Why there’s more to vetting investors than Net Worth

I live something of a public life, and as such I try to keep tabs on what comes up when people google my name.  I generally do a thorough search on myself about once a month.  A few months back I found a link from a site that specializes in estimating the Net Worth of celebrities and other people in the public eye.  They estimated my net worth to be about 12 million dollars. As much as I’d like to tell you that’s true, it’s not.  At least not yet.  So here’s why you should be careful in trusting Net worth estimates.

Edit: This site has taken down that page, and while I thought I had screencaps, I don’t.  

If you want me to invest in your movie, read this

I have a feeling posting something on my film services site that says I’m worth 12 million dollars is going to get some investment inquiries, so let’s get this out of the way before we continue.  

I don’t personally invest in projects beyond recoupable distribution expenses.  If I do early-stage fundraising for clients, it’s only AFTER I’ve worked with them and developed a working relationship with them.  That being said, I get the distinct impression a lot of people just skim my articles.  So I’m including a big button below that links to my official policy on investing in people’s projects who contact me cold via social media.  Those who skim my articles probably won’t like it, but I have to find some way of dealing with the near-constant bombardment of investment inquiries.  Click it, you might get a laugh.

In the rare cases I do act as a conduit for investment, equity investment is never the first money in.  It’s often not the last money in, but it’s definitely not the first.  If you’re looking for me to invest in your film, it’s probably not going to happen.  I’m more likely to help you set up your investment documents.  

Related: The 9 ways to finance an independent film.

Net Worth isn’t as important as you may think.  

So getting back to the meat and potatoes of the article.  Net Worth probably doesn’t mean as much as you may think.  The way Net Worth is calculated is pretty simple, you list your assets and calculate a value (Home Equity, Stocks, Bonds, Other investments) , then you list your liabilities (Debt of all kinds) then you subtract the value of your debts from the value of your assets and you’ve got a net worth.  

The important to realize about this is that the majority of the assets I listed above aren’t what investors would call liquid capital.  That means that in most cases, only a small portion of your net worth is spendable.  There are ways to liquidate such assets without selling them, but that generally requires some level of loan and implies interest.  For a bit more on that, check out the blog below.

Related: One Simple Tool to Reopen Conversations with Investors

So let’s look at my net worth as an example.  First off, I have no idea where they got the 12 million dollar number.  Even by the most generous valuations of my assets, it’s off by at least 3-4X.  But even going with that generous valuation of my assets, most of that would be tied up in equity between Guerrilla Rep Media and ProductionNext.  There’s not a whole lot I can do with those assets to liquidate them.  Even if I could, it’s unlikely I would as I don’t think the asset is completely mature, and selling off shares would be unlikely to help me.  This is actually a pretty common problem for investors and High Net Worth Individuals (HNWIs) and it’s something you should be on the lookout for when you’re vetting your investors.

Related: 5 Steps to Vetting your investor

It’s Not Money until you can buy beer with it

I’m quoting someone, but I’m not sure who.  But in essence, just because someone has a high net worth doesn’t mean that they’re going to be willing or even able to invest in your project.  If someone derives their net worth from owning a couple of multi-family homes and drawing income as a landlord, then even if their net worth is several millions, their assets are tied up in real estate and harder to access than you might think.  

The only metric that really matters when courting an investor is how much investable capital they have at their disposal, and that’s a very different metric than their net worth that’s harder to pin down. 

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