By Matthew Helderman, & Luke Taylor
Introduction
The difficulty in raising capital for any venture is two fold: first off, the market is crowded with opportunities that are currently earning strong returns. The stock markets, the bond markets and the traditional high yield sectors of real-estate, speciality finance and lending all present solid outlooks financially.
Second off, speculation is the killer of many financial deals. Being pragmatic and logical – who wants to invest in an opportunity when the return not only is unlikely but the timeline is completely unknown?
When raising capital for a film project – even more elements come in to play. Talent, timeline, creative, multiple financiers needing to feel comfortable with the structures and scheduling.
Having raised capital many times in the past – our overview here is a sample of the realities currently presented in the private equity financing arena of independent feature films — and furthermore our eBook details a breakdown on best-practices for structuring raise specifics.
Private Equity
Private equity investors are flooded with opportunities today – with the traditional markets performing well, the venture capital sector offering incredible teams and projects and the re-emerging performance of real-estate and lending.
How do you make your project stand out to these investors?
We’d like to believe it’s as simple as a strong script, a great team with experience and a game plan for success — but it’s never that simple.
The key factor to private equity investors is to remove speculation — meaning, when are they going to start earning a return and can you guarantee that?
The more speculation you remove (by utilizing the steps below) the better chances you’ll have in securing capital assets in “hard money”.
Agencies
The talent agencies are a difficult nut to crack — they are well guarded, highly established and protected entities. They are the gatekeepers of taste, talent and possibility — and more than anything they are the lifeblood of the in pendent producer seeking to put projects together with financing.
Step #1 is finding a piece of material that excites you & that you believe you can rally a team behind. Remember, you’ll be living with each film you produce for many years so choose wisely.
Once you have a piece of material – get an agent/agency excited about the project as well. As with most of the entertainment business — agents think in numbers — how much will my firm/I make from this deal?
Incentivize the agency by offering them the ability to package the project — place multiple roles with their roster rather than just one or two roles — which gives them the ability to earn 10% of multiple deals across the board.
Furthermore, offer them the ability to have a first look opportunity for domestic sales representation — again, finding ways to incentivize.
By packaging these elements early on, you’ll be able to bring strong talent to the project and gear up to being more ready to approach equity players.
Strength of Team & Experience
A first time producer/director/star is a tough sell for many instituions in the film business.
Sales teams are unable to project value (pre-sell), agents are unable to place large name talent (packaging) and financiers are unable to gauge project ROI (basic returns).
Find a director who has carried a project before, find an agency who is interested in packaging and will keep you/your project in the stratosphere of content that matters and you’ll be in a great starting position.
If you HAVE to utilize unknown talents to make your project – surround them with experience on all fronts. An unknown star with a strong director, DP, producer and writer is a reasonable recipe.
Tax Incentives/Pre-Sales/Debt/
With your packaged talent signed off, strong team on board and well developed script — you can now approach “soft money” options.
Tax incentives are nothing new — they offer a percentage of the in-state spend back in rebate form. Meaning, you can bankroll/cash-flow this piece to off set your investors risk.
Pre-sales are nothing new — they offer projections of value based on the elements you’ve brought together. Meaning, you can bankroll/cash-flow this piece to off set your investors risk.
Debt options are nothing new — is this starting to sound like a trend?
Essentially, find ways to cover 50 cents of every dollar your investor is putting up before the camera’s even turn on.
Shoot in tax incentive rich states, with a strong pre-sold package with a great sales-team on board to execute. Therefore you reduce the level speculation and can guarantee a return of X% based on Y investment in a tangible timeline.
Plan of Execution
With these elements on board make your investment proposal personable, professional and tailored to your investors specifics.
Do not pitch high level film financing to first-time entertainment investors — keep it simple, above board and remind them that while smoke & mirrors often run throughout the business you’re putting together a basic structure returning X% on Y investment over Z timeline — they will respect you & your approach much more.
Lastly, look into completion/guarantor bonds as a way to assure your investors that the project will be completed on time/schedule, budget/spend and with the elements they have agreed to finance.
The liability is now removed via a bond company and their return is partially guaranteed via incentives and additional soft-money.
Pitch smart, often and confidently — knowing that you’ve done your homework and that the investment is well structured for a return.
Buffalo 8 is a turn-key development, production and post-production company based in Beverly Hills with a library of 30+ indie titles. Having produced 30+ feature films, the team recognized a dilemma in the production process — union deposits — and launched BondIt to resolve the situation to assist producers & union representatives alike.
