A LOT of people contact me about film financing, wondering if I can hook them up with some money people, or provide them with a list of film investors. I figured it was time to have a discussion about investors and investment.
First of all, I get it: we’re artists, we don’t have a lot of cash and we want some help to get our films made the way that we want to make them. We want to make movies, not run a corporation. It makes total sense from an artistic/career point of view.
Well, I’ve got bad news and I’ve got good news.
Let’s start with the bad news.
I work a “day job” as a development exec in the film industry and while my job is focused on creative development (mostly scripts but also providing notes on cuts of movies that we’re involved with), I have been in on many conversations over the years about financing in all its many flavours. I have seen how it works at the level of low-to-mid budget indies.
The first thing is that financing films is very complicated at this level – never mind at higher levels. There’s many forms of financing a film – equity financing in various forms, pre-sales, cash flowing tax credits, gap financings, debt financing, various forms of “soft money” from government (besides tax credits, which also can vary in quantity and type). It’s mind-bending, especially when you’re building a financing structure out of several of them combined across multiple countries.
I’m not going to explain them all here because that would take a whole book. But I will tell you about one that I’ve been asked about repeatedly and how it impacts you as a microbudget filmmaker: pre-sales.
Basically, pre-sales are a way of financing the production of a movie by going to distributors and/or broadcasters in specific geographic markets (Germany, America, China, etc) and getting them to commit to purchasing the film before its made. They give the filmmakers a contract that commits to the purchase, the filmmakers take this to a bank that cash-flows pre-sales and that bank gives the filmmaker cash, minus a substantial commission. In doing this filmmakers get money upfront and distributors get to pay a cheaper price in return for the risk that the film won’t get made or that it will suck.
A lot of indie films used to get financed this way (particularly “hard” genre films like action), almost entirely from pre-sales, combined with some “soft money” – for instance, tax credits. Tax credits are only paid out after a film is shot, has a distributor (usually), and you fill in lots of complicated forms. But you can get certain banks – again, with a substantial fee – to give you the cash upfront).
This became much less popular because of the inherent risk to distributors (see above, re: films that suck). But it still happens though rarely to provide the bulk of a film’s financing. So why would a distributor give you money to pre-buy your movie? Two words: your package. This is all the combined “market elements” that are connected to your film project.
For instance, if you have an A-list actor (mostly measured in terms of a small group of white, male actors in the 35-55 age range, based on the superstition that only these guys sell in all world markets) who has consistently performed well in a given market – with their films selling in a certain range. That is a bankable element. If you are a known director or producer whose films have a following and generally recoup a certain amount,that is a bankable element. If you are already partly financed through equity investments – ie. real investors take your project seriously – this also is an element of your package.
Seriously, these things are measured in quantifiable, dollar values. The script, your brilliant vision for the film or your belief that it will knock it out of the park in terms of recoupment once it’s completed – these are pretty much irrelevant. Distributors often won’t even read the script, just looking at the concept, logline and the package of elements. Welcome to show business!
So, what do you have? Do you have a big name, marketable actor with a track record that can be measured? Do you have a track record that can be measured? If not, it is literally impossible to get a pre-sales deal.
What about getting an equity investor? This is the elusive golfing foursome of dentists looking for a thrill in their lives, like hanging out with attractive movie stars and basking in the glamour of the festival circuit, all while raking in a profit. They’re like the unicorn – everybody wants to find them, few have actually seen them.
Well, if you do find such guys, you’re going to need a business plan with a recoupment strategy (like how are they going to get paid back). People are notoriously careful with their money. They may not be as scientific about it as distributors viz pre-sales. But people aren’t going to throw $50K-$100K at you just because you say that you have a really, really great idea that will make them a lot of money. People want to see some kind of proof. And then you’re back to the same questions: what are your bankable elements? If you don’t have any, who is going to be foolish enough to give you a boatload of cash to pursue your dream?
Money is high stakes. Would you give away the cost of a luxury vacation, or a house, or a Porsche to someone you don’t know just because they told you they have a great idea? Probably not, especially if you’re aware that the vast majority of film projects lose money (in fact, you need to put this disclaimer note in any business plan/investment package you create warning that investors will probably never recoup).
OK, so when am I going to get to the good news, right?
The good news is that you can get there, by which I mean you can get to a place where investors take you seriously. Just probably not yet. You need to do some prep work first to build up your credibility. You need to get to the point where you can get some name actors in your films that have market value and/or you need to yourself have the kind of credibility that attracts investors (unless you have rich relatives). How can you do that? Why would a name actor with a serious career agree to be in your film – or rather why would their agent or manager agree to even put your project in front of them? You have to build up a track record of producing high quality movies that win awards, have built a following, etc.
The good news part of this is that the fall in prices for gear and the availability of really talented people who also want to build up a body of work – means you can make your first films for almost nothing. If you’ve gone to film school you know how much that costs – in the USA that can be more than $40K/year. In Canada, the Toronto Film School will run you $18K for a diploma and it will cost you twice that for a university film degree. Well, you can shoot a movie for under $10K if you’re smart about it. We shot our last film for $7K. In other words, for less than the price of one year’s tuition at an American film school you can shoot four feature films!
Making four feature films can really build your credibility as a filmmaker. It can make it more possible for you to go to known actors, investors, etc. in order to shoot with larger budgets. Of course, the key here is that you have to make good films, with solid scripts, good acting and decent camera work. That doesn’t mean that all of them have to be great movies that win awards. You have some room to learn here, get better, start to win awards.
And it may not take four films (or it might take more) to get to that point if you’re careful and committed to telling great stories well. But you should definitely not think of this in terms of “I’m going to make one film that will be a massive breakthrough, go to Sundance, get picked up for distribution...” That almost never happens. Be in it for the long haul. You want to have a 25 or 30-year career as a filmmaker? Don’t kid yourself that for 29 of those years you will be Stephen Spielberg. Unrealistic expectations are bad for stamina and you need stamina to build a career in any field, especially film.
Some filmmakers go the route of making a bunch of short films that win awards to do the same thing: build up pedigree. That can also work but has its dangers. From the point of view of many investors what you’ve shown is that you can make really good short films – not features. We had a project come through with a very good script based on an award-winning short. But nobody wanted to put money in because the director was “untested” as a feature director.
That’s definitely not fair but if you want to go the route of getting other people to invest, I’m afraid that it’s not fair and it’s rarely just. That’s probably not a popular thing to say but I don’t want to lie to you. The important thing is that you can make good films that prove your mettle and do well on the festival circuit and even in the distribution marketplace. But it requires focus, determination and some skills. So, don’t give up. Re-commit yourself to building a film career on your own terms because you can do it!
Now, tell me what you think. Have you gotten investors? Are you pursuing this route and what has your experience been like?
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