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.
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 a loose guideline, and by no means apply to every situation. This piece originally appeared on my medium, but I'm moving those posts over here in an effore to consoidate my presence.
Piece 1 — Skin in the game. 10–20%
Investors want you to be risking something other than your time. The theory is that tt makes you more likely to be responsible with their money. This can be from friends and family, but they prefer it comes from your pocket. However, if you’ve got a mountain of student debt and no rich relatives, then there is another way…
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. It’s a full time job during the campaign if you want to do it successfully. However if you can, you’ll be able to put some skin the game, and get to retain more creative control and more of the back end. Due to the difficulty in finding money for film, the skin in the game for a director’s first project is often much higher than it is in other instances.
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 perspective, it’s good in that if everything goes tits up, you don’t owe the investors their money back. That is assuming you haven’t committed fraud or misrepresented yourself. 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 commonly 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. Those There are some great services to help with this, including Brandwood Global.
Here’s a primer on how to go about contacting brands.
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. For a more detailed analysis of the presale market, check out this article I wrote on HopeForFilm.com
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, 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.
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. There are far more grants available for women and minorities, and 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 Debt 10–40%
Gap debt is an unbacked debt 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, but that market has been largely taken over by private investors loaning money through slated. It almost certainly requires a completion bond.
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 does donations or loans from product placement.
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