Film Finance —Raising Money Post Pandemic
The economy is declining and there’s continued political turmoil. Learn how to raise money for your content post-COVID-19.
In Early March 2020, Hollywood was put on a hiatus until further notice. Thousands of productions around the world came to a screeching halt! The shutdown prompted hundreds of studio and independent film producers to hit the pause button on fundraising. This is the first time in history, that the recession-proof entertainment industry is suffering.
Two months into this Pandemic, filmmakers are wondering how to go about raising funds when the world opens up. The world we left behind isn’t the same world to which we will return.
In the past few weeks I’ve had the opportunity to reach out to private and institutional investors to learn what they are doing with their investment funds during this era of COVID-19. From each conversation I gained helpful information. Hopefully, these tips will assist you in your efforts to raise funds for your next motion picture production:
Understand the Investor’s Current Mindset
Even the wealthy have worries during this pandemic. Good health is something that one cannot buy. No one is exempt. Any investor you’ve spoken to a hand full of months ago does not have the same mindset today. Most of them went to cash to cut losses when this pandemic hit. They are fiercely protecting their money. So it is in your best interest to re-examine their current threshold.
Be Considerate
Out of all the pitch emails I get on a daily basis, there is one in particular that gets under my skin the most; the email that goes right into a cold pitch. As a general rule, I like to have a proper introduction and friendly conversation before I am even open to hearing a pitch. It’s easier for someone to respond to a message that is more personal and polite than a cold pitch right out of the gate.
There is a reason why the Swiss are the kings of banking. They live by the Three Second Rule; the first three seconds are more important than the next three minutes. No matter what industry you work in, it’s crucial to make a good impression in the first few moments.
Re-budget and Re-evaluate
Make reasonable adjustments to your budget. Remember many crew members are also in a different state of mind. Get your list of department heads together and pick up the phone and call each one. Get them to commit to an adjusted pay rate/equity deal that works for both of you. Additionally, this is a good time to reach out to talent that can add value to your film.
Re-examine the investment deal. Adjust the values of the shares you are offering. Break them up into smaller increments. If you had a $100,000/share offering, it may be better to offer a $10,000/share offering. This makes fundraising a bit easier according to some of the private equity investors with whom I recently spoke.
Emphasize Job Creation
When I personally reach out to my co-investors, I always lead with job creation. Many investors forget that the use of their funds helps to create jobs for people.
The Motion Picture Association estimates that the film and TV industry directly employs 892,000 people. This number isn’t including independent contractors. Most of these people are out of work during this pandemic.
Build A Small Investor Alliance
This works. Make a micro offering with good ROI terms. Get a few of your friends or colleagues to commit to a very small amount such as $500 each. Then ask them to get 5–10 of their friends or colleagues who can afford the small amount to commit too. Open an escrow account and deposit the money.
Building this alliance does two things. 1) It gives you a head start in recruiting new investors for a larger amount. 2) It creates a small group of “go-to” investors. These investors will more than likely join you in future investments.
Shared Risk
I cannot begin to stress how important it is to use some of your own cash to invest into your project. Investors want to know that you are willing to put up your own money.
About ten years ago a well-known producer recounted his story of how he got his first break in Hollywood:
“You need to write your own ticket.”
He didn’t have a dime and was growing tired of pitching his idea around town. So he got a night job, sold his car, and saved that money to start his very first production. He stressed the importance of starting small. Today that producer is worth about $200 million.
Use Combination Financing
This is a great way to make your next film. The way that these deals work is quite simple. Raise a portion of equity, make an offer to talent, get pre-sales against the talent, and then finish the financing with a bank. There are a number of savvy producers who use this method for every picture they produce.
Distribution Reshaped
Distribution is not going to be the same post-pandemic. Film Markets may not be the same as they were in the past. Reach out to some reputable sales agents and ask them about the content market. They are on the front lines and will be open to sharing what buyers are currently looking to purchase and how they are buying content currently.
Do your research always. Make certain that you are well informed about the legal perimeters when raising funds. The SEC website is an excellent resource to utilize for learning.
© Gena Vazquez 2020
Thank you for reading! If you enjoyed this article, feel free to read similar articles I have written.
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