It was February of 2006. I had just returned from my annual birthday trip to the Super Bowl when I learned that an indie producer from the East Coast wanted to hire me to rewrite a modern-day pirate script. So we met, agreed on the value of my words, and I started writing. My mailbox still hadn’t been graced with a check a week later. After avoiding my first several calls, my “producer” finally answered my call just long enough to try renegotiating my price. Obviously, the mutiny was afoot over my payday.
When we met again, I asked him how his film was being financed. His answer was the most harrowing and painfully unique I’ve ever heard. He claimed his film would be financed by lawsuit settlement money from a guy run over by a UPS truck and turned into a quadriplegic. Wow! A recent quadriplegic wanted to risk the bulk of his settlement money on the second-most dangerous investment in America (restaurants being the first). What a huge mistake. One thing I was sure about was that I no longer wanted to have anything to do with his film. I don’t need bad karma, and the producer never paid me anyway, so I bowed out.
That experience solidified my belief that indie producers will do anything – and I mean anything – to get their films financed. This, of course, brings us to today’s topic: Indie Film Financing. Let me start by saying over the past 20 years, I have directly invested in production financing for independent films and development financing for much larger films, and I’ve been an indie producer who has tried to reel in investors. Throughout it all, I’ve made money, lost money, and learned hard lessons that will forever be tattooed in my memory. So, my goal today is to give you some insight on how to position your film in its best light to potential investors.
The Right Investors Aren’t In It For the Money
Classic film investors won’t be affected if you lose their money. Of course, they usually want to make money (sometimes they don’t because of tax liability reasons), but their real reason for investing in an indie film is to tell their friends they’re an ‘executive producer.’ These investors are usually too busy to keep tabs on your film or visit your set more than once. But they’re also very shrewd and must ensure you know what you’re doing before they cut you a check. Thus, they will rake you over the coals on your budget and demand your production is filled with seasoned veterans. They will also ask you hard questions about your film’s distribution.
In most cases, these investors have invested in films before, so be ready for an assault of challenging questions. Obviously, their money is hard to get. But, it’s the best kind because you’ll keep getting it in the future if your film breaks even or even gets close to breakeven for them. Plus, if your film tanks, these investors usually won’t cause you much grief because they’ll use the loss as a write-off on their taxes.
Getting ‘Dumb Money’ Is A Dumb Move
By ‘dumb money,’ I don’t mean these investors are dumb. They’re usually quite intelligent and highly successful. Doctors, dentists, lawyers, and corporate professionals usually fall into this category. These people live healthily but will feel a pinch in their pocketbook if they lose money. These investors are usually easier to get on board because they have no idea they have a better chance of starting for the Los Angeles Lakers next season than they do of making their money back. They will also want to be on your set far more than you’d want them to be there, and they will call you incessantly for updates. Be careful with these investors because they will come after you if their money is lost.
Be Honest With Family And Friends Who Invest
Let’s be honest; mom, dad, grandma, siblings, cousins, and best friends from grade school don’t believe your film will make them rich. In your mind, they’re investing, but in their mind, they’re donating. So, if you choose to take investment money from family and friends, it may be a good idea to ask them to give you the amount of money they can live with losing. That way making them money is a pleasant surprise. But losing it won’t ruin your relationship with them.
Create a Business Plan That Makes Sense
If I had a dollar for every business plan that has come across my desk with ridiculous assumptions and exorbitant fees for the filmmakers, I could afford to buy the Ferraris for every day of the week – on cash! Trust me, once your financial assumptions shoot into the galaxy of ridiculous, your potential investor won’t sign that check you’re pining for. So, to help you get that check signed, here are some insights on how investors view indie film business plans:
a) Your business plan doesn’t have to be Bible-thick, especially since 99% of your potential investors won’t read it anyway. They will, however, focus on two crucial aspects: how much money you’re asking for and when they should expect to see a return on their investment.
b) Don’t pay yourself too much money. For example, if your film is a $1,000,000 budget, don’t pay yourself $100,000 to direct, another $100,000 to write, and yet another $100,000 to produce. Asking your potential investors to let you pocket $300,000 of a $1,000,000 budget will kill their interest. Investors don’t want you to get rich off their money; they want you to make enough money to cover your bills during the shoot. Simply put, your investors want you to suffer alongside them until they get their money back. Besides, if you ask for heavy fees, some investors will ask you to prove you’ve made the same money on your previous project (I know I always ask).
c) Demanding the investor sign an NDA (Non-Disclosure Agreement) before they look at your proposal is NOT a good strategic move. If you’re asking an investor to give you money, you shouldn’t threaten them with a lawsuit. In this age of lawsuit-happy people, the last thing an investor will do is sign something that allows you to sue them. Thus, most of them (me included) would rather not get involved in looking at your business plan. But if you insist on having an NDA signed, you should clearly notify your potential investor of your intention before you meet with them.
Several years ago, I was duped by such a crafty move when I met with a producer who wanted me to invest in and distribute her multi-picture production slate. While a very positive ninety-minute meeting ensued, the producer pulled out an NDA for me to sign as the meeting winded down. Asking me to sign an NDA after the pitch? Needless to say, my interest evaporated. On the inside, I was thinking, “Damn, what a waste of ninety minutes,” On the outside, I politely told the producer I don’t usually sign NDAs for film business plans. Suddenly, the positive vibes left the room, and the meeting ended soon after that.
d) The film successes you choose to compare your film with should be within believability. For example, if you’re making a $400,000 comedy, don’t compare its potential to “The Hangover” – a bigger studio film with studio advertising and studio muscle at the theater chains. Try to find films with budgets like yours, and list how well they did without a theatrical release. Since getting a theatrical release on an indie film is like winning the lottery, your numbers should look strong without adding potential numbers at the box office. You’ll have a better chance of getting a check cut if they do.
e) If you describe your film (tonally speaking) as a cross between two other films, make sure those two films were successful! You can’t imagine how many filmmakers will list their film as a cross between two critically acclaimed indie films that nobody outside the indie film world has ever heard of. Investors don’t care if your film is like other critically acclaimed gems. They don’t care if it plays at Cannes, Sundance, and Berlin or how many awards it’s won. All investors care about is making money. So, if you’re going to say your film is a cross between two others, make sure you mention highly successful titles that even a farmer in Kansas has heard of.
f) Make sure your numbers make sense. I recently looked at a business plan that stated, “Since the filmmaker’s previous short film made 798% in the educational market, his feature film will make 798% in the mainstream market.” Are you kidding me? How much did his shortfall cost? A few thousand? How much does he want for his feature? A few million? Anyone with half of a brain will see the flaw in that logic. Sometimes you have to take a step back and ask yourself if you would buy what you’re selling.
g) Do not include your script with your business plan unless your investor specifically asks for it. No, I’m not worried about an investor stealing your script but about them reading it. Most investors have never read a screenplay, so they may not understand the “EXT. DRIVEWAY – DAY” or the “CU: ON A BURNING CIGARETTE.” Just give them what they need and no more.
Only Take Money From Accredited Investors
Being an accredited investor means your investor is willing to sign a document stating they understand the high-risk nature of investing in your film and they have the money to lose. Usually, this means the investor’s total net worth should be at least ten times greater than the amount they’re investing. Making sure your investors are accredited is the one step that most independent producers ignore. But it’s an important element of your investment package because accredited investors can’t sue you if they lose money.
Treat Your Investors Like You’re Married To Them
Because you will be married to them for a few years. Before you take money from an investor, ask yourself if you’re okay with dealing with them. I firmly believe some of the best investment money I have ever dealt with was the money I chose not to deal with.
There are several ways to finance your film, and since we’ve only covered investors and business plans today, I will continue discussing other ways of financing on Wednesday.
That’s my offering for today. As always, thank you for lending me your eyes and ears, and I look forward to borrowing them again soon.