of private capital… and so long as you really are amazing at what you do, being freed from the lazy, inefficient methods of doing business everyone else relies on will give you a competitive edge over rest of the industry. Secondly, making investors the kind of money they look for in a private investment, typically at least 200% on their money, will most likely inspire them to invest as deeply as possible in the long-term future you are building.
Like I said, debt capital is not my strength. Fortunately for you, this is the type of financing that just about everyone else is researching and writing about. If you’re financing with debt, then the level of cast and crew with which you “package” your film is going to mean everything to your success. What’s important to understand as you start seeking out “above the line” attachments is that your own personal definition of success and fame is not what makes an actor or a director valuable to the packaging process.
In a perfect world, what’s going to happen is this: You will cast the four biggest roles in your film with actors that have appeal and pull with foreign distributors. Ideally, you’ll attach a director with a similarly “bankable” reputation. In this case, “bankable” does not mean “financially promising.” Literally, there is a bank involved. Here’s how that works:
Foreign distributors know how much they will pay for a given actor or director, and under what conditions they will pay it. Specifically, at the Cannes and Berlinale film markets, you or your reps will meet with these distributors and show them that you have actors for whom they are willing to pay… and depending on the budget and genre of your film, they will give you little promissory deal memos with an agreement on how much money they will pay if and when the film is delivered. In all likelihood, you have no idea which actors are drawing money from which nations - let alone how much money you can expect. Getting an experienced foreign sales agent is the most straightforward way to solve this problem.
Once you’ve added in a smart tax incentive package from wherever it is you’ve decided to shoot, any product placement money, any advances you can wrangle from domestic distributors and streaming services, and any other financial incentives you’ve cobbled together… you can piece together a package of anticipated debts that’s worth a little bit more than the budget of the film. Walk that package into a bank that handles this kind of thing, and you can take out a high-risk loan with which to make your movie. Once your movie is made, you deliver it to everyone who’s promised you money and you pay back the loan.
In real life, what you’re going to find is that the attachments that make your movie work will cost you money. Since you can’t get money without attachments, this is going to seem like a sadistically paradoxical and unfair system… until we consider the fact that these actors are asking for money because they know we’re selling them like grandpa’s baseball cards at the pawnshop. Suck it up, go find some money, and start the chain reaction that drives your film’s development process.
Nobody wants to be the first person to invest in our film specifically because it makes them into the obvious scapegoat if our project turns out to be... well, you know. In the business of banking, everything is about avoiding blame. Finding your “first monies” is a matter of overcoming this lack of confidence.
Maybe that first commitment that “breaks the ice” is an actor, maybe it’s cash, and maybe it’s something else. If it seems like Hollywood is addicted to remakes and adaptations, that’s because having a recognizable brand makes it feel like “first monies” have already been invested. If people have been reading “X” book for years… then who’s to blame if the movie doesn’t work? Nobody?! Hey, I’m in!
What’s great about this kind of financing is that once you deliver the finished film to your distribution partners, fill out all your tax paperwork, and wrap up the other details, you can pay your loan and be done with it. Once the bank is all paid off, you’re free to let the film’s commercial success be someone else’s problem. Probably the biggest reason you see so many would-be big movies on Netflix is because they were financed through debt. Nobody needed the ticket sales, and nobody felt like doing the work of distributing those films in theaters. Plus... this type of film finance pays really well.
You guys, it pays REALLY well.
Talking to bankers is not my forte. Like I said, I leave those discussions to my producer and my manager. What I do know a thing or two about is this:
Contrary to natural impulse, the first thing you want to do when discussing business with a potential investor is to tell them exactly who you are, exactly what you want from them, and exactly how it benefits them to invest in your project. Literally, tell them you’re a producer and you want to discuss how an investment in your film can make them a better return than they’re probably expecting. Until you do this, any investor with a lick of common sense is going to be stressing themselves out trying to figure out your “deal.” Take the pressure off, and tell them what the deal is right up front.
As soon as you’ve made your intentions unmistakably clear, and before you start telling this investor all the great things you have to offer, get them talking. Ask them questions about their relationship with film, about how they understand the business, about their portfolio and about how they choose their investments. Avoid “yes or no” questions. Ask “how” and “why” questions that invite discussion. Let them paint a clear picture of all the ways in which they relate to investments, and to the film industry.
Now that you’re getting a more intimate picture of how your film might help them achieve their investment goals, embrace your role as the primary authority figure on your project. Feed them information, but don’t overdo it. Start with the broadest possible picture of how your investment works, and focus down to the direct benefits of signing that check and becoming your investor. With every piece of information you give them, make sure to explain the facts of the deal as clearly as possible - and also the manner in which those facts benefit the investor directly.
Finally, ask the investor if they’re ready to cut a check for your movie right then and there. Specifically, ask for the full amount that you need - and if an investor needs to invest a smaller amount, they will tell you so. If they say “yes,” congratulations! If not…
Ask your investor what they would need to see to make this investment. Once they’ve explained what it would take for them to invest, it’s time to ASK YOURSELF some questions. Do you actually have what they need? Just as importantly, is this a person who should be making film investments in the first place? Right now, you’re asking an investor to let you manage their finances as they relate to the film industry. Act like the leader you are promising them you can be, and help them make the right decision for their portfolio instead of just the right decision for your movie.
Remember, once you find an investor who well and truly benefits from the investment you’ve built… then your interests are in alignment. Forget about ever having to compromise on an important decision, just because it makes the investor feel good. If you find an investor who really does need this film in their portfolio, then what’s good for the film is good for the investor. Taking time to find that relationship upfront means you’re free to make the best and most successful film you are capable of making.
If you can give this person the investment they need, then show them. Make sure they’ve digested what they’ve seen by literally asking them to explain things back to you… and once you’ve shown them what they asked for, ask them to sign those papers. Repeat this process as many times as it takes to get a signature. If an investor hasn’t told you “no” at least three times, they haven’t even stopped to consider your investment.
Whatever you do, do NOT take “maybe” for an answer. “No” is definitive. Get enough clear, definitive decisions from enough investors, and one of them will eventually be a “yes.” “Maybe” means you haven’t gotten a clear picture of what this person actually needs to write a check. Keep asking questions, and ferret out the conditions under which they will do business.
That’s it, folks! Meet a bunch of people, and ask them for money! Make sure that everything you bring to your work demands to be invested in, and remain relentless and resilient in the grind. Take care of yourself. Avoid any circumstances that impose a timetable on the success of your financing, because this process will take just as long as it wants to.
Establishing the financial network that will one day support your various endeavors isn’t just a part of your career, it’s very much a lifestyle choice. What money you decide to pursue for your projects will start shaping your habits, and it will definitely shape your social circles. Assuming that, like me, you will eventually come to specialize in two of these three finance methods… be conscious in choosing which two they are. From your financial well-being to the joy you bring to your work, that decision is bound to have widespread impact.
Lastly, I’d like to offer some thoughts to any readers who struggle with being “only interested in the art.” In showbusiness, we are supposed to be a family. All of us are responsible for one another’s well-being, and for how we are supported in our work, and money is a big part of that. Moreover, movies are collaborations, growing and thriving in the space between people more than just in one person’s mind, heart, or even soul. Taking responsibility for the excellence of a film means being responsible for the strength of those relationships, and for the money that supports and feeds them. Besides, who else is going to do the work?
Writer, director, and producer Tennyson E. Stead is an emerging leader in New Hollywood with a lifetime of stagework, a successful film development and finance career, and a body of screenwriting encompassing more than 30 projects - recently including the upcoming Emagine Content sci-fi tentpole Atlas Uprising, as well as a scathing film industry satire called Making the GAMP with director and newfound colleague Michael Wohl. In collaboration with producer Lucinda Bruce, Stead is writing and directing a sci-fi heist feature with his company 8 Sided Films entitled Quantum Theory. When Stead is not writing and directing feature films, he’s working in the theater, he’s developing content for gaming and transmedia, or he’s volunteering work and experience to help strengthen the content and community defining indie Hollywood.
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