Archive for the 'Raising Money' Category

When it comes time to get the money from the investor, and to sign some paperwork, there’s a lot of different ways you can go.

Sometimes a simple contract will suffice, spelling out the terms of the deal, and sometimes a more detailed, specific financial document may be required.  For filmmakers on our level, the simple document works the best.  Just use the following questions as a guide to write your investment contract.

How much is the investor is investing?  How much percentage of the profit will the investor receive in exchange for that amount?

When will the investor will be paid her initial investment, and when will she be paid her share of the profits?

Does she get paid back her initial investment in one lump sum?  Or is she paid back in equal parts with other investors as the money comes in?

What rights does the investor have?  Can they look at your books every now and then to make sure you’re not cheating them?  Do they have any creative say?  Can they come to the premiere?  Do they get a copy of the movie?  Do they get a credit as co-producer, executive producer, or otherwise?

Be fair, and be detailed, and don’t worry too much about any arcane financial huggermugger.  Just draw up a deal that’s clear to both you and your investor and get going.  As long as something’s in writing, you both know where you stand.

But however you draw up your contract between you and your private investor, make sure you’re not giving them a ridiculously huge slice of the pie.  But conversely, make sure you’re not taking too big of a slice yourself. The deal has to be fair for you and your investor.

Here’s a super-simplified, common way you can divvy up the profits, which is fair to you and fair to your investors. There are a bunch of ways to do it, and producers who are far more skilled than I when it comes to setting all this up, but this is how it best served the scale of films I’ve worked on.

Let’s just say that you’re going to sell shares of your movie.  Your budget is $100,000.  So to make it totally fair to the investor, if Investor Mike puts in $5,000, that means that Investor Mike put in 5% of the movie’s budget.  Therefore, Investor Mike should get 5% of the profit.

Right?

Well, let’s take a closer look at that.

Let’s say we have just given 5% to Investor Mike, based on his $5,000 investment. And now, along comes Investor Bob, who invests $95,000.  So, based on the same math you used to figure out Investor Mike’s profit, you now have to give Investor Bob 95% of the profit.

And that means, between Investor Mike and Investor Bob, 100% of your movie’s profits are now going to those two investors, leaving none for you, your team, or anyone else.

The way we fix that, is we split the profit participation “pie” into two halves:

One half of the pie is called the Producer Pie.

The other half of the pie is called the Investor Pie.

Each of those two halves contains 50% profit of the movie.  So 50% is in the Producer Pie, and 50% is in the Investor Pie.  Clear so far?  Good. Stay frosty.

Your team, the producers, director, writer, your company – everyone except the investors – are in the Producer Pie.

All the investors, including any vendors or other folks who give you free services or products in exchange for a chunk of the profit, are in the Investor Pie.  Caveat:  It’s okay to assign producer credits (i.e. credits in the movie like “Associate Producer” etc.) to investors as part of their deal, but for our purposes here, they are not considered part of the Producer Pie.

The Producers (a generic term for your whole team or company) are taking 50% of the movie without having to put in any money, because it’s the Producers who are putting in all the work to make the movie happen, but none of the money.  The Investors, however, are putting in all the money, but are not doing any of the work.  So that’s the balance.

So now let’s go back to Investor Mike and Investor Bob’s same exact investment.  Investor Mike put in $5,000 and Investor Bob put in $95,000, remember?

Now they’re divvying up 50% of the total overall profit, instead of 100% of the total overall profit, because we put them in the Investor Pie, which only has 50% of the total overall profit in it, (because the Producer Pie has the other 50%).

To make things super-simple, we’ll say that the total budget is $100,000, and of that, 100% of that is being raised from investors, so you’re raising $100,000.

And now here where it might get a bit tricky, but stay close:

100% of the Producer Pie contains 50% of the total overall profit, and 100% of the Investor Pie contains 50% of the total overall profit.

In other words, we split the Producer Pie into 100 slices.  And we split the Investor Pie into 100 slices as well.

Got it?  So picture one big pie, which is the total overall profit.

Now split that pie into two halves.  One half is the Producer Pie and the other half is the Investor Pie.

Now split the Producer Pie into 100 slices, and then split the Investor Pie into 100 slices.  Comprende?

That means Investor Mike, who put in $5,000, gets 5% (aka 5 investor points) from the Investor Pie, and Investor Bob, who put in $95,000, gets 95% (aka 95 investor points) from the Investor Pie.  Meaning that 100% of the Investor Pie has now been sold, and there can be no more investors.  (Unless they just want to give you money and not ever take any profit percentage).

So let’s do an example of how a $10,000 profit check would be split amongst the Producer Pie and the Investor Pie.  First, let’s set up who owns what slices of what pie:

Director 10%  of the Producer Pie
Producer 80%  of the Producer Pie
Director of Photography 5% of the Producer Pie
Lead Actor  5%  of the Producer Pie

Investor Mike 5% of the Investor Pie
Investor Bob 95% of the Investor Pie

Okay, we get a check in the mail for $10,000 and, finally, after a year of paying off all the expenses, and the investors have been paid their total investment back.  That means Investor Mike and Investor Bob have been paid back their original $5,000 and $95,000, respectively, plus any interest you agreed to, and now everybody’s just splitting up the profits at long last.

The check that comes in from Acme Distributors is for $10,000.

Split that check in half.  $5000 goes to the people in the Producer Pie, and $5000 goes to the investors in the Investor Pie.

The Director is paid $500 (10% of $5,000 = $500)
The Producer is paid $4,000 (80% of $5,000 = $4,000)
The Director of Photography is paid $250 (5% of $5,000 = $250)
The Lead Actor is paid $250 (5% of $5,000 = $250)

TOTAL TO PAID TO PARTICIPANTS IN PRODUCER PIE:  $5,000

Investor Mike is paid $250 (5% of $5,000 = $250)
Investor Bob is paid $4,750 (95% of $5000 = $4,750)

TOTAL PAID TO PARTICIPANTS IN INVESTOR PIE: $5,000

Your point assignments can be totally arbitrary.  It’s your ballgame.  Assign them however you like. But if you want investors to bite, you have to be fair.

If you’re a filmmaker trying to raise money for your indie film, you need more than some good paperwork and a business plan (and, uh, not to mention a great script and great production team).  Raising money for film is a Herculean task, but I’m gonna give you several cool websites/apps that you should be using if you want to cut down on the workload and actually boost your chances of getting money invested in your movie.

Kickstarter

If you haven’t heard of Kickstarter until now, you’re going to kick yourself. Kickstarter is a website where you can “crowd source” the funding of your film by asking for private investments from investors.

Here’s the beauty of it and why it works. Let’s say you set up a project on Kickstarter, and set it’s funding goal to be $50,000. If you don’t reach your fundraising goal by the designated time, the investors keep their money.

That way, investors are more prone to invest to begin with, because they know they’re not throwing their money towards a project that may never get off the ground. Not to mention it’s a great way to reach out to potential investors WORLD WIDE, as opposed to circulating in your geographic locale only.

The world is HUGE. Lots of millionaires. Kickstarter helps you reach those folks with a proven, working tool that you absolutely MUST be using, even if only for seed money for your film. http://www.kickstarter.com/

Weebly

Every film needs a website. We all know that. But what film investors are looking for when they’re considering investing in your film is:  Who is this guy? Does he have a company? Is it legitimate? That means your production company, even if it’s just you, needs a website too. Until recently, that meant either hiring a web guy (or getting your buddy to design one), finding a hosting company, and/or doing it all yourself (and quite possibly making a mess of it).

Enter Weebly. You can sign up for a free account and, seriously, DRAG AND DROP your website together with an awesome, easy-to-use, intuitive browser-based interface.

You don’t need HTML coding skills, you don’t need to know how to install scripts, heck, you don’t even need a hosting company. Weebly does it all, and it’s free.

And oh man, is it super-easy. Your grandma could do it.  Not to mention Weebly comes with awesome drag-and-drop plugins that allow you to add a Paypal shopping cart to your site, an email signup form, blogs, forums, surveys, videos, you name it.

Some of the features are only available with the paid Weebly, but even that’s super-affordable, and I recommend it highly.  You can have your production company’s website up and attracting film investors in a matter of minutes. http://www.weebly.com/

Hootsuite

If you’re getting the word out about your film, you’re probably using Twitter and Facebook (or you live in a cave.)  Hootsuite allows you to log into both in one easy interface and track comments about you, post new posts, add friends, update your status, and more. And it’s FREE. http://hootsuite.com/

Mailchimp

Every good film fundraising campaigns needs an email list. Mailchimp is a free email list manager that lets you create mailing lists and blast out emails to your subscribers, FREE (for up to around 2000 subscribers, I believe). You can also create signup boxes which you can use on your website, track email opens, and tons more awesome tools, like I said, all FREE. You’ve got to start building your email list if you’re serious about raising money for your film, so you can let investors know that you have a viable plan for internet marketing to fall back on should your film not be bought at Sundance. (Chubby chance.) http://mailchimp.com/

Sendible

Sendible is another great Twitter/Facebook tool that allows you to AUTOMATE your posts. Schedule posts to Twitter and Facebook days, weeks in advance, and then forget about it.  Well, technically, don’t forget about it, because that’s just bad social networking. (Keep your eye on your posts, and respond!)  It’s a paid service, but well worth it. http://sendible.com/

Square

Square allows you to turn your smartphone into an instant credit-card swiper. You can accept credit cards for payments, seed money, whatever a producer can think of. You sign up for a free account and then Square sends you a free small swiper tool that you plug into your phone, and wham – you’re ready to accept credit cards. Check out their site to learn more about your phone’s compatibility and all the other juicy details. https://squareup.com

Well, okay, the title of this post is pretty harsh. There’s technically nothing wrong with product placement in any film, unless it’s blatant and gross and, well, product-ish.  But here’s three things to watch out for when accepting a company’s product placement offer.

1) Know that no company is going to give you cash to feature their product in your small film, they’ll just give you product.  There are rare exceptions.  Rare, rare, rare.

2) Make sure you’re not turning your entire film into a commercial for the product you’ve agreed to place in your film.

3) Make sure the product placement actually serves some practical purpose to getting your film made.

A good example of product placement was on the film I produced called Boppin’ At The Glue Factory. One of the producers had a friend at a healthy soda company, and we featured the soda in several scenes, and on the t-shirts of several small characters, in exchange for approximately 25 days worth of soda, which kept our crew happy and hydrated.

A somewhat worse situation took place on the film I wrote and directed, Audie & The Wolf.  The script, as originally written, had only one single moment where a character drank from a bottle of wine, and subsequently smashed that bottle on another character’s head.

The producer of the film, the same producer who had scored the soda product placement on Boppin’, read that moment and saw an opportunity.  He had a business contact who owned a winery.  So he urged me to write a larger part for the wine, in various spots throughout the script, insisting that the wine be featured in a key romantic scene, in a key horrific scene in the kitchen, and thoroughly stocked inside one of the characters’ refrigerator for 2 or 3 other times when the refrigerator was seen open.

His insistence was based on the idea that his winery-owner contact would appreciate the gesture in the script, and want to not only provide the film with free bottles of wine, but perhaps investment funds.

Turns out, the winery owner didn’t want to invest cash in the film, but had no problem putting his wine in the film.  In return, what the film received was several cases of the wine, which was never used except to line the producer’s stash, and to be handed out as gifts here and there by the producers.  It served no other purpose in the film, and we featured the wine for no real reason.

In yet another example, on the same film, the same producer insisted we feature a brand of beer.  The producer claimed that the liaison for the beer company had connections with several semi-prominent film festivals, and could put in a good word for our film at those fests once the film was finished.

So the producer insisted that the fridge in the film be fully stocked with this brand of beer as well – and in nearly every scene which could remotely justify having the beer in it.  Not to mention, decorative mirrors with the beer’s logo on it were placed throughout a key character’s house, and show up in many, many scenes of the film.

A year later, the beer guy put in a good word for the film at one of the festivals, and the film was accepted.  But whether or not the film suffers from the amount of beer logos throughout is a question I keep coming back to every time I watch the film.

As a result of my experiences with product placement, I’m extremely wary of it.  The best I can say is that If you’re in a position where you have to sell out your film by offering product placement, make sure you do it for something tangible and useful that helps the film, and isn’t just there so that the producer can curry favor with a vendor.