Business Plans for Filmmakers

14. Where to Find Investors

161 14. Where to Find Investors One of the most commonly asked questions relating to investor financing of film companies or projects is, “Where can I find prospective investors?” Often, the question is based on one or more false premises. Such a question may assume that investors likely to invest in risky film ventures gather at a particular physical location or that the investors who invest in independent film often return to invest again after their first investment. Neither of these described situations are generally accurate, although occasionally prospective investors might show up at a film-finance seminar seeking to learn more about how film financing works. In such instances, however, these investors may or may not actually reveal who they are or that they are investors. Even if they do reveal their presence, they will typically be mobbed by desperate independent filmmakers, and the experience is not likely to be favorable. Many independent-film producers often state that they believe they have identified and/or have relationships with one or several wealthy investors who can and may fund the entire cost of their film project. Unfortunately, it rarely happens. Investors with money tend to want to spread their investments among a variety of opportunities. That is one of the most fundamental tenants of wealth preservation or investing—diversification. In addition, wealthy investors tend not to want to place a significant portion of their money into the more risky investments and will more likely only allocate a small portion of their wealth for such projects. And truthfully speaking, few investment opportunities are more risky than an independent feature film. This is another reason why a business plan may not be the best choice for raising money from investors since none of the active-investor investment vehicles legally associated with a business plan offer the opportunity for spreading the risk of the venture among a large group of investors. That’s where the passive-investor vehicles and the securities offerings Where to Find Investors 162 come in. They do allow the film producers to spread the risk of this very risky investment among a large group of passive investors. In any case, at least one of the keys to or starting points for finding investors (i.e., looking in the right places) is analysis of investor motivation. First, do some brainstorming with associates regarding what might motivate anyone with money to invest some of it in the filmmaker’s high-risk venture. Some of the possibilities are listed below. Others may be unique to a specific film project. Some of these descriptions of investor motivation are closely related and may even overlap. They are presented in no particular order. Career support. A prospective investor has close ties with the filmmaker and is interested in supporting the filmmaker’s career. Glamour. An investor is enamored with the glamour of the film industry or the idea of owning a piece of a movie. Cocktail chatter. An investor feels the investment has a certain amount of “cocktail chatter” value (i.e., it’s more interesting and fun to talk about than most boring investments in their portfolio). Associate. An investor wants to be able to spend some time on the set and rub elbows with the cast and crew. (This needs to be carefully controlled so that it does not get out of hand and become a distraction.) Learning experience. An investor wants to use this investment as an opportunity to learn about how the film industry works so that he or she can get more involved in the future. Extras. An investor has a son, daughter, niece or nephew who can appear as an extra in the movie. Appear in movie. An investor wants to appear in the movie as an extra or actor or actress in a small part. Local economy. An investor realizes that by investing in the movie, it will help bring the movie to a specific locale that will benefit the local economy. Movie message. An investor is very interested in one or more of the messages being communicated through this significant medium. (All movies communicate something.) Tax incentives. An investor is in a position to take advantage of federal, state or international tax incentives for film-production expenses. Screenwriter. An investor is a screenwriter and wants to get his or her script produced. Direct. An investor is also a director, and (in rare and unusual circumstances ) he or she may want to direct the movie, and the filmmaker...