Anybody trying to raise equity financing for their next film or TV show has a secret weapon up their sleeve to appeal to investors: the entertainment industry can offer a sense of glamor that is virtually unparalleled in any other sector of the market.
And while you still need to be very focused on the business side of things and making sure that the numbers add up, the uniqueness of the entertainment business is something that a filmmaker should always use to their advantage.
But, as enticing as this can be, any investment still has to be structured and handled in the right way so that there is substance behind all the pizzazz.
The Glamor
For people all across the world and in all walks of life, however successful or wealthy they might be, the glitz and glamor conjured up by places like Hollywood, Sundance, and Cannes are hard to underestimate.
The perks that a filmmaker can offer an investor are virtually unmatched by any other industry. After all, in which other business sector could you offer an investor the chance to sip champagne with their favorite movie stars at a party in the Hollywood Hills or on a luxury yacht along the French Riviera?
Film and TV captures the imagination of even the most hardened of businesspeople, and allows them access to a fantasy world that most people can only dream of.
We all know that investing in an independent movie can be very risky. Investors know this too. If they wanted a safe and secure investment, there are other places that they could look. The excitement of being part of a film or TV show is what offsets a big chunk of that risk. This is a unique type of investment, and you shouldn’t be shy to remind them of it.
For some investors, particularly those who have made fortunes in other industries and want to use their wealth to have a bit of fun or support the arts, the opportunity to take a photo with an A-list star can be almost as important as a monetary return.
Sometimes just seeing their name up in lights on the big screen when the credits roll is enough to make someone invest. It makes for a great story at dinner parties with their friends. However much money an investor might have made in their previous businesses, there are few experiences that are quite so intoxicating, and it makes you want to do it again and again.
Perks
Filmmakers should be aware of the potential perks that they can offer an investor. Don’t underestimate how attractive these can be to someone who has had no previous exposure to the entertainment industry, even if they might seem trivial at first glance.
For example, an investor might be invited to:
Visit the set
Meet the cast
Be an onscreen extra
See rushes/dailies/footage
Attend film festivals
Attend premieres and screenings
And much more…
These are exciting opportunities that sometimes even money can't buy... Unless you invest in a production!
Use It, But Don’t Abuse It…
All of these perks are at the discretion of the producers and whatever they negotiate with the investor. They should only be where the circumstances are deemed appropriate. Neither the producer nor the investor should take advantage of the other.
For example, I remember working on a film where an investor felt permitted to turn up on set pretty much every day of the shoot. At first it wasn’t an issue, but by the end he was getting in everybody’s way, especially when the production needed a small and mobile crew. Eventually, the producer had to ask the investor to stay at home, which was very awkward and embarrassing for everyone.
Conversely, I recall another occasion when a producer completely ignored an investor’s desire to visit the set and witness first-hand the production that she had helped pay for and make possible. The producers were treating the investor as more of an annoyance than a vital part of the project.
Neither of these scenarios is appropriate. Whichever side of the coin you are on, any perks should be reasonable and within the bounds of what the production can realistically offer. Neither party should take advantage of the other.
You Still Need Substance Behind The Glamor
Filmmakers should use the glamor of the entertainment industry to their advantage when speaking to investors. And, as we’ve discussed before, a successful equity investment can offer big returns!
But don't forget that the glamor can wear off quickly, and for seasoned investors in particular, the perks are only impressive for so long.
For all the excitement of producing a movie, don’t assume that investors will simply throw their cash around. These people did not get rich by making stupid investments. They’re probably extremely smart and astute, and no amount of set visits will impress them if they feel that their money will not be handled responsibly.
A perk is still just a perk, not a reason for an investor to throw their money down the drain. A perk helps to augment the deal, to open the door, but a perk alone is rarely a reason to invest.
A smart investor will still want to see that your numbers make sense, however glamorous you make the proposition seem. They’ll still want to study your business plan. They’ll still want to see your distribution strategy. They’ll still want to know that they’re not being taken advantage of.
Because if you can’t prove to them that you can handle their money responsibly, there are plenty of other filmmakers who can, and who can offer the same perks as well.
Remember, you want the investors to succeed as much as they do. If they have a good experience with you, they will come back and invest in your projects again and again in the future.
So, if you're a filmmaker, make sure that you use the glamor of the industry to your advantage when speaking to equity investors! Just bear in mind that, pretty quickly, you’ll still need some substance to back it up.
This post has been adapted from our book HOW THE HELL… Do I Get My Film Financed: Book Three: Equity Financing by Ricky Margolis. To learn more about Equity Financing, and how to raise, invest, spend and return it, check out this book and other books in this series on film and TV financing and production by clicking here.
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