Filmmakers Glossary of Film Investment Terminology

Last week I laid out a glossary of general-use film business terms, but the blog ended up a bit too long and dense to be a single post.  So, I broke it into two.  Last week was the basics of business terms, this week is the next level, and focuses entirely on investment terms.  Some of these may seem tangential and unnecessary, however if your goal is to close an investor, you’ll need to thoroughly speak their language.  If there’s something you don’t see here, check out last week’s blog here. I’m not a lawyer, this isn’t legal advice, and you should have a solid attorney on your team before trying to close an investment round. With that out of the way, let’s get started.

Capital

While many types exist, The term most commonly refers to money. 

Liquid Capital

Money that can be spent immediately, or near immediately.  Non-liquid capital would be considered something like real estate holdings which would first need to be liquidated in order to sell. 

Principle

In finance: it’s general the initial capital investment or the remaining balance on a debt. 

Interest

A percentage fee is added on to the principle of a loan or line of credit.

Compound interest

Interest on the principle of the loan and interest.

Simply: interest on interest.

High-Risk Investment

An investment where an investor may lose most or all of the money they put in. Independent Films are always high-risk investments

Securities and Exchanges Commission (SEC)

The main financial regulatory agency in the United States.  It oversees most forms of investment.

Accredited Investor

A person of means who is generally considered to have enough business know-how to appraise an investment, pay someone to appraise it for them, or who wouldn’t be completely destitute from taking a high risk-gamble.  As of the date of this publishing, according to the SEC the investor must meet either (NOT both of) the income or net worth requirement in order to be considered an accredited investor.
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Income Requirements
1.If filing individually, a person must have made 200,000 USD a year for the past 2 years, and be likely to do the same this year. 
2.If filing Jointly, a household must have made 300,000 USD a year for the past 2 years, and be likely to do the same this year. 

Net Worth.

The investor or household must have 1 million dollars in net worth OUTSIDE of their primary residence. ​

High Net Worth Individual (HNWI)

Outside the obvious, this term is generally a financial industry term for accredited investor

Edgar Database

A database of high-risk investments maintained by the SEC that is only accessible to Accredited investors and licensed brokerage or investment firms.

Financing Round

A round of financing or funding that is large enough to take an organization or project to the next major milestone.  For how this works in film, check out the youtube video I’ve linked below, and the blog linked below that.

Related Video: The 4 Stages of Indiefilm Financing

Related Blog: The 4 Stages of Indiefilm Financing

Business Plan

A document written by an entrepreneur or filmmaker outlining their investment.  In the film industry, this document will also often educate the investor on how the industry functions as a whole.  This document is also known as a prospectus, but that term is not as commonly used as it once was. 

Private Placement Memorandum (PPM)

A document that’s filed with the SEC for investors to consider investing in your project.  Frequently an attorney will base this document off of the filmmaker or entrepreneur’s business plan.  In most cases, a PPM will be registered with the aforementioned Edgar database for a modest filing fee. 

Pro-Forma Financial Statements

Financial documents consisting of an expected income breakdown, cash-flow statement, and top sheet budget to be invaded in the business plan and function as the basis for many of the financial sections of other documents

The Three points above are heavily outlined in my business planning blog series.

Related: How to write an independent Film Business Plan (1/7)

Backed Debt

A secured loan backed by something like a tax incentive or pre-sale agreement.

Unbacked Debt

An unsecured loan, or debt without backing.  Generally very high interest.

Financial Gap

The space between what you are able to raise and the amount you need to finish your project.

Financial Markets

A market where stocks, bonds, derivatives, or other securities are bought and sold. Common examples in the US would be the DOW and the NASDAQ.

Film Market

A convention where films are bought and sold primarily by sales agents and distributors.  For more, check out the link below.

Related: What is a film market and how does it work?

Gross Domestic Product (GDP)

The total value of all newly finished goods in a given country during a set timespan.  Most commonly calculated on an annual basis.

Recession

A macroeconomic term signifying a period of a significant decline in economic activity.  It’s generally only recognized after two consecutive quarters of down financial markets. 

Depression

A severe recession that lasts longer than 3 years and corresponds with a drop in GDP of at least 10%

Bull Market

A market that’s strong and growing. It’s called a bull market as the upward trending graph looks like a bull nodding its head according to some people on Wall Street.

Bear Market

Yes, I spelled that right.  It’s a financial market that’s going down, or staying stagnant.  The name comes from a bear swiping its claws down.  Probably the same wall street guy came up with it. 

Thanks so much for reading! If you liked this, please make sure to check out last week’s general financing glossary, as well as my glossary of distribution terms. Also, please share. It helps A LOT.

Filmmakers Glossary of Business Terms

Additionally, make sure you grab my free Film Business Resource Package to get a print ready PDF version of all 3 glossaries.

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Filmmakers Glossary of Film Business Terminology.

A colleague of mine asked me if I had a glossary on film financing terms in the same way I wrote one for film distribution (which you can check out here.)  Since I didn’t have one, I thought I’d write one.  After I wrote it, it was too long for a single post, so now it’s two.  This one is on general terms, next week we’ll talk about film investment terms. As part of the website port, I’m re-titling the first part to a general film business glossary of terms, to lower confusion on sharing it. It’s got the same terms and the same URL, just a different title.

Capital

While many types exist, it most commonly refers to money.  

Financing

Financing is the act of providing funds to grow or create a business or particular part of a business.  Financing is more commonly used when referring to for-profit enterprises, although it can be used in both for profit and non-profit enterprises. 

Funding

Funding is money provided to a business or non-profit for a particular purpose.  While both for-profit and non-profit organizations can use the term, it’s more commonly used in non-profit media that the term financing is. 

Revenue

Money that comes into an organization from providing shrives or selling/licensing goods.  Money from Distribution is revenue, whereas money from investors is financing, and donors tend to provide funding more than financing, although both terms could apply.

Equity

A percentage ownership in a company, project, or asset.  While it’s generally best to make sure all equity investors are paid back, so long as you’ve acted truthfully and fulfilled all your obligations it’s generally not something that you will forfeit your house over.  Stocks are the most common form of equity, although films tend not to be able to issue stocks for complicated regulatory reasons and the fact that films are generally considered a high-risk investment.

Donation

Money that is given in support of an organization, project, or cause without the expectation of repayment or an ownership stake in the organization.  Perks or gifts may be an obligation of the arrangement. 

Debt

A loan that must be paid back. Generally with interest.

Deferral

A payment put off to the future.  Deferrals generally have a trigger as to when the payment will be due.

“Soft Money"

In General, this refers to money you don’t have to pay back, or sometimes money paid back by design.  In the world of independent film, it’s most commonly used for donations and deferrals, tax incentives, and occasionally product placement. It can have other meanings depending on the context though.

Investor

Someone who has provided funding to your company, generally in the form of liquid capital (or money.)

Stakeholder

Someone with a significant stake in the outcome of an organization or project.  These can be investors, distributors, recognizable name talent, or high-level crew. 

Donor

Someone who has donated to your cause, project, or organization. 

Patron

Similar to donors, and can refer to high-level donors or financial backers on the website Patreon.  For examples of patrons, see below. you can be a patron for me and support the creation of content just like this by clicking below.

Non-Profit Organizations (NPO)

An organization dedicated to providing a good or service to a particular cause without the intent to profit from their actions, in the same way, a small business or corporation would. This designation often comes with significant tax benefits in the United States.

501c3

The most common type of non-profit entity file is to take advantage of non-profit tax exempt status in the US.

Non-Government Organization (NGO)

Similar to a non-profit, generally larger in scope.  Also, something of an antiquated term. 

Foundation

An organization providing funding to causes, organizations and projects without a promise of repayment or ownership.  Generally, these organizations will only provide funding to non profit organizations. Exceptions exist. 

Grantor

An organization that funds other organizations and projects in the form of grants.  Generally, these organizations are also foundations, but not necessarily.

Fiscal Sponsorship

A process through which a for-profit organization can fundraise with the same tax-exempt status as a 501c3.  In broad strokes, an accredited 501c3 takes in money on behalf of a for-profit company and then pays that money out less a fee.  Not all 501c3 organizations can act as a fiscal sponsor. 

Investment

Capital that has been or will be contributed to an organization in exchange for an equity stake, although it can also be structured as debt or promissory note.

Investment Deck (Often simply “Deck”)

A document providing a snapshot of the business of your project.  I recommend a 12-slide version, which can be found outlined in this blog or made from a template in the resources section of my site, linked below.

Related: Free Film Business Resource Package

Look Book

A creative snapshot of your project with a bit of business in it as well. NOT THE SAME AS A DECK.  There isn’t as much structure to this.  Check out the blog on that one below. 

Related: How to make a look book

Audience Analysis

One of 3 generally expected ways to project revenue for a film.  This one is based around understanding the spending power of your audience and creating a market share analysis based on that. I don’t yet have a blog on this one, but I will be dropping two videos about it later this month on my youtube channel.  Subscribe so you don’t miss them.

Competitive Analysis

One of 3 ways to project revenue for an independent film.  This method involves taking 20 films of a similar genre, attachments, and Intellectual property status and doing a lot of math to get the estimates you need. 

Sales Agency Estimates

One of 3 ways to project revenue for an independent film.  These are high and low estimates given to you by a sales agent.  They are often inflated.

Related: How to project Revenue for your Independent Film

Calendar Year

12 months beginning January 1 and ending December 31.  What we generally think of as, you know, a year. 

Fiscal year

The year observed by businesses. While each organization can specify its fiscal year, the term generally means October 1 to September 30 as that’s what many government organizations and large banks use.  Many educational institutions tie their fiscal year to the school year, and most small businesses have their fiscal year match the calendar year as it’s easier to keep up with on limited staff.

Film Distribution

The act of making a film available to the end user in a given territory or platform. 

International Sales

The act of selling a film to distributors around the world. 

Related: What's the difference between a sales agent and distributor?

Bonus! Some common general use Acronyms

YOY

Year over Year.  Commonly used in metrics for tracking marketing engagement or financial performance on a year-to-year basis.

YTD

Year to Date.  Commonly used in conjunction with Year over year metrics or to measure other things like revenue or profit/loss metrics.

MTD

Month to Date. Commonly used when comparing monthly revenue to measure sales performance. Due to the standard reporting cycles for distributors, you probably won’t see this much unless you self-distribute.

OOO

Out of Office.  It generally means the person can’t currently be reached. 

EOD

End of Day. Refers to the close of business that day, and generally means 5 PM on that particular day for whatever the time zone of the person using the term is working in.  

Thanks for reading this!  ​Please share it with your friends. If you want more content on film financing, packaging, marketing, distribution, entrepreneurialism, and all facets of the film industry, sign up for my mailing list! Not only will you get monthly content digests segmented by topic, but you’ll get a package of other resources to take you film from script to screen. Those resources include a free ebook, whitepaper, investment deck template, and more!

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When and Where to use Each Indiefilm Investment Document

There are 3 different documents you would need to approach an investor about your independent film. I’ve written guides on this blog to show you how to write each and every one of them. Those three documents are a Look Book (Guide linked here.) a Deck (Guide Linked Here) and a business plan. (Part 1/7 here) But while I’ve Written about HOW to create all of these documents, I’ve held back WHY you write them, WHO needs them, and WHEN to use them. So this blog will tell you WHO needs WHAT document WHEN and HOW they’re going to use it.

As with some other blogs, I’ll be using the term stakeholder to refer to anyone you may share documents with, be they an investor, studio head, sales agent, Producer of Marketing and Distribution (PMD) or Distributor.

What are these documents and WHY do you share them?

So first, let’s start with what each document is, just in case you haven’t read the other blogs (which you still should)

A Look book for an independent film is an introductory document, that’s very pretty and engaging and gives an idea of the creative vision of the film.  The purpose is to get potential stakeholders interested enough in the project to request either a meeting or a deck.  The goal in showing them this document is to get them to start to see the film in their head and get them to become interested in the project on an emotional level.

Related: Check out this blog for what goes into a lookbook

A Deck is a snapshot of the business side of your film.  The goal is to send them something that they can review quickly to get an idea of how this project will go to market and how it will make money so that they get an idea of how they’ll get their money back.

Related: The 12 Slides you need in your indie film investment Deck

A business plan is a detailed 18-24 page document broken into 7 sections that will give potential investors not only an idea of your investment but of the industry as a whole.  In a sense, it’s equal parts education and persuasion, especially for investors new to the film industry.  The goal is to give the prospective stakeholder a deeper understanding of the film and media industry, and a very thorough understanding of your project and the potential for investing in it. 

Related: How to Write an Indiefilm Business Plan (1/7 - Executive Summary)

WHO needs these documents and HOW they’ll use it

Different stakeholders need these documents at different times.

Look Books should be sent to any potential stakeholder, including investors, studio heads, sales agents, distributors, producer’s reps, Executive Producers, and more.  It’s a creative document that gives a good idea of the product at the early stage.  It helps people gauge interest in your project

Decks are primarily used by Investors, Executive Producers, PMDs, and potentially Sales Agents.  Distributors and Studio Heads are less likely to need a deck since they know the business better than you do. At least most of the time.

Business plans are primarily needed by angel investors new to the film industry and Angel Investment Syndicates to use as the backbone for the Private Placement Memorandum (PPM) The First and last sections of the business plan (The Executive Summary and Pro-Forma Financial Statements) may be more widely used, often at the same general place as the deck, or only shortly after.

WHEN do they need these documents?

Look books come early on.  It’s generally the first thing they’ll ask for when considering your project.

Decks come shortly after the lookbook.  Sometimes in an initial meeting, or sometimes directly after that first meeting. 

Looking at a business plan is generally very deep in the process of talking to a potential stakeholder, it’s almost always after at least 2-3 meetings and a thorough review of the deck.

If this was useful, you should definitely grab my free film business resource packet. It’s got templates for some of these documents, a free e-book, a whitepaper that will help you write these documents, as well as monthly blog digests segmented by topics about the film business so you can sound informed when you talk to investors. Click the button below to grab it right now.

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How to Make LookBook for an Independent Film

I’ve written previously about what goes into an indie film deck, but as I get more and more submissions from filmmakers, I’m realizing that most of them don’t fully understand the difference between a lookbook and a deck.  So, I thought I would outline what goes into a lookbook, and then I’ll come back in a future post to outline when you need a lookbook when you need a deck, and when you need a business plan.

What goes in a lookbook is less rigid than what goes in a deck.  It’s also designed to be a more creatively oriented document than a deck.  But in general, these are the pieces of information you’ll need in your lookbook.  I’ve grouped them into 4 general sections to give you a bit more of a guideline.

You’ll often see the term stakeholder.  I use this to mean anyone who might hold a stake in the outcome of your project, be they investors, distributors, or even other high-level crew. ​

Basic Project Information

This section is to give a general outline of the project and includes the following pieces of information.

• Title

• Logline

• Synopsis

• Character Descriptions

• Filmmaker/Team bios

The title should be self-explanatory, but if you have a fancy font treatment or temp poster, this would be a good place to use it.

The logline should be 1 or 2 sentences at most.  It should tell what your story is about in an engaging way to make people want to see the movie.  You probably want to include the genre here as well,

The synopsis in the lookbook should be 5-8 sentences, and cover the majority of the film’s story.  This isn’t script coverage or a treatment. It’s a taste to get your potential investors or other stakeholders to want more. 

Character descriptions should be short, but more interesting than basic demographics. Give them an heir of mystery, but enough of an idea that the reader can picture them in their head.  Try something like this.  Matt (white, male, early 20s) is a bit of a rebel and a pizza delivery boy.  He’s a bit messy, but nowhere near as bad as his apartment.  He’s more handsome than his unkempt appearance lets on,  If he cleaned up he’d never have to sleep alone.  But one day he delivers pizza to the wrong house and gets thrust into time-traveling international intrigue.

Even that’s a little long, but I wasn’t actually basing it on a movie, so tying it into the film itself was trickier than I thought it would be.  That would be alright for a protagonist, but too long for anyone else. 

Filmmaker and Team bios should be short, bullet points are good, list achievements and awards to put a practical emphasis on what they bring to the table DO NOT pad your bio out to 5000 words of not a lot of information.  Schooling doesn’t matter a lot unless you went to UCLA, USC, NYU or an Ivy League school. ​

Creative Swatches

These are general creative things to give a give the prospective stakeholder an idea of the creative feel of the film.  They can include the following, although not all are necessary.

• Inspiration

• Creatively Similar Films

• Images Denoting the General Feel of the Film

• Color Palette

The inspiration would be a little bit of information on what gave you the vision for this film.  It shouldn’t be long, but it definitely shouldn’t be something along the lines of “I’ m the most vissionnarry film in the WORLD.  U WILL C MAI NAME IN LAIGHTS!” (Misspellings intentional) Check your ego here, but talk about the creative vision you had that inspired you to make the film.  Try to keep it to 3-4 sentences.

Creatively similar films are films that have the same feel as your film.  You’re less restricted by budget level and year created here than you would be in a comp analysis, that said, don’t put the Avengers or other effects-heavy films here if you’re making an ultra-low budget piece.  I’d say pick 5, and use the posters. 

Images denoting the general feel of the film are just a collection of images that will give potential stakeholders an idea of the feel of the film.  These can be reference images from other films, pieces of art, or anything that conveys the artistic vision in your head.  This is not a widely distributed document, so the copyright situation gets a bit fuzzy regarding what you an use.  That said, the stricter legal definition is probably that you can’t use without permission.  #NotALawyer

The color palette would be what general color palette of the project.  This is one you could leave out, but if there’s a very well-defined color feel of the film like say, Minority Report, then showing the colors you’ll be using isn’t a terrible call,  Also,, it's generally best to just let this pallet exist on the background of the document on your look book.  ​

Technical/ Practical swatches

This section is a good indicator of what you already have, as well as some more technical information about the film in general.  It should include the following.

• Locations You’d like to shoot at

• Cities You’d Like to shoot in

• Equipment you plan on using

Photos are great here, if you use cities or states include the tax incentives for them,  The equipment should only be used if it’s the higher end like an Arri or Red.  If you’re getting it at a fantastic cost, you should mention that here as well. People tend not to care about the equipment you’re using, but if you’re going to put it in any pitch document, this is the one.

Light Business Information

The lookbook is primarily a creative document, but since most of the potential stakeholders you’re going to be showing it to are business people, you should include the basics. When they want more, send them a deck.

Here’s what you should include

• Ideal Cast list & Photos

• Ideal Director List

• Ideal Distributors

These are important to assess the viability of the project from a distribution standpoint. It can also affect different ways to finance your film. If your director is attached, don’t include that. If you have an LOI from a distributor, don’t mention potential distributors. Unless your film is under 50k, don’t say you won’t seek name talent for a supporting role. You should consider it if it’s even remotely viable.

If this was useful to you but you need more, you should snag my FREE indiefilm resource package.  I’ve got lots of great templates you get when you join, and you also get a monthly blog digest segmented by topic to make sure you’re informed when you start talking to investors.  Click below to get it.

How to Write an Independent Film Business Plan - 7/7 Pro-Forma Financial Statements

In the final part of my 7-part series on writing a business plan for independent film and media, I’ll be going over all of the financial statements you’ll need in your business plan.  This is a section that you’ll want to write before you write the financial text section of your plan, as it will have a great impact on that section and potentially other sections of the plan.  Each document should take up only a single page.

Topsheet Budget

If you’re reading this, hopefully, you already know what a topsheet budget is.  In case you don’t, It’s the summary budget of your entire film that should take up no more than a page.  Unlike the rest of these documents which should be made by an executive producer, the top sheet budget is best made by a line producer or UPM.  It’s important to note, that you can’t just make a topsheet budget, it comes as a byproduct of making a detail budget for your film.  It’s not something that should be effectively created for it’s own sake. 
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Revenue Topsheet

This page is a summary of all the money that will come into your project, and how it will go out and come back to the production company and the investor, loosely organized by what comes in domestically vs internationally, and what media right types bring in what money.

This is not something that all people writing business plans for films include, however, I feel that it’s an important document that gives an angel investor a simplified snapshot of the entire revenue picture before diving into some of the more gory details. 

Waterfall to Company (Expected Income Breakdown)

Louise Levison says you only need an expected income breakdown.  When I create proformas, I tend to include how the overall revenue table that outlines where the money will be divided among the major stakeholders. This includes the distribution platforms, distributors, sales agents, producer’s reps, banks, and investors.  It’s likely that if this is your first film, you won’t have all of those stakeholders, but it’s important to include the stakeholders you do have.
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Additionally, I use this outline what cuts are standard for each of those stakeholders, and what remains from each right type to go to the production company and the investor. 

Internal Company Waterfall/Capitalization Table

This is another document that not everyone includes, but due to my time in the tech industry, I find something like it is essential.  The term capitalization table (or Cap Table for short) is taken from the tech industry and outlines who owns what part of a company.

This document goes further than a standard cap table, in that not only does it outline the major owners of the company, it also shows where the money goes once it comes back to the production company, and how it’s divided between debt, investors, producers, actors, and other people within your production company who made the film. 

This document should calculate the investor’s expected Return on Investment (ROI) as well as how much is likely to go to producers and anyone else who has received profit participation.  If you have more than one set of people on the crew receiving profit participation, then you may want to lump it into a cast/crew equity pool. 

CashFlow Statement/Breakeven Analysis

This is a yearly/quarterly estimate of how the money will go out and come back in.  Generally, your entire budget will go out before any money comes back in.  If you’re using staged investments, you’ll want to outline when additional rounds of funding are likely to come into the company. Part of this is keeping track of the cash flow as you spend the money and as it goes back to investors. 

I’ll generally make an assumption that it will take a year from investment to complete the film.  After that, money will start coming back in about 3-4 quarters, and trickle in from each source according to however you think the film will be windowed.  That’s actually the optimistic version timeline. By the end of 5-7 years after the initial investment, you’ll likely just want to end the cash flow statement since it’s unlikely your film will be producing that much revenue. Films are not evergreen.

Research/Sources

This is as it sounds.  it’s all the resources for your comparative analysis that you used to make revenue projections, as well as any other sources you may have referenced in your plan.  If you did a comparative analysis, you’ll want to include the details on the films you chose as well as where you got the data, as reporting is inconsistent across major platforms like IMDb pro, The-Numbers, Box Office Mojo, and Rentrack.  I also have a useful whitepaper and some useful links in the resource pack.
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Thanks so much for reading this blog.  Thanks even more if you read all 7 parts!  If you’re a film school teacher and would like to use this in a course, feel free to email me using the link below to get a free print-ready version of this series, or anything else you may want to reverence.

Making your pro-forma financial statements requires a lot of research. My resource package has a whitepaper and collection of links that will help speed that process up a bit, as well as other templates and related content. Grab it for free with the button below.

If you need a guiding hand through the process, I’ve written. few dozen plans. Check out my services page if this is just. a bit too daunting to do on your own.

Lastly, if you want to review any of the other sections of this 7 part series, here’s a guild for you below. 

Executive Summary
The Company
The Projects
Marketing
Risk Statement/SWOT Analysis
Financials Section (Text)
Pro-Foma Financial Statements. (This Section)

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How to Write an Independent Film Business Plan - 6/7 Financial Methodolgy

In part 6 of my 7-part series on independent film business planning, we’re going to go over the text portion of the financial section of the business plan.  This is where you explain the methodology you used in your financial projections, the general plan for taking in the money, and then an overview of what you’re going to present in the final section, the pro-forma financial statements.  

It’s pretty common to send this section out as a standalone document, or perhaps paired with the deck or executive summary. That said, the reason it’s at the back of the business plan is to force your potential investor to flip around through the plan and better acquaint themselves with your prospectus and project. That, and this is relatively standard practice across multiple industries.

​Investment Plan

This subsection is devoted to how you intend to raise your funding.  As a hint, the answer SHOULD NOT be that you intend on raising your funding entirely from equity investors.   You’ll want to outline where you intend to raise each part of your money from, as well as how that money will be raised. 
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Some questions to ask yourself here are as follows, how much are you planning on raising in tax incentives?  How much are you planning on raising in product placement?  Do you have any pre-sales from a distributor or sales agency?  Are you planning on any other forms of backed debt?  Did you have a successful crowdfunding campaign?  How much are you looking for in equity investment?  And how much do you intend to raise in unbacked debt?

For more detail on this, you should check out one of my most popular articles.

Related: The 9 ways to finance an independent film.

You’ll also want to figure out if you’re staging the investment.  By this, I mean are you planning on raising money for development first?  Do you plan a separate raise for completion or marketing funds?  There can be some pretty big advantages to raising funding for your film across multiple rounds. 

For more information on this, I encourage you to check out my blog on the 4 stages of independent film investment.​

Related: The 4 stages of independent film investment.

You absolutely must to make sure they understand your offer.  Some questions you’ll need to answer are: What’s the amount you’re raising in equity and what percentage ownership in your project are you offering for that funding?  What’s your minimum buy-in?  Who are the other stakeholders? 
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Additionally, you’ll want to highlight the potential revenue for your film and give them their estimated Return on Investment (ROI).  This will have to be done after your pro-forma financial statements.  You’ll also want to outline when you expect them to break even.

Financial Assumptions

This section is primarily about outlining the assumptions you used while making your pro-forma financial statements.  You’ll want to outline the criteria you used when creating a comparative analysis, as well as what assumptions you made while creating your cash flow sheet, and waterfall to your company/expected income breakdown.

For more detail on financial projections, please check out this blog below.

Related: The two main types of financial projections

Pro Forma Financial Statements

Finally, you’ll want to outline your Pro-Forma financial statements.  For reference, these are the following documents. 

Topsheet Budget: A snapshot of how the money will be spent on your film. You can only get this by doing a full detail budget. If you try to make a top sheet from scratch, you’ll end up creating more problems than you solve.

Revenue Topsheet: An overview of money to the company and to the investor.

Waterfall to Company/Expected Income breakdown: An outline of how much money your film will make based on your comparative analysis, and from what sources.  Generally, when I make a waterfall like this, I’ll also deduct the fees from various other stakeholders including platforms, distributors, sales agents, and producer’s reps (if applicable.)

Internal company waterfall (capitalization table). This sheet is something that not everyone does, but it essentially outlines where the money will go once it gets to your company.  I feel this is necessary if you’re using a more complicated financial mix that incorporates debt and tax incentives. 

Cashflow Sheet/ Breakeven analysis: This document is an overview of how money will flow through the company and subsequently come back in.  you’ll want to highlight when they can expect to recoup their investment.

Research/Sources: This is self-explanatory, it’s the research you used in the other sections of the plan, particularly the films you used in the comparative analysis.

Thanks so much for reading! I’ll be back next week with the final installment going into much more detail on the pro forma financial statements. 

The reason I was able to write this blog series is that I’ve written a few dozen independent film business plans. If you need help with yours, you should check out my services page.

If you need more help researching for your business plan, check out the indiefilm Business Resource Pack. As mentioned above, it’s got a whitepaper to help you with your research, as well as lots of other helpful links and resources to aid in the creation of all the documentation you’ll need to talk to your investors. Plus, you’ll get a monthly blog digest full of helpful content so that you can be as knowledgeable as possible when you speak to your investor contacts.

Finally, if you want to check out the other sections of this 7 part blog series, I’ve included a table of contents below.
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Executive Summary
The Company
The Projects
Marketing
Risk Statement/SWOT Analysis
Financial Section (Text/Methodology) - This Post
Pro-Foma Financial Statements.

Check the tags below for related conent!

How to Write an Independent Film Business Plan - 5/7 SWOT/ Risk Analysis

In part 5 of my 7-part series on business planning, we talk about the risk management/SWOT Analysis of your project.  It begins with a risk statement that goes into exactly why film is a highly speculative and inherently risky investment, and then goes into a SWOT Analysis that illustrates how you plan on managing those risks.  For those of you who don’t know SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.

Risk Statement

This is a boilerplate legal copy that you should not write yourself.  You’ll need a lawyer to write it, or some editions of Filmmakers and Financing by Louise Levinson have a statement you can use.  You’ll see it in the related books section below.  The purpose of this statement is to ensure that any potential knows that film investment carries a fairly significant risk of losing everything you put into it. 
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This is something you MUST include in order to not paint too blue a sky, or make false promises.  If it scares off any investors, it’s probably better you didn’t work with them anyway.

SWOT Analysis

The way I do my SWOT analysis is on the bottom third of the page that contains the risk statement, I do a 2*2 grid of strengths weaknesses, opportunities, and threats that outlines everything that will come for the following pages.  If it fits, this is succinct and a great way to manage space while informing your people.   

The other four sections of this plan are things I generally dress in a format similar to an outline, starting with a restatement of the Strength, Weakness, opportunity, or threat itself, and then stating how I intend to mitigate the negative and capitalize on the positive.  Here’s an outline of what each of these parts of the acronym stands for.

Strengths

Strengths are good things that are inherent to your project.  This could be something like holiday movies tend to have longer lifespans because they have regular movies to trigger people feeling the need to watch them, or there’s already an existing fan base for the intellectual property you’ve optioned.  Another good thing to focus on would be the track record of your team, and the general stength of any marketable attachments you’ve gotten. If you don’t have any of those, there’s an article on it in the free ebook in the resouce pack.
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Weaknesses

Conversely, weaknesses are things inherent to your project that may represent a problem. These could be things like the Fourth of July is a uniquely American Holiday, so the film may be difficult to sell internationally.  It could also be something like, the film is completely original and has no existing fanbase.   As previously stated, you’ll want to add exactly how you plan on addressing any weaknesses below each one. 

Opportunity

While Strengths are inherent to your project, opportunities are more related to the current state of the overall market.  This could be a marketable attachment you’ve got that just had a big win, such as one of your cast being cast in a major show or movie that was just announced.

Another example of this might be that there aren’t enough Fourth of July movies currently being made to sate demand and you’ve budgeted your film such that you can make your money back domestically.

Another example would be that a book from the same author as the book we’ve based our script on just got picked up for a television series by *insert name of the studio or PayTV Channel.*. Similarly, if your story is inspired by current conditions going on in the world or targeting a growing audience this is a good place to hammer that point home.

Threats

Just like opportunities, threats are reflective of current market conditions.  An example of a threat would be that due to the current geopolitical state of the world, many foreign countries are less likely to buy American than they used to be.  A potential trade war would also be considered a threat, although as of right now that’s not incredibly likely to effect to film and media.   Without being too political, many threats you’ll need to understand are a result of macroeconomic conditions that you can only really track by being politically aware.

Thank you SO much for reading!  I do a lot of this sort of work with my clients, so if you have a direct question that you need help answering for your business, then check out the Guerrilla Rep Services page.

If you like the content, you should grab my free film business resource package You’ll get great research aides and a whitepaper on the state of the industry, you’ll also get a free e-book, money and time-saving resources, templates, monthly digests of content like this segmented by topic, plus a whole lot more. Link in the button below.

Finally, this is part 5 of a 7 part series. Next week we’ll be tackling the financial text section, and then we’ll round it out with proforma financial statements the following week. In the meantime, check out the other parts of the series with the links below.

Executive Summary
The Company
The Projects
Marketing
Risk Statement/SWOT Analysis (This Section)
Financials Section (Text)
Pro-Foma Financial Statements.

How to Write an Independent Film Business Plan - 4/7 Marketing Section

In this installment of my 7 part blog series on business planning, we’re going to take a look at the marketing section of the plan.  This section is likely to be the longest section, as it encompasses an overview of the industry, as well as both marketing and distribution planning.  Generally, this section will encompass 3-5 pages of the plan, all single-spaced.  This is among the most important sections of the plan, as it is a real breakdown of how the money will come back to the film

Industry

In this subsection, you’ll want to define some key metrics of the film industry.  You’ll want to include its size, how much revenue it brings in, and ideally an estimate of how many films are made in a year, as well s the size of the independent part of the film industry vs the overall film industry.  If you want help with some of those figures, you should look at the white paper I did with ProductionNext, IndieWire, Stage32, and Fandor a few years back.  To the best of my knowledge, it’s still among the most reliable data on the film industry.

The fact that the film industry is considered a mature industry that is not growing by significant margins is also something you’ll also want to mention.  You’ll also want to talk about the sectors of growth within the film industry, as well as where the money tends to come from for independent producers, and a whole lot of other data you’re going to have to find and reference.  As mentioned above, the State of the Film Industry book linked in the banner below has much of this information for you.
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Overall, this section should be about a page long.  The best sources for Metrics are the MPA THEME report and the State of The Film Industry Report. You can find links or downloads of both of those in my free resource pack.

Marketing

The marketing subsection of the plan goes into detail about both the target demographics and target market of your film, as well as how you plan on accessing them.  To quote an old friend and long-time silicon valley strategist Sheridan Tatsuno, Finding your target market is like placing the target, and marketing is like shooting an arrow.  For more detail on how to go about finding your target market, I encourage you to check out the blog below, as my word count restrictions will not let me go too deeply into it here

Related: How do I figure out who to sell my movie to?

Figuring out how you’re going to market the film can be a challenge for many filmmakers.  Generally, I’d advise putting something more detailed than “smart social media strategy.”  I tell most of my clients to focus on getting press, appearing on podcasts, and getting reviews.  Marketing stunts can be great, but timing them is difficult to pull off. 
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All of this being said, you’ll need more to your marketing strategy than simply going to festivals to build buzz. The marketing category at the top of this blog, as well as the audience, community, and marketing, tags at the bottom of the page, are a good place to start.

Distribution

This section talks about how you intend to get your film to the end user.  This section should be an actionable plan on how you intend to attract a distributor.  This section should not be “We’ll get into sundance and then have distributors chasing us!” I hate to break it to you, but you’re probably not going to get into Sundance.  Fewer than 1% of submissions do. 
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The biggest thing you need to answer is whether you plan on attaching a distributor/sales agent or whether you intend to self-distribute.  if you’re not sure, this blog might help you decide. There’s lots more to it, I’d recommend checking the distribution category or the international sales tag on this site to learn more of what you need to write this section.

Related: 6 questions to ask yourself BEFORE self distributing your indiefilm

Somewhere between a quarter and a third of all the blogs on this site are devoted to distribution, so there’s lots of stuff here for you to use when developing this plan.  If you want to develop more of a plan than distributing it yourself, it’s also something I’d be happy to talk to you about it.  Check out my services page for more.

If that’s a bit too much for you but you still want more information about the film business, check out my film business resource package. You’ll get a free e-book, monthly digests segmented by topic, and a packet of film market resources including templates and money-saving resources.

This is part of a 7 part series.  I’ll be updating the various sections as they drop.  So check back and if you see a ling below, it will take you to whatever section you most want to read. 
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Executive Summary
The Company
The Projects
Marketing (This post)
Risk Statement/SWOT Analysis
Financials Section (Text)
Pro-forma Financial Statements.

Check the tags for more content!

How To Write a Business Plan for an Independent Film - 3/7 Project(s)

Next up in my 7 part series on writing a business plan for independent film, we’ll be taking a deeper look at the project(s) section of the plan.  The projects section of the plan is the most creative section, as it talks about the creative work that you’re seeking to finance.  That being said, it breaks those creative elements into their basic business points.  This section should be no more than a page if you have one project, and no more than 2 pages if you’re looking at a slate.

GENRE

Genre is a huge part of marketing any film.  It essentially categorizes your film into what interest groups you’ll be marketing.  This subsection should focus on the genre of your film, as well as who you expect the film to appeal to. 
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For more information on the concept of Genre in Film as it pertains to distribution, check out this blog.

RELATED: WHY GENRE IS VITAL TO INDIEFILM MARKETING & DISTRIBUTION

PLOT SYNOPSIS

This is as it sounds.  It’s a one-paragraph synopsis of your film.  When you’re writing it, keep in mind that you’re not telling your story, so much as selling it.  Make it exciting.  Make it something that the person reading the plan simply will not be able to ignore. 

BUDGET ​

This one should also be self-explanatory, list the total budget of your film.  It would make sense to break it into the following categories.  Above the Line, Development, Pre-Production, Principle photography, post-production, and producer’s contribution to marketing and distribution.
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The last part is to acknowledge that while the distributor will be contributing a large amount to the marketing and distribution costs of the film, it will not be the sole contribution, and you as the filmmaker will likely have to contribute some amount of time and/or money to make sure your film is sold well.​

RATING

This section talks about your expected rating.  Say what you expect to get, what themes you think will cause the film to get that rating, and how that will help you sell the film to the primary demographic listed above.

MARKETABLE ATTACHMENTS

Did you get Tom Cruise for your movie?  What about Joseph Gordon Levitt?  Or maybe Brian De Palma came on to direct.  If you have anyone like this (or even someone with far less impressive credits) make sure you list that you’ve got them.  If you’re in talks with their people, list it here too.

Related: 5 Reasons you Still need Name Talent in your film

INTELLECTUAL PROPERTY STATUS

Finally, you’ll need to list the intellectual property status of your film.  By this, I simply mean is the concept original? Is it based on anything? Did you acquire the rights to whatever it’s based on?  If you optioned rights, when does the option expire? If you optioned rights, who is the original owner of the rights?

Writing a business plan that can actually raise funding is a lot more than just using a template. If you want a leg up you should check out my free resource pack which includes a deck template, a free e-book, digests of relevant industry-related content, delivered to your inbox once a month, and notifications of special events and other announcements tailored to the needs of the filmmakers I work with.

You should know that I’ve written a few dozen business plans for filmmakers, some of which have raised significant funding.  If you want to talk about it check out our services page.

Thanks so much for reading!  You can find the other completed sections of this 7-part series below.
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Executive Summary
The Company
The Projects (This Post)
Marketing
Risk Statement/SWOT Analysis
Financials Section (Text)
Pro-Foma Financial Statements.

Check the tags below for related content

How to Write an Independent Film Business Plan - 2/7 Company Section

Last time we went over the basics of writing an independent film executive summary.  This time, we’re diving into the first section of a business plan.  By this I mean the company section.  If you want an angel investor to give you money, they’re going to need to understand your company.  There are some legal reasons for this, but most of it is about understanding the people that they’re considering investing in.

The company section generally consists of the following sub-sections.  This section only covers the company making the film, not the media projects themselves.  Those will be explored in section III - The Projects.

FORM OF BUSINESS OWNERSHIP

​This is the legal structure you’ve chosen to form your company as.  If you have yet to form a company, you can tell an investor what the LLC will be formed as once their money comes in.  I’ve written a much longer examination of this previously, which I’ve linked to below. Also, I’m Not a Lawyer, that’s not legal advice, don’t @ me.

Related: The Legal Structure of your Production Company

THE COMPANY

This subsection talks a bit about your production company.   You can talk about how long you’ve been in business, what you’ve done in the past, and how you came together if it makes sense to do so.  Avoid mentioning academia if at all possible, unless you went to somewhere like USC, UCLA, NYU, or an Ivy League School. Try to make sure this section only takes up 2-3 lines on the page.

BUSINESS PHILOSOPHY

This is what you stand for as a company.  What’s your vision?  What content do you want to make over the long term?  Why should an investor back you instead of one of the other projects that someone else solicited? 
Your film probably can’t compete with the potential return of a tech company.  I’ve explored that in detail over the 7 part blog series linked below. ​

Additionally, you might want to check out Primal Branding by Patrick Hanlon it’s a great book to help you better understand how to write a compelling company ethos. I use it with clients as it frames it exceptionally well for creative people. That is an affiliate link.

Related: Why don’t rich Tech people invest in film?

Since you can’t compete on the merits of your potential revenue alone, you need to show them other reasons that it would behoove them to invest in your project.  See the link below for more information.

Related: Diversification and Soft Incentives

PRODUCTION TEAM

These are the key team members that will make your film happen.  List the lead producer first, the director second, the Executive Producer second, and the remaining producers after that.  Directors of photography and composers tend to not add a lot of value in this section, but if you’ve got one with some impressive credits behind them, it might make sense to add the.

Generally, if you have someone on your team with some really impressive credits, it might make more sense to list them ahead of the order I listed above. ​

Essential Reference Books for Indiefilm Business Planning

PRODUCT

This should talk a little about the films you’re going to make, and the films you’ve made in the past.

OPERATIONS

This is a calendar of operations with key milestones that you intend to hit during the production of the film.  These would be things like:

• Financing Completed

• Preproduction Begins

• First Day of Principle Photography

• Completion of principal Photography

• Start of post-production

You’ll also want to include when you intend to finish post-production, as well as when you intend to start distribution, but that should be less specific than the items listed above.  For the non-bullied items, I would say that you should just give a quarter of when you expect to have them happen, whereas the bullets should be a month or a date. 

CURRENT EVENTS

The Current events are as they sound, a list of the exciting events going on with your film and with your company.  This could be securing a letter of intent from an actor, director, or distributor, completing the script, or raising some portion of the financing.

Assisting filmmakers in writing business plans is a decent part of the consulting arm of my business.  The free e-book, blog digests, and templates in my resource package can give you a big leg up. That said, If this all feels like a bit much to do on your own you might want to check out my services page. Links for both are in the buttons below.

Thanks so much for reading!  You can find the other completed sections of this 7 part series below

​Executive Summary
The Company (This One)
The Projects
Marketing
Risk Statement/SWOT Analysis
Financials Section (Text)
Pro-forma Financial Statements.

Check the tags for more related content.

How to Write an Independent Film Business Plan - 1/7 Executive Summary

One of my more popular services for filmmakers is Independent Film Business Plan Writing.  So I decided to do a series outlining the basics of writing an independent film business plan to talk about what I do and give you an idea of how you can get started with it yourself.  

Before we really dive in it’s worth noting that what will really sell an investor on your project is you. You need to develop a relationship with them and build enough trust that they’ll be willing to take a risk with you. A business plan shows you’ve done your homework, but in the end, the close will be around you as a filmmaker, producer, and entrepreneur.

The first Section of the independent film business plan is always the Executive Summary, and it’s the most important that you get right.  So how do you get it right?  Read this blog for the basics.

Write this section LAST

This section may be the first section in your independent film business plan, but it’s the last section you should write.  Once you’ve written the other sections of this plan, the executive summary will be a breeze.  The only thing that might be a challenge is keeping the word count sparse enough that you keep it to a single page.   
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If you have an investor that only wants an executive summary, then you can write it first.  But you’ll also need to generate your pro forma financial statements for your film, and project revenue and generally have a good idea of what’s going to go into the film’s business plan in order to write it.  I would definitely write it after making the first version of your Deck, and rewrite it after you finish the rest of the business plan. ​

Keep it Concise

As the name would imply, the Executive Summary is the Summary of an entire business plan.  It takes the other 5 sections of the film’s business plan and summarizes them into a single page.  It’s possible that you could do a single double-sided page, but generally, for a film you shouldn’t need to.  

A general rule here is to leave your reader wanting more, as if they don’t have questions they’re less likely to reach out again, which gives you less of a chance to build a relationship with them.

Here’s a brief summary of what you’ll cover in your executive summary.

Project

As the title implies, this section goes over the basics of your project.  it goes over the major attachments, a synopsis, the budget, as well as the genre of the film.  You’ll have about a paragraph or two to get that all across, so you’ll have to be quite concise.

Company/Team

This section is a brief description of the values of your production company.  Generally, you’ll keep it to your mission statement, and maybe a bit about your key members in the summary.

Marketing/Distribution

In a standard prospectus, this would be the go-to-market strategy.  For a film, this means your marketing and distribution sections.  For the executive summary, list your target demographics, whether you have a distributor, plan to get one, or plan on self-distributing.  Also, include if you plan on raising additional money to assist in distribution.

SWOT Analysis/Risk Management

SWOT is an acronym standing for Strengths Weaknesses, Opportunities, and Threats.  For the executive summary, this section should include a statement that outlines how investing in film is incredibly risky, due to a myriad of factors that practically render your projections null and void.  Advise potential investors to should always consult a lawyer before investing in your film.  Cover your ass.  I’ve done a 2*2 table with these for plans in the past, and it works reasonably well.  Speaking of covering one’s posterior, you should have a lawyer draft a risk statement for you.  Also, I am not one of those, just your friendly neighborhood entrepreneur. #NotALawyer #SideRant

Financials

Finally, we come to the part of the plan that the investors really want to see.  How much is this going to cost, and what’s a reasonable estimate on what it can return?  There are two ways of projecting this, outlined in the blog below.
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Related: The Two Ways to Project Revenue for an independent film.

In addition to your expected ROI, you’ll want to include when you expect to break even and mention that pro forma financial statements are at the end of this plan included behind the actual financial section.

Pro Forma Financial Statements.

If you’re sending out your executive summary as a document unto itself, you will strongly want to consider including the pro forma financial statements. For Reference, those documents are a top sheet budget, a revenue top sheet, a waterfall to the company/expected income breakdown, an internal company waterfall/capitalization table, a cashflow statement/breakeven analysis, and a document citing your research and sources used in the rest of the plan.

Writing an executive summary well requires a lot of highly specialized knowledge of the film business. It’s not easy to attain that knowledge, but my free film business resource package is a great place to start! You’ll get a deck template, contact tracking templates, a FREE ebook, and monthly digests of blogs categorized by topic to help you know what you’ll need to have the best possible chance to close investors.

Here’s a link to the other sections of this 7 part series. 
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Executive Summary (this article)
The Company
The Projects
Marketing
Risk Statement/SWOT Analysis
Financials Section (Text)
Pro-Foma Financial Statements.

5 Rules for Finding Film Investors

One of the most common questions I get is where to find investors for a feature film.  Inherent in that question is simply where to find investors.  While I may not have a specific answer for you regarding exactly where to find them, I do have a set of rules for figuring out where you might be able to find them in your local community.  This is meant to be applicable outside of the major hubs in the US, and as such it’s not going to have to be more of a framework than a simple answer.

Would you rather watch or listen than Read?  Here's the same topic on my YouTube Channel.

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1. ​Go where the money is.

Think about where people in your community who have money congregate.  In San Francisco, the money comes from tech.  In Colorado, the money came from oil, gas, and tourism, but has recently grown to include legal recreational marijuana.  In many communities, some of the most affluent are the doctors and medical professionals.  In most communities, the local lawyers tend to have money, but you’ll have to make sure you come prepared.  Figure out what industries drive your local economy and then extrapolate from that who might have enough spare income to invest in your project. 

If you know what these people do, then you can start to figure out where they go when it’s after working hours.  If you know where they go after hours, you can go get a drink and start to work your way to making a new friend in this investor. 

All that being said, Be careful not to solicit too early, as that can actually be illegal.  #NotALawyer.​

2. Figure out a place where you can find something in common

Any investment as inherently risky and a-typical as the film industry relies heavily on your relationship with your investor.  As such, finding something you have in common is a great way to start the relationship right. 

RELATED: 7 Reasons Courting an Investor is Like Dating

As an example of what I mean, I’ve met investors while singing karaoke at Gay bars in San Francisco.  I’ve met others at industry events, and I’ve even met a few by going to some famous silicon valley hot spots where investors and Venture Capitalists are known to congregate.  If you know where all the doctors go to drink after work, and if there’s a regular activity at one of the bars that can facilitate meeting them, it might not be a bad idea to go and try to establish some connections in that community.  This segues us nicely to…

3. ​Understand that moneyed people tend to have their own community

Generally, wealthy individuals know other wealthy individuals.  If you develop a relationship with someone within that community, it means that even if that investor you ended up establishing a relationship with won’t invest, they may talk to a friend about it who might. 

The reverse of this notion is also true.  If you get a bad reputation in the Wealthy community then you’re likely to find it very hard to raise funds for your next film.

4. Understand that most people with money will have other investment options.

As stated above, film investment is highly volatile and inherently risky.  If these investors took on every potential project that comes asking for their money, they would not be rich for very long.  As such, you’re going to have lots of competition when it comes to raising funds for your film.  This competition will not only come from other films, but also from stocks and bonds, other startups and small businesses, and even the notion that if they’re going to spend 100k they never get back, why not just buy a new Mercedes?

5. Find a not entirely monetary way to close the deal.

So to bring the last point home, you have to find other reasons that aren’t solely based on return on investment to get people to consider investing in your independent film. This can be the tax incentives, the moral argument to support culture, the fact that investing in a film is an inherently interesting thing to do, or a few other potential things. The blog below explores this in much more detail than I have the time or the word count to do here today.

Related: Why Don't Rich Tech People Invest in Film Part 5: Diversification and Soft Incentives

If you still need help financing your film, you should check out my free indiefilm business resource package. It’s got lots of tools and templates to to help you talk to distributors and investors, as well as a free-ebook so you can know what you need to know to wow them when you do. Additionally, you’ll get a monthly content digest to help you stay up to date on the ins and outs of the film industry, as well as be the first to know about new offerings and releases from Guerrilla Rep Media. Get it for free below.

7 Reasons Courting an Investor is Like Dating

There’s an old adage that Investing is like Dating.  In fact, I’ve talked about the similarities both on meetings with investors, and dates with people who are qualified to be investors.  So as something of a tongue-in-cheek yet still (Mostly) safe-for-work post, here are 7 ways courting an investor is like dating. ​

​1. Your goal is to see how compatible you are with the other person.

Most of the time, if you want to get into bed with someone, you want to be compatible with them first.  Getting money from an investor isn’t like a one-night stand.  You don’t just get the check and then never hear from them again.  Getting into bed with an investor is a long-term deal, so making sure you two work well together is simply a must.  Otherwise, the break-up may not be pretty. 

2. If you come off as Asking for too much the first time out, you probably won't get a second.  

The first time you go out with an investor is kind of like that first coffee date.  you’re both sizing each other up, and you want to see how you click.  If you went on a first date trying to make out and take the partner back to your place, it’s probably not going to end well for you.  Similarly, if you start asking an investor to whip out their checkbook on the first meeting, then you’re not likely to get a call back for a second. 

In summation, the goal of your first date should always be to get a second.  If you’re out with an investor, then the second meeting is the sole goal of the first meeting. 

3. It Generally takes at least 3-5 meetings to jump into bed together.  

As with dating, it generally takes 3-5 meetings to decide to get into bed together.  Often, the longer it takes the more likely it is that the relationship will be fruitful down the line.  At least to a point.  If it takes more than 7 meetings to get a check, the investor (or your romantic partner) might just want to be friends. 

4. Both Parties have something to gain, but generally speaking one has significantly more options than the other.  

Just like women are generally more sought after than men in the dating scene, Investors are generally more sought after than entrepreneurs. This may sound crass, but the only pretty girl in the room is going to get a lot more offers than the 10 guys pursuing her.  The ratio is similar for investors. 

So sure, while everybody is looking for a mate, and every investor needs deal flow, generally one side has more options than the other.  It’s important to remember that when attempting to court an investor.

5. They're Probably going to Google You.

Everybody does diligence in this day and age.  If you didn’t think your date was going to check out your online presence, you should probably think again.  Investors are going to look into your past history, and maybe even check your credit before they invest in you.  Dates will do as much as they can on a similar level, but probably not check your credit.

Related: 5 Steps for Vetting Your Investors

6. If you jump into bed on the first date, you're in for a wild ride.  a

One-night stands can be fun and all, but if you jump into bed with the wrong person right after meeting them it can be a real nightmare.  (Or so I’ve been told…) If you don’t take the time to get to know somebody before you get into a serious relationship with the, you’re going to be in for a nasty surprise.  All investment deals are serious relationships.  Don’t let anyone tell you otherwise. 

7. When you seal the deal, you might be stuck with that person for YEARS.

If you take money from someone you’ll be dealing with them until all investors somehow exit the company.  This can be many years.  The Series A Investors at Twitter didn’t exit until their IPO Years later, and a film generally takes 3-5 years to pay back their investors, if they ever do.

If you do get into bed with an angel investor to finance your feature film or web series, they’re going to be a part of your business for a long time.  It’s not just about finding independent film angel investors, it’s also about courting them and making sure you’ve found the right investor, not just the first investor who makes you an offer.

If you want some help with this courting process, my free resource package is a great place to start. It’s got a free e-book that might answer some questions your investor may have. It’s also got a deck template you can use in your first meeting. Get it for FREE below.

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The Two Main types of Financial Projections for an IndieFilm

As a key part of writing a business plan for independent film, a filmmaker must figure out how much the film is likely to make back.  This involves developing or obtaining revenue projections. 

There are generally two ways to do this, each with its own advantages and disadvantages.  The first way is to do a comparative analysis.  This means taking similar films from the last 5 years and plugging them into a comparative model to generate revenue estimates.  The second way is to get a letter of intent from a sales agent and get them to estimate what they could sell this for in various territories across the globe. 

This blog will compare and contrast these two methods (Both of which I do regularly for clients) in an effort to help you better understand which way you want to go when writing the business plan for your independent film.

Would you Rather Watch/Listen to this than read it? Here’s a corresponding video on my YouTube Channel!

Comparative Analysis - Overview

A comparative analysis is when you comb IMDb Pro and The-Numbers.com to come up with a set number of comparable films to yours.  These are films that have a similar genre, similar budgets, similar assets, are based on similar intellectual property, and are generally within the last 5 years.  If you can match story elements that are a plus, but there are only so many films with the necessary data to compare. 

When I do it, I compare 20 films, average their ROIs from theatrical, pull numbers from home video wherever I can (Usually the-numbers.com), and then run them through a model I’ve developed to come up with revenue estimates.   Honestly, I don’t do a lot of this work.  Most of the time I refer it to my friends at Nash Info Services since they run The-Numbers.com and the brand behind these estimates means a lot to potential investors. 

I will do it when a client asks though, generally as a part of a larger business plan/packaging service plan.  

Sales Agency Estimates - Overview

Sales Agency Estimates are when you get a letter of intent from a sales agent, and as part of that deal the sales agent prepares estimates on what they think they can sell the film for on a territory-by-territory basis.  Generally, they work from what buyers they know they have in these territories, whether or not they buy content like this, and what they normally pay for content like yours. 

These estimates are heavily dependent on the state of your package, who’s directing your film, and who’s slated to star in it.  If you don’t have much of a package and a first-time director, then you’re not going to get very promising numbers.  ​

Comparative Analysis - Benefits

Generally, anyone can get these estimates.  Some people figure out the formula and do it themselves, others pay someone like me or Bruce Nash to do it for them.  There’s either a not insubstantial fee involved or a lot of time involved in getting them. They’ll generally satisfy an investor, especially if Bruce does it. 

Sales Agency Estimates - Benefit

The biggest benefit to a sales agency approach is that if they’re doing estimates for you, they’re probably going to distribute your film.  Also, these estimates have the potential to be more accurate, because they’re based on non-public numbers on what buyers are paying in current market conditions.  Finally, if a sales agent has given you an LOI, these estimates are generally free.

Comparative Analysis - Drawbacks

The first drawback is likely that they’re either very time intensive or somewhat costly to produce.  Also, because VOD Sales data is kept under lock and key, it’s very difficult to estimate total revenue from VOD using this method.  Given how important VOD is, that’s a somewhat substantial drawback.

Further, these estimates are greatly helped by the name value of who made them.  Likely, if the filmmaker makes them themselves, then they’re not as viable as if someone like Bruce or Me does them.  This is not only because we both have a track record in them, (Bruce much Moreso) but also because we’re mostly impartial third parties. 

These revenue estimates can be very flawed if a filmmaker makes them because many filmmakers have a tendency to only pick winners, not the films that lost money.  In business, we call this painting too blue a sky, as it makes everything look sunny with no chance of rain.  In film, there’s always a substantial chance of rain. ​

Sales Agency Estimates - Drawbacks

The biggest drawback to these estimates is that not everyone can get these estimates.  You have to have a relationship with the sales agency for them to consider giving them to you.  Generally, you’ll need to have convinced them to give you an LOI first.  That’s not always the case though. 

If you have a producer’s rep, they can sometimes get you through the relationship barrier, but they’ll often charge for doing so when we’re talking about a film that’s still in development. 

Also, Sales agencies can sometimes inflate their numbers to keep filmmakers happy and convince them to sign.  This does not look good to investors if that money never comes in

Conclusion

Overall, which method you use to estimate revenue depends entirely on what situation you find yourself in.  If you have the ability to get the sales agency estimates, they can be VERY strong, if you don’t, the comparative estimates are reliable enough to do what you need them to do.  That being said, I wouldn’t advise taking a comparative analysis to a sales agency. 

Thanks for Reading! Creating revenue estimates is only part of raising money for your film. There’s a lot more you’ll need to know if you want to succeed. That’s a large part of why I created my indie film resource package, to help filmmakers get the knowledge and resources they need to grow their careers. It’s totally free and has things like a deck template, free e-book, and even specialized blog digests sent out on a monthly basis to help you understand how to answer the questions your investors will almost certainly have. Check it out at the button below.

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7 Realistic ways to Find First Money In on your Feature Film.

When fundraising for anything, the first money is always the hardest.  Investors don’t want to be the first in due to the investment seeming untested.  So in order for them to feel more secure, you might need to raise some of the money in other places.  Here are the 7 most realistic places for filmmakers to go to get first money in. ​

First money in isn’t meant to be the entirety of your budget.  It’s only meant to be about 10%.  Having raised 10% of your budget helps investors see that you’re serious, and aren’t going to require them to do all of the funding work themselves.  With that in mind, almost every item on this list is not meant to fund your entire movie, but more serve as a jumping-off point to help you raise the funds you need to make an awesome film. 

Highly Related: The 9 ways to Finance your Independent Film

1. Donation based Crowdfunding

I know most filmmakers really don’t want to hear about crowdfunding, but it’s still one of the best ways to serve as a proof of concept for a film.  It’s also a great way to get first money in.  Specifically for this example, I’m talking about donation based crowdfunding.  I’m far from an expert in equity crowdfunding, and while there’s potential in the idea, it’s unclear how it should be executed. 
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That being said, donation based crowdfunding can be an excellent way to get the project rolling, and get further into development.

2. Tax Incentives

Depending on where you’re planning on shooting, Tax incentives can be a great way to get a portion of your funding in place.  If you’re in the US, then shooting in Kentucky can get you as much as 35% of your budget.  Granted, that will go down to about 30% once you take out a loan against it so that it becomes real money instead of a letter of credit.  That loan will be fairly low interest, since Kentucky’s incentive is structured as cash.

There are a lot of things I could go into about tax incentives, but it’s more than I can cover in this blog.  I might make a future blog or video about it Comment and ask.

3. Grants

There aren’t a lot of development stage grants out there, and as such the few there are tend to be in very high demand.  However, if you can get some portion of you money via a grant from the Kenneth Rainin Foundation or some other development stage granter, then it cuts the risk for your investors and gives you first money in. 

Keep in mind, most organizations that give grants turn you down automatically when you first apply. It can be wise to apply multiple years in a row while you try to get this film, or other films off the ground. 

4. Equipment Loans

An equipment loan is a relatively low interest loan that uses any equipment you own as collateral for the money that’s being lent.  I understand that this is a scary prospect for many filmmakers (With good reason) but it can be a way to get money into the project at an early stage, and serve as your first money in.
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It’s also important to note that debts are paid off before equity is paid back, so your loan would be repaid and your equipment secured before any future investor got their money back.  Of course, this isn’t always the case, but it generally is. 
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5. Personal or Business Credit

There are a few people who will loan money for films based on your personal credit.  Sometimes it will be a business loan, sometimes it will be an insanely high limit credit card, but in the end it can be the money you need for development.  It’s not ideal, but it can be a way to get your movie to the next level. 

If you’ve been making corporate videos through your entity for a number of years your business may have enough credibility to take out a moderaate interest loan from a bank against your future corporate video earnings.

In general, this will be a percentage of your previous earnings according to you last few tax returns and whatever debt burden the business has from general operations. This is best used to offset time away from corporate work as an expansion into a new product line, I.E. your feature film.

This would most likely be considered an unsecured loan, which means it’s higher interest than the equipment loan or anything of the sort like that.

If you do go down this road, you should not forget that it often takes 12 to 18 months from delivery to a distributor to start earning royalties, and that’s not accounting for the minimum of 9-12 months to make the film and deliver it to a distributor. The interest over the course of a term like that might be hard to bear.

I should stress I’m not a lawyer or financial advisor. You should check with yours before acting on anything on this list, especially anything that’s debt base.

6. Wealthy Friends and Family

If you’re lucky enough to have accredited investors in your friends and family, then this can be a good way to get your first money in.  Investors normally invest in people as much if not more than projects, so approaching someone you already know is generally an easier ask than someone you don’t.  Since this blog is about getting first money in, having an investment from a wealthy friend or relative can be the quickest and easiest way to get over that hurdle.
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Of course, in order to raise money from wealthy friends and family, you must HAVE wealthy friends and family.  If your friends and family ARE NOT Accredited investors, then it’s best to include them in a donation-based crowdfunding round.  While the SEC (Securities and Exchanges Commission) has loosened requirements for high-risk and small business investments since the JOBS Act, they’re still very strict when it comes to high risk investments, and it would be better for you to not run afoul of them. ​

7. Equity Investment

Finally, if you don’t have wealthy friends and family, you can chase equity investment.  Normally this means that you would approach the person who owns the car dealerships in your neck of the woods, or other local business leaders.  If you can get a meeting to talk to them about investing in a movie, there’s a chance that the excitement of it might help you raise a portion of your funding. 

Mind you, this is not an easy sale.  It’s going to take a skilled salesperson to pull it off, and a lot of research into why someone like this person who owns the car dealerships would want to invest in your project. 

Thank you for reading! If you found this content valuable, check out my FREE film business resource pack. It’s got a free e-book on the indiefilm biz featuring 21 articles around similar issues covered in my blog. Around half of those articles can’t be found anywhere else. Additionally, you’ll get an indiefilm deck template you can use to create a deck for investors, contact tracking templates, form letters, and a whole lot more! Check it out below.

5 Steps to Vetting your investor

Just like all filmmakers and Entrepreneurs are not created equal, nor are all “Rich Guys.” Many will jerk you around, and not actually deliver on what they promise. So how do you know if your potential investor is legit? Well, here are a few tips.

Note: This Article is largely in response to a piece by Jason Brubaker at Filmmaking stuff. Overall it’s a good piece, but I felt it lacking a few things so I’m expanding it with my thoughts. You can find the original article here. Even though Jason was a bit too involved with Distribbr and that whole debacle, he did make some good content so my response blog is getting a port.

1. Look them up online (Duh)

You need to know who you’re dealing with, so before you meet with them you should do some diligence. The goal of this step is just to ensure they have money, and get an idea of whether they’ll be likely to spend it.

You want to find out what they’ve done, and where they got their money. Generally start by looking them up on AngelList and Slated. These sites do some pretty deep vetting for to make sure that investor members are accredited. They’ll also list the previous investments of the investor, so you can see how they stack up against yours.

Slated is strictly for film, AngelList is focused on Tech. If they have active profiles on these sites, then you know that they are active investors. Active investors are more likely to invest.

If they don’t have either of those profiles, look at their LinkedIn. Generally Linkedin will show you previous positions, if they have multiple executive positions at companies with more than 15 employees, or list that their company was sold to a bigger company they probably have excess capital to invest.

If you’re too far away from them to see their full Linkedin profile, google them. If they have a profile in Forbes or Bloomberg, you’re set. If they have a ton of lawsuits or if you find something saying they, I Don’t Know, tried to buy a baseball team but were laughed out of the room then lambasted by a major newspaper, maybe steer clear. Totally not at all a real example, by the way.

2.Look at what they’re wearing and what they’re driving.

As Brubaker says, this technique is far from perfect. Sometimes the guy in the three-piece suit has less capital than the girl in the jean jacket and yoga pants. However, there are some things you can take into account. Fashion is highly dependent on the area you live in. Here in Silicon Valley, it’s common for the people in sweats to be worth more and be more likely to invest than the suits. Try to understand the cut of the clothes, and get an eye for designers. I know some people who wear T-shirts that cost more than I paid for my first Armani suit. Admittedly, I bought that suit secondhand.

But there are some constants. Before you look at the clothes, look at the shoes. People, especially men, overlook the importance of shoes to the overall aesthetic, but they’re a relatively constant indicator of wealth. Watches are also a good indicator of status.
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Whatever make or model of car they drive will give you a good idea of how much they’re worth. Generally make is better than model, for example, hybrids are big here in the bay. for a time, a Prius was a status symbol. Now that most luxury brands have a hybrid, the make is generally a good metric to judge by. Teslas are still a great indicator.

​3.Do they pick up the check?

Here’s one that I totally disagree with Jason on. He makes the point that if he can’t pick up a 50 check you’re not getting a 50,000 dollar check from them. Whether or not an investor picks up the check is largely dependent on a few factors. If they’re an independent angel investor, they can take about 8 meetings with entrepreneurs a week. If they always picked up the check, they wouldn’t be an accredited investor for long. Also, most of the rich guys I know are surprisingly stingy.

Generally, if it’s a first meeting I split the check. I pay for my seat at the table, they pay for theirs. A fear of many legitimate angel investors is whether or not the entrepreneur is going to carry their weight, so in a way splitting the check is symbolic of what a good relationship with an investor should be. Future meetings are up for debate.

4. If they’re talking about “Money Coming In” it’s BS.

Jason is completely correct on this one. Unless the startup they were one of the first ten employees at a is about to IPO, (You can google that, and easily fact-check it) that money won’t come in.

However, if they say their money is tied up, that’s a different story. Savvy Rich people don’t let their money sit in a checking or savings account. They invest it. Most of the time, they’ll have a respectable stock portfolio. That means they’ll have to sell something (Liquidate Assets) in order to free up money to invest in your projects. Here’s a tool to help them to do that.

5. Is it too Easy?

It may sound counterintuitive, but if it’s too easy to get the check that should be a huge red flag. I’ve worked in Silicon Valley and Hollywood, and it’s never easy. It requires finesse, charisma, and luck. Just like you need to do your homework, your investors need to do homework on you. They will need a deck, a business plan, and a good relationship in order to give you a check.

This analogy is crass, but the more I play this game the more I realize the truth behind it. Getting investment is like dating. You have to get to know each other first. Then you figure out if you like each other you figure out if you could work well together. Finally, after 3–7 excellent meetings and more phone calls and messages, you get into bed together. Often the more meetings it takes to get into bed, the better the relationship will be. That’s not always the case though.

If you want more like this, you should grab my free film market resource package. It’s got lots of templates to help you talk to investors and distributors including deck templates form letters, and tracking sheets as well as money-saving resources and a free e-book.

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The 9 Ways to Finance an Indiependent Film

A lot of Filmmakers are only concerned with finding investors for their projects. While films require money to be made well, there’s are better ways to find that money than convincing a rich person to part with a few hundred thousand dollars. Even if you are able to get an angel investor (or a few ) on board, it’s often not in your best interest to raise your budget solely from private equity, as the more you raise the less likely it is you’ll ever see money from the back end of your project.

Would you Rather Watch or Listen than Read? I made a video on this topic for my YouTube Channel.

So here’s a very top-level guide to how you may want to structure your financial mix. The mixes in the image above loosely correspond to the financial mix of a first-time film, a tested filmmaker’s film, and a documentary. They’re also loose guidelines, and by no means apply to every situation, and should not be considered financial or legal advice under any circumstance. This is just the general experience of one Executive producer.

Piece 1 — Skin in the game. 10–20%

Investors want you to be risking something other than your time. The theory is that it makes you more likely to be responsible with their money if you put some of yours at risk. This can be from friends and family, but they prefer it come directly from your pocket.

I've gotten a lot of flack for this.  However, the fact investors want skin in the game is true for any industry or any business.  Tech companies normally have skin in the game from the founders as well, not just time, code, or intellectual property.

However, if you’ve got a mountain of student debt and no rich relatives, then there is another way…
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Piece 2 — Crowdfunding 10–20%

I know filmmakers don’t like hearing that they’ll need to crowdfund. I understand it’s not an easy thing to do. I’ve raised some money on Kickstarter and can verify that It’s a full-time job during the campaign if you want to do it successfully. However, if you can hit your goal, not only will you be able to put some skin in the game, and retain more creative control and more of the back end but you’ll also provide verifiable proof that there’s a market for you and your work. Investors look very kindly on this.

That said, just as success provides strong market validation as a proof of concept, failing to raise your funding can also be seen as a failure of concept. and make it more difficult to raise than it would otherwise have been. Make sure you only bite off what you can chew.

Due to the difficulty in finding money for an independent film, the skin in the game or crowdfunding portion of the raise for a director’s first project is often a much higher percentage of the raise than it will be for their future projects.

Piece 3 — Equity 20–40%

Next up is equity. This is when an investor gives you money in return for an ownership stake in the company. From a filmmaker's perspective, it’s good in that if everything goes tits up, you don’t owe the investors their money back. Don't misunderstand what I mean by this.  You ABSOLUTELY have a fiduciary responsibility to do your due diligence and act in the best interest of your investors to do absolutely everything in your power to make it so they recoup their investment.  If you do that, or if you commit fraud, your investors can and likely will sue the pants off of you. You’ll have an uphill battle on that as well since they probably have more money for legal fees than you do.

Also, you will need a lawyer to help you draft a PPM.  You shouldn't raise any kind of money on this list without a lawyer, with the possible exception of donation-based crowdfunding or grants.  In general, just remember that I’m a dude who produced a bunch of movies who writes blogs and makes videos on the internet. Not a lawyer or financial advisor. #Notlegaladvice #Notfinancialdvice #mylawyermakesmewritethesesnippets.

It’s bad in that if everything goes extremely well, they get a huge percentage of your film. So it deserves a place in your financial mix, but ideally a small one.

For a longer list of my feelings on this topic, check out Why film needs Venture Capital, or One Simple Tool to Reopen Conversations with Investors

Piece 4 — Product Placement 10–20%

Product placement is when you get a brand to compensate you for including their product in your film. It’s more common in the form of donations or loans for use than hard money, but both can happen with talent and assured distribution. If you’re a first-timer, it’s difficult to get anything other than donated or loaned products.

Piece 5 — Presale Backed Debt 0–20%

Everything you read tells you the presale market has dried up. To a certain degree, that is true. However, it’s more convoluted than you may think. According to Jonathan Wolfe of the American Film Market, the presale market has a tendency to ebb and flow with the rise and fall of private equity in the filmmaking marketplace. There’s been a glut of equity for the past several years that’s quickly drying up.

 That said, there are a lot of other factors that will determine where pre-sales end up in a few years. The form has shifted, in that it’s generally reputable sales agents that give the letters instead of buyers and territorial distributors. You then take that letter to a bank where you can borrow against it at a relatively low rate.

Piece 6 — Tax incentives 10%-20%

While many states have cut their filmmaking tax incentives, it’s still a very viable way to cover some of the costs of making your project. It is worth noting that the tax incentive money is generally given as a letter of credit, which you can then borrow against or sell to a brokerage agency. It’s not just a check from the state or country you’re shooting in. This system of finance is significantly more viable in Europe than it is in the US, but no matter where you plan on shooting it needs to be part of your financial mix.

Piece 7 — Grants 0–20%

There are still filmmaking grants that can help you to make your project. However, that’s not something that is available to all filmmakers, especially when they’re first making their projects. Don’t think grants don’t exist for you and your project, because they probably do, spend an afternoon googling it. My friend Joanne Butcher of www.FilmmakerSuccess.com suggests applying for one grand a month for the indefinite future, as when you do so you’ll develop relationships with the foundations you contact which can be invaluable for your career growth.

Grants are much easier to get as a completion fund once you’ve shot your film. Additionally, films made overseas are more likely to be funded by grants than those shot here in the US.

Piece 8 — Gap/Unsecured Debt 10–40%

Gap debt is an unsecured loan used to create a film or television series. This means that the loan has no collateral, be it product placement, Presale, or tax incentive. It used to be handled by entertainment banks for a very high interest rate, I can’t say who my source was on this, but I have heard of interest rates in excess of 50% APR. That market has been largely taken over by private investors loaning money through slated, which did bring interest rates down. Unsecured debt almost certainly requires a completion bond, which generally means that it’s only suitable for projects over 1mm USD in budget.

In general, you should use this form of financing as little as possible, and pay it back as quickly as possible. Again, Not legal or financial advice.

Piece 9 — Soft money and Deferments — whatever you can

Soft money is funding that isn’t given as cash. This can be your crew taking deferred payment for their services, or receiving donated or loaned products, locations, and anything else meant to get your film made. This isn’t so much funding as cost-cutting. It often includes donations or loans from product placement.

If you like this content and want to learn more about film financing, you should consider signing up for my mailing list. Not only will you a free e-book, but you’ll also get a free deck template, contract tracking templates, and form letters. Plus you’ll stay in the know about content, services, and releases from Guerrilla Rep Media.

How do we Get More Investors into Independent Film?

Throughout writing this blog series, I’ve been told more times than I can count that film is a terrible investment, and no one besides hobbyists would consider it.  Many want to leave it there, without bothering to look at what’s causing it.  Last week we thoroughly examined the issues plaguing the film industry, and what keeps investors out.  The issues aren’t pretty, but they may be fixable.  What follows is a list of what could be done to fix this problem and some of the ways organizations that are implementing these tactics.

Greater Transparency

One of the biggest things stopping film investment is the perception that it’s unprofitable.  All too often that’s not simply a perception.  Another thing stopping independent film as an industry from being profitable is the fact that many sales agents don’t accurately report the earnings of the films they represent.  Others charge too much in recoupable expenses, so it’s unlikely to recoup.  Some take an unreasonable portion of the revenue or simply hide sales from filmmakers. 

One necessary problem to fix is the lack of transparency within distribution.   There are rights marketplace solutions like Vuulr and RightsTrade emerging thanks to recent technologies for international distribution. Aggregators like BitMax and FilmHub have been around for a while already.  The issue that these platforms have yet to solve is that of both audience and industry awareness of their project. If a filmmaker can market or receive help with that audience discover and marketing, then in theory the entire process can be disintermediated and filmmakers can sell directly to customers using a marketplace.  Unfortunately, this discovery issue is still both time-consuming and expensive.  

What about a hybrid system?  One where a skilled group works with distributors and sales agents to sell the completed films at the maximum possible profit to the investors and production company.  What if those groups were directly linked to protecting the investor’s interests, and gives sales agents capital for growth and new projects?  Then the sales agents would have much better incentives to ensure the companies that license their content to them get a strong return.

That would seem like a solution, but we’ll get to it.  There are other problems to delve into first.

Better Business Education for Filmmakers.

I touched on this in my last blog, but filmmakers don’t understand the business well enough to function as media entrepreneurs.  Traditionally, specialists such as executive producers, PMDs, and true producers focused on the marketing and supported projects so that the writers, directors, creative producers, and line producers could focus on making the project.   With film sets getting leaner, there aren’t enough of media entrepreneurs doing their jobs. ​ (although I take on this role from time to time.)

In essence, there isn’t enough of a skilled entrepreneur class capable of making and selling films as a product either directly to consumers or to distributors, sales agents, and other industry outlets.   So long as filmmakers don’t understand business, they’ll never be able to break out and get what they and their films are worth.  If filmmakers don’t endeavor to understand business, they will be unable to communicate with investors and understand where they come from well enough to make a sustainable living in film.  This issue is exacerbated by the fact that film schools don’t teach any of these skills as well as they should. ​

Filmmakers want to make the movie, and they will stop at nothing to get that done.  As a result, promoting the film becomes an afterthought far too often.  What would be ideal is if these educational organizations could tie into an angel investment group or community.

But what about integrating with an investor class and/or investment group?

Educated Investor Class

Investors generally understand business, but the film industry is ripe with its own nuances and idiosyncrasies.  Investors need to know how money flows from them to create the product, then to take the product to market through various forms of distribution, and how that money eventually gets back to that same investor. Investors need tools to tell when someone is offering a con instead of an investment.  It’s not the easiest thing to find information on, and when they do it’s focused more on the filmmaker than the investor.  

If an investor doesn’t understand the issues within the film industry, then it’s less likely they’ll be able to properly vet an investment.   If that same school that teaches filmmakers business, could teach investors about the nuances involved in the film industry, then there could be something of a connection point at a different sort of event.  

Curators and tastemakers with Access to MEANINGFUL Distribution.

Just because an investor knows about how money comes in and out of the film industry doesn’t mean they can find quality films in which to invest.  Being a professional Investor is all about quality deal flow. Indiefilm success tends to make less money than a successful technology startup, so curation and guidance is even more important.  

Sure, nobody knows everything, but a curated eye can help separate the wheat from the chaff.  Most investors don’t have a trusted source to review projects for feasibility and potential returns.  Investment is about more than just money.  Investors often act as business advisors.   Unfortunately, not enough angel investors understand the industry well enough to do that effectively.  However, if the curation board also acted as advisors on the projects, then the potential returns get much higher.   

As an example, if that board had access to distribution, then you could cut out the biggest risk of investing in film.  A member of the curation board could get the films to the proper PayTV, TVOD, SVOD and other distributors to help the fund managers.  ​

A way of Discovering new talent

It’s always been a problem to find the next Quinten Tarantino, Jennifer Lawrence, or Jason Blum.  Everyone has heard stories of how everyone in Hollywood is related.  While it's more true than anyone wants to admit, the on set path to grow your career has become more difficult and less sustainable than it once was.  

It's not an easy problem to solve.  It’s difficult to tell the difference between that person who’s DEFINITELY going to be the next big thing but ends up washing cars two years later and the dweeby 20 year old who no one thinks will ever make anything of themselves makes millions at the box office on their directorial debut. This problem may be the most difficult of any listed.

Making your first film is incredibly difficult.  It’s also very difficult to get it financed.  From an investor perspective, they put in all the money up front ant they’re the last to be paid.  It’s incredibly high risk with little reward.

Marketing a film is also quite difficult, and generally involves additional expenditure when the coffers are dry.  This has killed many films before they saw the light of day.  If a fund were to offer finishing funds to new filmmakers, they keep their risk incredibly low while opening up new discovery options.   

Sure, it doesn’t help get the film made in the first place, but it can help get it finished and out there.   The barrier to entry of having a nearly completed film also cuts down on the pool of potential applicants in a way that necessitates them showing they have the mettle to actually make something. That fund could also give preference to successful filmmakers for their second, third, and fourth projects.  Such a system could enable a fund to retain the quality people they need to make a successful organization, while still opening the ranks for discovery.

Staged Financing

Investment in film is inherently speculative an as a result incredibly high risk.   But the risk could be made lower by borrowing some techniques from Silicon Valley VCs.  Instead of funding 100% of a film upfront in equity, an investor could stage their investment over the course of the film, at key points where the filmmakers would require more money.   

It’s not something that could be done with a  simple line in the sand due to the difficulty in getting recognizable name talent on board the project, but there are systems that could be used to mitigate risk while maintaining the ability to make high-quality name-driven projects that have a higher chance of financial success than directorial debuts with no names attached.  It’s not a magic bullet, but it could mitigate the problem enough for other solutions to be more possible.  

Staged financing would make it much more approachable for investors, since the risk to the individual investor is significantly smaller.  But there are ways an organization could further limit the risk. How you ask?

Same Funder Providing different securities. ​

As mentioned in part 6 of this series, equity investors are the last to be paid on most projects due to where they fall in the waterfall in relation to Platforms, Distributors, Sales Agents, and the like.  This is due in part to filmmakers needing to secure debt-backed securities from different funders in order to complete the project. These debt-backed securities must be paid before the investors are, which further disincentives the equity investment from the original investors.   

But what if the different securities were made available from the same group? That way a fund could offer the same pool of investors the last in first out debt in order to protect the interest in their equity position. From my vantage, that would seem to protect both the investor and the filmmaker by enabling the investor to mitigate risk and the filmmaker to maintain greater ownership of their projects, and a higher profit share once the debt is paid off.

Thanks for reading. This one required A LOT of rewriting as part of the archive transfer/website port. If you made it this far, you should sign up for my email list to get my free film business resource pack. You’ll get blogs just like this one segmented by topic, as well as a free e-book, investment deck template, contact tracking templates, form letters, and more!

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Diversification and soft incentves in the film industry.

In this blog series, we’ve been talking a lot about why filmmakers would invest in an independent Film.  Sadly, if you go by numbers alone the answer is that they shouldn’t.  Film investment is an unpredictable, volotile, high risk endeavor.  But, if you’re the type that isn’t scared by that, there are some reasons to considerer it.  Sure, it will probably never make you as much money as tech, but it might has other benefits that aren’t offered by tech investment.

1. Smaller Potential Downside

If a Tech company fails to exit, generally you’re out everything you put in.  Films exit once they’re completed, and investors begin recouping when they do.    Further, a smart filmmaker won’t fund their project solely by equity, si the investor is more likely to get their money back.  So, while you may not have be able to find a decacorn, the potential to lose everything you put in is somewhat less likely.  It can be even less likely if you invest in finishing funds.  

2. Tax Credits

Nobody likes to pay Uncle Sam, most people would rather see their name in lights than pay the government.   Many states offer a tax incentive to get filmmakers to attract productions outside of territory.  Often, those incentives are structures as tax credits an investor could buy at about 85-90 cents on the dollar.   Other commissions offer it as a rebate that goes back to the filmmakers and subsequently back to the investors, if it’s not re-invested to finish the film.  

3. Diversification

A strong investment portfolio is a diversified investment portfolio.  Some industries do better than others when times are tough.  Historically, Film is a sector that’s somewhat reversely dependent on the economy.  That means when there’s a downturn, film investments sometimes do better.  The period of greatest growth was in the great depression, and until recently it’s still been one of the least expensive ways to get out of the house.  

But will that continue to be true?  Perhaps not.  Theater sales are continually declining, and DVD sales are in the toilet.   However, in todays world, most independent films never get a theatrical release.  if they can market themselves to the right audience, they can still make sales to people in their homes, for less than a cup of coffee.  Admittedly that marketing job is no small feat.

Even if you don’t want to invest in social activism, you can enable an artist to create something that brings joy into the hearts of countless people.  Sometimes by scaring the pants off of them.  The arts are more than just storytelling, they help us communicate who we are as a people.  In many ways I know more about Luke Skywalker than I do about my uncle, and more about Harry Potter than most of the people I went to my real high school with.  These cultural touchstones have a huge impact on who we are as a society.  

The US is terrible about helping to fund the arts and culture, so to some degree it comes down to society itself to perpetuate it’s own culture.  If you can afford to help filmmakers make better movies, you should consider it

4. Supporting Arts and Culture

While every cultural or artistic entrepreneur should learn how to make their money back, it’s not the sole purpose of any cultural or artistic endeavor.   It’s about communicating an idea, perhaps for entertainment or perhaps to spend a different level of consciousness.  

If there’s a cause you care about, you should fund some filmmakers looking to do more to spread awareness of that cause.  Then when you tell your friends to watch it to share your views, you also get the benefit of making a sale.  Many ideas were only able to take root through the power of mass media.  ​

5. Non-monetary incentives.

We all have hobbies, most of them cost us far more than they make us.   If you’re the sort of person who can afford to lose 5 figures here or there, investing in films can be very interesting.  if you can’t afford quite that much, you may want to look into different funds.  I’m in the process of starting one, you can find out more here. 

Some of my best friends became my friends because we talked about the money behind the film industry.  These non-monetary incentives might even be useful sooner than you would think.  If you start networking with filmmakers you may even get a deal when it comes time to make your next whiteboard video from the filmmakers you invested in.  ​

6. Do something other people aren’t

I hear you.  that Nerd you were shouting in #4 has been replaced by hipster.  Don’t worry, you’re about to go back to nerd, since I’m going to lay some science on ya.  If we look at the general attractiveness of beards, we learn that as they’re less common, they’re more attractive.  Now, whether or not to invest in film is a multifaceted concept.  I’m not saying ti will help you find a lady, (or gentleman,) but I am saying that it’s almost certain to start an interesting conversation.  

If you’re at a Silicon Valley Networking event, it’s important to seem like a very interesting person.  The same is true for any party.  Attraction is somewhat based on scarcity, so you want to stand out from the pack.  Investing in films is a good way to do that.   You never know how it might help you stand out from the pack and talk to that person over by the bar with their eye on you, be it for your interesting investment or your beard.  

7.   Glitz and Glamour

If you’re a tech investor, you may have made a lot of investments that made you a very good return.  Some of them may have been solely for the strong potential for ROI, or because the entrepreneurs could execute and build something that made a return.  It could have changed the world of B2B Payroll invoicing.  But while those make a difference in the lives of many myself included, it’s not really exciting.  

Film is different.  You get to meet interesting creative people.   You get to talk about things other than how that API with that box shaped thing that processes your payments isn’t working as you planned, or the calendar integration isn’t as easy as it should be.  You get to see what happens on set, or what it was like meeting that guy from that Quinten Tarantino movie for a day.  And when you’re done, you can talk to the people at the tech event and share some awesome stories. 

Thanks for reading.  I’ll be back with more next week about why more people don’t invest in film.   In the meantime, if you want to consider investing in film, try joining Slated.   They’re a great resource to help you find projects that give you the best chance at a return.   While all of the things above are great, they’re not worth losing every cent you put in.  Slated helps you rate your projects, and find the ones with the best chance of success.

This entire 7-part series examines why film is an unsustainable investment.  Part of the reason for the lack of sustainability is the fact that not enough producers understand the investment metrics of the film industry, and not enough filmmakers understand the business side of their craft.  To help counter this, I offer all of these blogs plus a FREE film market resource pack on you can get by clicking below. If you want to take your career to the next level, the resources it has in it are a great place to start. Plus you’ll get monthly blog digests with recommended reading to help you parse through the 100+ blogs on my site and more easily reference them when you need them.  

Why Angels Invest and Why they Choose Tech

Why should those Rich Tech [People] Invest in your Film, Part 2/7

In order to understand why an investor should invest in your film, you need to understand why investors invest at all.   What is an angel investor?  What does it take to be a successful angel investor?  Why don’t they just buy that Second Third yacht?

To answer the first question, an angel investor is person of means, who generally has a sizable amount of liquid assets and wants to do something more interesting and potentially lucrative than buying stocks or mutual funds.  In order to be an accredited investor, an unmarried person must have made at least 200,000 USD for two consecutive years, and be likely to do the same in the current year.   If they’re married, that number is more like 300,000 USD.  They could also have 1,000,000 in liquid assets, not including their primary residence.  

The reason this came about was to protect individuals from being taken by scam artists.   The theory behind the income threshold is that if you’re that affluent, you would either have the education or sense to know if you’re being taken, or the means to hire someone who does.

Apart from the aforementioned asset requirement, what does it take to be a professional angel investor? It basically requires two things.  Access to capital and deal flow.  In layman’s terms, money to invest and projects to invest in.  Most of the time, Investors generally assume that about half of their investments will tank and they’ll lose everything due to an inability of the company to exit.  

So why do Angel Investors invest?  This question is more difficult to answer and actually has several answers that we’ll explore throughout this blog series.   But, essentially it boils down to the fact that These investments have the potential to breakout in a big way. 

Below is a chart illustrating that point.  It has been simplified and assumes very early-stage investments.  This chart is generally based on loose feelings and assumptions asserted by many investors I’ve talked to.  Just like it’s very difficult to estimate how many films break out, it’s very difficult to estimate how many investments are completely lost.  It’s very easy to track winning bets, but much harder to track losing ones.  This data is accurate to the dozens of investors I know as to their top-level assumption and the data around films is accurate to my experience as a distributor.

Before we get into any numbers, I should preface I’m not a financial advisor, this is not financial advice, nor am I soliciting for any particular project. This is all conjecture and an extrapolation and explanation of personal experience.

If you’re a filmmaker reading this, you might be thinking to yourself, why are they hunting mythical horses and WTF is a decacorn?  A Unicorn is a company valued at more than 1 billion before exiting.   If you’re a decacorn, your company is valued at more that 10 billion prior to exit.   The reason that you don’t really see it on that pie chart is that it’s only about 1 in 1000 to 1 in 10,000 chance of happening.

So how do investors get their money back from a tech investment?   in order for a tech investor to get their money back, generally the company has to be acquired, or go public [IPO.] Films on the other hand, simply need to find profitable distribution, or self-distribute the product.  Each exit in each sector have its pros and cons, but in the end the boils down to which is more accessible.  So what does the return look like in both cases?  

Let's assume an investor invested One Million Dollars across 20 tech sector investments, each investment is made equally.  I know that these tables are going to be hard to fully understand, so I’ll have a better data visualizations after table 3.     ​

As you can see the overall ROI is about 85%, which means they nearly doubled their money on the entire portfolio.  This is assuming that the investor isn’t completely green and has some idea of what they’re doing, so they make better picks.    At some level, this looks very similar to the studio tentpole system.  Experts making bets are confident that the ones that hit will cover the losses of the ones that miss.  Unfortunately, the numbers don't back that up in the way we would like, partly due to the fact that most angels in the film stlate are not experts, and many filmmakers don't package as well as they should to maximize potential returns.

What does the picture look like for the investor going with no real knowledge of film look like? Well, from my more than a decade marketing and distributing features, here’s about how that would break out.

That’s not Pretty, but it is making a fair amount of negative assumptions about the slate of films.  These numbers are assuming they don’t have distribution going in, don’t know what sells, and the film is financed entirely by private equity. The hypothetical investor made the investment at the outset of the project assuming the entirety of the risk. AND the film isn’t well cast with an eye for international sales.  

BUT, if you structure your slate look to get at least a letter of intent for distribution a North American distributor and work with an international sales company to ensure the best casting for international saleability.  It’s at least possible that you could have a slate that looks ​more like this.

That’s better, but a well-managed tech portfolio still obliterates it if we go solely by total return potential.  The Graph I mentioned is below, to help illustrate my point.   Trying to convince a tech investor to break from what they know to invest in something that has less potential to return is a hard sell.   

Edit From the Website Transfer: If I were to re-do this, I would probably put the 10x return at more like 0.5-1% as opposed to 0.1%, assuming we account for one in 10 portfolios of 20 films gets a breakout hit, the potential average returns end up around 20-22% depending on which of the pool the breakout comes from. if 2 out of 10 of the portfolios happen to have a breakout it’s closer to an average return of 24-26%

​Filmmakers, this is what you’re up against.  But fear not, you may have an ace in the hole.  In fact you may have more than one.  The first ace in the whole is the speed of exit for film projects compared to that of tech startups. Due to that, film projects can return money to the investor faster than a startup would, which matters significantly in increasing the ability for an investor to re-invest and increasing the overall Annual Percentage Rate (or APR) of the investment. Check out part 3 linked below for more information on that.

Part 1:
Why Don’t those “Rich Tech [People]” invest in Your Film?
Part 2: (This Part)
Why Angels Invest, and Why they Choose Tech.  
Part 3:
Examining APR: How does Film Stack up to Tech Portfolios?
Part 4:
Breakouts vs Decacorns
Part 5:
Diversification and Soft Incentives.
Part 6:
What’s really stopping Tech Investors from investing in Film?
Part 7:
How do you make a sustainable asset class out of film?

Thanks for Reading! The numbers in this blog have evolved since I wrote it, but only slightly. If you want to stay up to date on resources, livestreams, and other awesome content I have to offer, you should join my mailing list! You’ll stay up to date on all of my latest content, plus get a free e-book, monthly blog digests, and even a great resource package to help you talk to investors about your film. It’s totally free, so what are you waiting for?