A producer and entrepreneur I know (who I won’t name) recently shared with me her views on film investment at the lower budget end, with specific regard to private investment. What’s interesting about this person is that she has had an extremely successful career in business before changing gear to enter the film industry.
nlike most filmmakers I know, she is used to rubbing shoulders with the business elite who are both successful and wealthy. That’s her club. Now she is on the hunt for investment for films, and from a purely business perspective, I asked her to share her thoughts on why on earth would an investor put money into a film?
She says… ‘Most investors aren't doing it for the money. They say they are because they want to look savvy but they're not really. Because any investor in his right mind wouldn't invest in a low budget movie - there's much better ways to invest your hard earned cash and many better SEIS opportunities (remember we are running our EIS / SEIS course in a couple weeks – there is an EIS podcast HERE).
So when answering investor's questions you have to bear in mind: they are investing for the fun of making a movie, but they also need to look like they are financially savvy so they can justify their decisions to people who ask them. In a sense you have to help them lie to themselves and both of you need to believe and be comfortable with that lie. Which is what fancy dinners, screenings, asking their "opinion" and coming to the set is for.’
Assuming you can get into the position where you can credibly pitch your business proposition (that’s your film) she suggests that the top questions private investors will ask, in order of priority, are …
Q - What's in it for me and can you prove it?
What's the equity?
What is the structure of the deal on offer and how is it broken down, specifically. What do they actually get for their money?
How much will I make?
In most deals, they are looking for ten times their money back, but most know that they will likely see much less or lose it all – you can offset some risk by offering to protect their investment with the SEIS / EIS and UK Tax Credit schemes. This is very powerful as a good portion of their risk is ‘insured’.
How long will it take me to make it?
Not just the film, but make good on the deal - it’s going to take a minimum of three years to return their investment. There is the potential for a very long tail to investment if your film is successful.
What other movies like this have sold in the last 3 years? What was their budget? Did it have stars or no stars?
They are looking for precedent here, what similar projects with similar budgets and similar ‘set-ups’ are out there? How did they perform? In essence, can you prove you have a good business idea because someone else has already proven it for you? Don’t ‘spin’ too heavily here, remember, deep in their heart they know they are taking a risk. Integrity is essential.
Who bought those films and for how much?
Can you find out who bought those movies and how much they paid? Surprisingly, if you ask around, you start to get a sense of what movies are selling, to whom and for how much. Often you will be left feeling like there is a greater truth that is not being shared by producers and sales agents, but you can often get solid ball parks. You may even get full disclosure as long as it stays confidential (you can often ask if you can share the details with investors, verbally and behind closed doors).
How much did they make?
Again, they are seeking precedent. These are really tough questions, but you would ask them too if it were your money being invested right? You may be able to do some speculative maths and should be able to explain accurately how you came to those conclusions.
Will it be theatrical? Or just DVD, online, TV etc?
Everyone likes a theatrical release. In reality most films fail at the box office. There is an argument that a tactical release in theatres will bolster PR and raise awareness for subsequent DVD/ TV / VOD and foreign sales. But mostly, it’s for the ego and career strategy for all involved.
Will the film company have annual audited accounts, showing any income from sales and royalties?
You need to answer YES to this of course. Better still, hire a collection agent to collect monies from sales and then pay out in accordance with the deal, offering secure and protected channels through which investors money flows back to them. It’s very hard for anyone to get ripped off in this scenario which again, offers comfort to nervous (and rightly so) investors.
How many other investors will I be sharing proceeds with?
Who else has an interest? Is their interest on a level playing field with mine, or are they getting more or less? It’s usually best to give everyone the same deal. It’s fair and no-one feels like they are getting screwed. Watch Dragons Den and you will be reminded about how important it is to save ‘face’. No-one EVER wants to feel like someone else is getting a better deal.
What are projected returns across all of the territories?
Bottom line, how much will your film make? Sales Agents can offer projected sales. While everyone asks for this report, it is in large, a piece of fiction. No-one really knows what your film will be like, who will be in it, who will buy it, what genres will be hot in three years time… yada yada… But they still like to have the piece of paper. So give it to them.
Check! Good so far... let's continue.
Q - Are you any good at this?
How are you spending my money?
Do you have a detailed budget? They want to know that you have really thought this through. You need to give a sense that you can deliver on time ON BUDGET. No-one ever wants to fork out more to bail out what could be perceived as a sinking ship.
Why is your film different or any more exciting than the next movie?
As ever, they want it to be the same but different – the same so you can show precedent (other successful similar films), but different so it has something unique and ideally better (than other similar successful films). What unique and juicy ‘thing’ do you have that will ‘wow’ people? Can you demonstrate that you are ‘that much’ of a creative genius? Do you have some killer cast in your pocket? Or a never been seen gimmick? And will it make your film more attractive?
Who are you? What else have you done before?
This is where your track record comes in. Previous short films, awards, feature films etc will all play here. It’s often best avoiding talking about how you went to film school, or any film courses you attended. You want to look like a natural and not someone who needed training. Mentioning film school or training will also make you seem inexperienced. You can cut a fabulous reel from your best work and show it to them, or a reel of your secured cast and crew to show their past work.
Paradoxically, you are often at your strongest when all you can show is raw talent, enthusiasm and strong business acumen, but still have no credible track record. If you get to make your film, ensure that you deliver on your promise (it’s great and makes money) or next time you come to financing, this film could be the millstone around your neck that sinks your career. Make sure your film does not prove that you are talentless and have no business head.
What's it about? Who's in it? etc
OK… if you have got this far, they may be hooked. They are starting to engage more like a consumer and want to hear you the master story teller. Weave a wonderful tale and deliver your story with passion, wit, mystery and a little show biz. Make no mistake though, investors are NOT consumers who can be blagged by shiny artwork and a great pitch. You MUST have all the other stuff before anyone will take your story pitch seriously. Investors also like to see ‘faces’ in your film, it gives them all a sense of security that this is real. The logic goes, ‘if top acting talent wants in, it must be good, right?’
How are you going to market and sell it?
Investors don’t necessarily understand film sales and how a film monetises, so provide as much data as you can to show how cash flows back to them. Also, be frank about who else takes a slice of your sales pie, from sales agents, to the VAT office. They want to know that you understand and have control of the sales cash flow.
Do you have any strategic partners? Or talent and experience around you?
Does your film have an experienced godfather you can call on? Do you have experience in your crew? Do your actors have a track record? Do you have an experienced accountant? Do you have a sales agent already onboard to sell it? Do you have money from the BBC / Ch4 / a government body / a co-producer etc. And if you do, who are they and can the investors see their track records too? Better still, can they meet them?
Is there likely to be a need for further funding before the film is finally ready?
Again, this is the fear of you coming back, cap in hand for more. Once they are committed they KNOW that they may need to invest further to protect the initial investment (should you go over budget). Of course this is best avoided. If you can prove that you have repeatedly delivered past projects on budget this will help enormously. Past production budgets that were successfully delivered (on budget) are also proof of concept – you can prove X movie cost Y amount?
Who are you again?
If you have got this far, it’s good news. Now they may want a little background to find out what inspired you, where you came from… to get to know you more. Now it’s moving from head to gut. Do they like you?
How do you protect me if it all goes wrong? (how do I not look stupid?)
What happens in various scenarios? What if you can’t complete? What happens if the film is not very good? How can you protect the investor and what are the risks? Be frank and upfront. You should be able to convince people that you CAN pull it off, you have done all your prep in great detail, you know the market, you have surrounded yourself with talent (both cast and crew), and hopefully you can protect some of their investment via the EIS / SEIS and UK Tax Credit.
So if you have got this far, you have proven that you can do it, and probably do it well. You have also proven that some of their investment is protected, giving them comfort. Now the deciding factors often become about delivering a fun experience.
Q - What's in it for me at an ego level?
What are the perks?
Can I go to the film set? Can I meet cast and team? Can my daughter be in it, she's such a good actor etc etc? Do I get a credit? Be creative about your investor perks.
And who are you again?
The subtext here is now can I use your name to make me look good? Can I tell my friends about his fun venture?
And finally… now YOU ask the question. Are you in?
Making a movie is much like backing an expedition to climb Mount Everest. Investors just want to know…
- That you will spend their money wisely, that you have experience doing so.
- That if there are returns, there are clear and protected channels to get their money back.
- That if it goes massive, they will get a big slice of that success.
- That a large chunk of their investment is protected.
- That you will deliver a fantastic experience that they can share at dinner parties.
This is of course no definitive list, and EVERY person is different, with varying degrees of interest, required comfort levels and ego.
But I would argue that investors attracted to film will fit this conversation and criteria more comfortably.