INVESTING SERIES - #2 Financing Movies

At the start of this blog, I mentioned I would cover a variety of topics including screenwriting, producing and investing. This is the second in a series of topics on financing and investing in movies. (Missed the first article? Read it here.)

Okay, so you get the general idea about investing, right? Lots of rules required to keep your head above water. The SEC also wants to make sure that investors aren't blindsided by ruthless con artists who will do whatever they can to swindle them. Previously, I wrote about the investment package. That would include the PPM, the Business Plan (or Prospectus) and the last piece is how you structure the offering.

Offering Structure

What does that mean? LLC, C-Corp, S-Corp, LLP, GP, etc., etc. It's the umbrella underwhich the movie is housed. This is where the novice filmmaker's eyes gloss over and they start daydreaming. "But I'm a filmmaker", they say, "I don't need to know anything about financing movies". Sure you don't, that's why you probably won't ever get your film made. Sorry folks, you're delusional if you think I'm going to be like everyone else and tell you, "write a great script, attach actors, and the money will flow". Here's the reality, as an independent producer, the structure is the real gold. Sure, it's nice that the script is good...it's even better that you have a direct connection to a certain actor...however believe me when I say, if they're not an A-List actor, your investors won't be that impressed. Unless you're independantly wealthy, or have a rich uncle or something like that, it will be a challenge to get money.

Here's the best advice that I can give, the more prepared you are when talking with investors, the better your chances of earning their trust, and ultimately gaining their investment in the picture (and more importantly, you). If you don't know the investor, then you're probably dealing with someone who is a "professional" investor. These guys are shrewd businessmen and don't part with their money easily. One of the easiest ways to get them on your side is the compelling argument in your favor...the movie's package. You show them the answers to all of their questions, and they're likely to invest.

How the film is structured is up to you, and a qualified attorney, to answer. Different structures have their different advantages. Personally, I prefer the LLC as a structure, due to the fact that any investor is a limited partner. That means, they're limited in the decisions of how this movie will be produced. Actually, in most situations, they have no say at all. They are also limited in their investment....meaning what they invest is all they are liable to lose (in the unfortunate event that somehow, someway your magnificent film doesn't make any money...but that won't happen to you, right?).

There is still more involved in investing in film, so for those of you that haven't had your hopes and dreams dashed yet, then stay tuned for more.

NEXT TIME: Is Slate Financing Dead?