How to Find Investors for Your Indie FilmEngage investors with the help of our comprehensive guide.
“A film can be built like a house.”
This post is a part of our in-depth series about how to finance your independent film.
It is best read after (1) a beginner’s guide to independent film financing, (2) 3 first steps to finance your indie film, and (3) how to get donations and grants for your indie film.
Should You Pursue Investments?
If your independent film’s primary purpose is to turn a profit, then you can expect to compete in the commercial arena of investments.
Traditionally, narratives – less connected than their documentary counterparts to social causes championed by philanthropic individuals, foundations, and corporations – find much of their funding here.
Of course, there’s no rule against documentaries entering the contest, but you may have to work harder to convince the judges that your film is a sound investment.
Business, Not Charity
To be a “sound investment” is to be an investment that can conceivably be recouped and generate profit. An investment is not a donation; it is a calculated business decision made when a good opportunity arises.
Remember, you must believe that your film is one such opportunity. You must be willing to invest your own money, and you must be comfortable with the idea of asking your loved ones to invest; both are indicators that you truly believe that your film is more than a charity case.
When you’re convinced of your film’s worthiness – when you’ve embraced the entrepreneurial side of your filmmaking identity – you’re prepared to begin your hunt for investors.
Build Your Case with a Fantastic Script and Pitch
Your conviction that your film is a sound investment must be based on more than wishful thinking.
In the case of a narrative, you must have a great script. In today’s digital age, we’re inundated with story, much of it trash. Separate yours from the pack. Seek feedback from family, friends, and peers, and consider employing a professional script reader to guarantee an unbiased review of your work. Do not betray the heart of your story when rewriting, but do rewrite; generally, writing is an iterative process.
Ultimately, trust the industry aphorism: great scripts get made.
A great script demands a great pitch. The pitch is what first reels in an investor; it’s what you give at a party or at a bar or while standing in line at the grocery store. You never know where or when you might make your pitch, so always be ready!
Present your pitch with passion. Your artistic side must be psyched by your creative vision, and your entrepreneurial side must be psyched by the business opportunity your film represents.
Getting Smart with a Business Plan
A great script and great pitch make a great beginning, but they’re not enough – especially today, in The Bronze Age of Independent Film Financing, when money is scarce, the market is flooded, and investors are understandably risk averse.
In addition to killer content, you must have a killer business plan. In its Film Business Plan and Investment Guide, Filmproposals.com explains that “A business plan is a tool with three basic purposes: communication, management, and planning.” The book summarizes these purposes beautifully:
As a communication tool, [the business plan]… is used to attract investment capital, secure loans, convince workers to hire on, and assist in attracting strategic business partners. The development of a business plan shows whether or not a business has the potential to make a profit. It requires a realistic look at almost every phase of your film project, in particular, the distribution and subsequent revenue streams needed to recoup your investment.
As a management tool, the business plan helps you track, monitor, and evaluate your progress. It is a living document… [that you can use to] gage your progress and compare your projections to actual accomplishments.
As a planning tool, the business plan guides you through the various phases of your business. A thoughtful plan will help identify roadblocks and obstacles so you can avoid them and establish alternatives.
In some ways, business plans are similar to proposals required by foundations, albeit less regulated. “The structure of a business plan is standard, but the contents are not boilerplate,” consultant Louise Levison clarifies in Filmmakers and Financing. “Each film has its own unique qualities.”
Levison advises that a one-film business plan is generally between 20-25 pages – “comprehensive but not too long” – and presented in a way that impresses investors while accurately representing the filmmaker’s ideas.
Note that when presenting a business plan to an investor, it is a Confidential Information Overview (CIO) intended to provide information about the prospective investment. As we discuss in the “Legalese” section of our introduction to independent film financing, a CIO does not replace an Offering Memorandum.
Detailing the nuts and bolts of a business plan is beyond the scope of this post, but I do want to sketch its basic structure, as outlined in producer Tom Malloy’s Bankroll: A New Approach to Financing Feature Films:
- Legal Disclaimer – A lawyer-drafted disclaimer that ensures confidentiality and provides legal protection. Stresses that the business plan is neither all-inclusive in its research nor a guarantee of success.
- Table of Contents – Self-explanatory.
- Executive Summary – A clear and concise breakdown of the business plan’s major points. Order the points according to what the investor considers most important. Ie., if an investor is most concerned with Hypothetical Investment Return, highlight this near the beginning of the Executive Summary.
- Project Synopsis – Tease your film’s story and leave the reader wanting more. Briefly highlight the positive elements of your project, ie., a low and/or realistic budget. Also include a box office comparison of successful films in the same genre as your own.
- Hypothetical Investment Return – Objectively the most important part of your business plan. Here, you illustrate the proposed division of hypothetical profit returned to your film’s LLC.
- Timeline/Production Plan – A general timeline that communicates when each phase of your film’s creation is scheduled to happen. Funding, packaging, pre-production, production, post-production, foreign sales, domestic sales, etc. Conclude with a concrete goal: “Film (x) is sold and profitable within (x) months of funding.”
- Bios/Resumes – Brief descriptions of your team: director, editor, cinematographer, etc. Create credibility by highlighting people’s accomplishments and awards.
- Risk Management Details – “Icing on the cake” that makes an investor’s financial risk less risky. Ie., a sales projection from an established distributor that exceeds the investment amount you’re pursuing. Also highlight valuable Movie Production Incentives (MPIs) like tax credits – see our introduction to independent film financing for more information.
- Supporting Articles – Recent clippings from reputable press sources like Variety, Hollywood Reporter, and LA Times that make a case for the success of your film.
- Contact Information – Self-explanatory.
It’s a good idea to submit your business plan for legal review to prevent against the possibility of a lawsuit.
What Is Return on Investment (ROI)?
On September 7, 1695, the Ganj-i-Sawai, a trading ship more commonly known as “The Gunsway”, was en route from Yemen to India, bearing a fortune fitting the translation of its name: “Exceeding Treasure”.
Unfortunately for its crew, Captain Henry Every – an Englishman who sailed under the Jolly Roger – intercepted its course, sunk its escort, and looted its cargo. Total gain? Somewhere between $500,000 – $900,000, split by Every and his men.
It is believed to be the most profitable pirate raid in history.
Of course, for every successful pirate, there are three weed-strangled skeletons lying at the bottom of the ocean. Pirating was a dangerous profession of high risk and high reward.
In this way, it is similar to the commercial arena of independent film investments. Speaking to The Wall Street Journal, entertainment lawyer Schuyler Moore insists that most films actually lose money – “You’re basically gambling… [and] hoping you invested in a hit.” However, the article acknowledges that “the payoff can be quite steep”:
Movie investments can generate returns of 50% to 100% in the first three years or so, when the bulk of the profits are realized, and then produce a recurring revenue stream lasting several decades as a movie generates ongoing royalties and income from DVD and soundtrack sales, television, pay-per-view, cable and streaming video.
In the investing world, 20% – let alone 50% – is a sizable return. It is this possibility – the possibility of fortune! – that you, Pirate Captain, must emphasize when recruiting your crew.
Of course, you must emphasize responsibly.
Malloy advises that in the Hypothetical Investment Return section of your business plan, Return on Investment (ROI) “should land between 35% and 85%. If it’s under 35%, the potential reward isn’t great enough. If it’s over 85%… an investor will… not invest in the movie for fear that it sounds too good to be true.”
To calculate ROI, employ this formula:
(Gain from Investment – Cost of Investment / Cost of Investment) x 100 = ROI
So now let’s imagine that you’re fundraising for your lo-fi sci-fi film, The Final Frontier. In the Project Synopsis section of your business plan, include a box office comparison chart listing successful lo-fi sci-fis:
These are positive, real-world numbers that inspire confidence in your concept! There is money to be made in the lo-fi sci-fi genre, which is what an investor wants to see.
Next, in the Hypothetical Investment Return section of your business plan, detail the division of your hypothetical profit, as Malloy illustrates in Bankroll:
- Total Budget – $1,000,000
- Profit Returned to the LLC – $2,100,000 (this is an arbitrary number chosen to illustrate the process of Investment Return)
- First Payout Until 120% of Investment Recouped – $1,200,000
- Remaining Money to Be Split Between Investor and LLC – $900,000 (a fifty-fifty split of net profit is standard for most film productions, so $450,000 to Investor, and $450,000 to LLC)
- Total Investment – $1,000,000
- Example of Investor Payout – $1,650,000
- Return on Investment (ROI) Over 2 Years – 65%
You’ve presented your prospective investor with convincing points of reference and a clear illustration of the Investment Return process. This information, along with the rest of the information in your business plan, comprises an important step toward proving that The Final Frontier is, in fact, a sound investment.
You must believe – and in your business plan, show – that to offer an investment opportunity is ultimately to give back more value than you’re requesting.
Armed with your great script, great pitch, and great business plan, you have the leverage you need to begin your hunt for investors. Do not begin before you have these three elements in place!
Where to Find Potential Investors
To get your film off the ground, you need your first piece of equity – ie., financing from an investor obtained in exchange for an interest in your film. This “First Dollar In” is often the most difficult financing to secure because it is the most risky.
Who has the sort of investable finance you need? Well, in the western private banking business, an individual with investible finance in excess of $1 million is known as a High Net-Worth Individual (HNI). As of 2013, there are more than 13 million HNIs in the world. 4.33 million – almost 16% – of these HNIs live in North America.
Also of interest is the US Bureau of Labor Statistics’ 2013 survey, which includes a list of the highest paying jobs in America:
- Anesthesiologists, mean annual pay: $235,070
- Oral and Maxillofacial Surgeons
- Obstetricians and Gynecologists
- Internists, General
- Physicians and Surgeons, All Other
- Family and General Practitioners
- Chief Executives, mean annual pay: $178,400
“Filmmaker” does not break the top ten. Instead, it is the United States’ healthcare industry that’s overflowing with HNIs.
Of course, affluent healthcare professionals – as well as Chief Executives and many other HNIs – are notoriously hard to reach. How can you contact them?
First, consider the people you know personally. Might anyone fall into the HNI category? Any family, friends, acquaintances? What about people from your past? Any former coworkers, college roommates, or fraternity brothers you could call, email, or meet?
Remember, you are not using these people for their money. You are gifting them with an investment opportunity. If you do not believe this, then Return to Start (“Business, Not Charity”).
If you have no direct connections, then a referral (not the medical kind) is an effective door-opener. Ask someone who knows an HNI to connect you.
Sometimes it’s useful to create additional incentive. Connections are valuable, so we can’t expect people to give them away for free. Moreover, the actions of the referred reflect on the individual referring; reputations are on the line. To encourage support, offer your connector an Associate Producer credit and finder’s fee. For example, if you’ve agreed to a finder’s fee of 5% and the investor to whom you’ve been referred writes a check for $10,000, then your connector will walk away as an AP, $500 richer… For simply picking up the phone or shooting an email on your behalf.
Just as it’s possible to secure individual donations for your noncommercial film, so it is possible to secure individual investments from HNIs who resonate with your story and/or its subject. Consider joining or otherwise participating in associations related to your film. Of course, this is a step in the community building process, which we discuss in our series introduction.
If after all of your networking and pavement-pounding you’re still coming up short, you might consider launching an email campaign. It is possible to rent opt-in lists of HNIs’ contact information. The included HNIs have chosen to be kept abreast of potential investments, like your film. If you don’t want to drop a chunk of change on a list, you could crawl IMDBPro or similar resources for email addresses.
If you do undertake an email campaign, it’s a good idea to have a lawyer review your language to ensure that you’re not violating securities laws by extending investments to everyone. Instead, you are offering more information about an investment opportunity.
Regardless of how you find your HNIs, be sure to note their contact information and your interactions in a database. Keep track of who you approach and how it goes. Follow up every concerted interaction with a potential investor, even if that interaction resulted in a rejection. Thank them for their time and consideration. Do what you can to cement a positive impression and so heed Benjamin Franklin’s adage: “It takes many good deeds to build a good reputation, and only one bad one to lose it.”
Moreover, who knows? An individual may not be interested or able to give to this film, but there’s always the next one. When you pitch to individuals, you’re playing a long-term, community-building game as well as a short-term, project-specific one.
First Dollar In: Risk Management
Let’s imagine that you’ve identified and found your first HNI. Congratulations! Having listened to your pitch, read your script, and reviewed your business plan, she’s interested in providing $100,000 of your $1,000,000 budget for The Final Frontier. But she has one outstanding concern: “What happens to my $100,000 if you don’t raise the remaining $900,000?”
To manage this risk, you could agree to access the $100,000 only after the remaining $900,000 has been raised.
If you need to access the $100,000 immediately, you can try offering extra incentives.
Of course, your first investor should receive a prestigious Executive Producer credit. You could promise that in order to receive this credit, future investors must invest significantly higher amounts than your first investor.
You could offer your first investor a higher and/or different percentage of the film, ie., a straight and undiluted percentage that does not change even if the budget balloons.
You also could create an incentive that covers and rewards your first investor after you’ve met your goal. For example, instead of raising $1,000,000, you’d raise $1,120,000, representing a 20% return (which, you will recall, is sizable) in addition to the first investor’s investment. This $120,000 – which essentially secures your first investor upon full financing – is in addition to the investor’s percentage of the film. As Malloy summarizes, “the only risk is that the film does not get financed”, not that the film will not turn a profit. This incentive is what’s built into the “Return on Investment (ROI) Example” above.
Alternatively, you could raise $1,000,000 and guarantee the $120,000 with your tax credit (assuming that the credit provides at least that amount). See our introduction to independent film financing for an overview of tax credits and MPIs.
If your budget includes four or more zeroes, you probably will have to recruit multiple investors.
Generally, recruiting is simpler once you’ve secured First Dollar In. First Dollar In lends your film a degree of credibility; it’s an assurance that your film is transitioning from idea to reality. You can use this excitement to encourage potential investors – at the very least, they’re helping to bring a film into the world! There’s a glamor about the film industry; a pride that comes from association with a creative product. Play to this where appropriate.
Understanding Talent Attachments: Pay-or-Play Deals, Starting Dates, & the Value Question
More concretely, you can bake value into your film by securing attachments.
Consider teaming with a casting director to guide you as you reach out to actors and their agents. Don’t be afraid to shoot for the stars (literally), but do put a time limit on your offers to big names; you can’t wait to hear from Brad Pitt forever – usually a couple of weeks at most.
To encourage an agent to pass your script to a client, you might propose a pay-or-play deal. Essentially, pay-or-play means that if an actor agrees to play a role in your film, you must pay him or her, regardless of whether or not your film gets made. You’ll probably want to have the actor’s fee on hand before proposing a pay-or-play deal, just in case your film does fall through. Some agents accept 10% pay-or-play deals, which means that only 10% of the actor’s fee must be paid if your film falls through.
If an actor accepts your pay-or-play deal, then you’ll have to commit to a start date, too. This is the day that the cameras roll, which, of course, impacts your fundraising timeline. You need to have at least enough money to keep the train moving through production; it’s very difficult to pull the plug on a film once shooting is underway.
Setting a start date is scary, but it’s also an incentive that works on three levels. First, it flows from the abundance mentality we discussed in our introduction to film financing, reminding you that your film is happening. Deadlines are an affirming and motivating force. Second, in the words of filmmaker Dan Mirvish, reflecting on Robert Altman’s advice: “Set a start date, and they will come.” Actors want to work. In many cases, the role is more important than the money, assuming that the script is great (which it is, if you’ve begun fundraising). Third, setting a start date contributes to your film’s credibility because it’s a commitment to progress, and credibility wins investors.
Pay-or-play deals should not be taken lightly. You want to ensure that the attachments you make with this risky strategy bring value to your film. One way to gauge an actor’s value is to consult with a foreign sales agent, who can predict the international value of a given name.
Even so, there are those who debate the worth of the star system. “[T]he right actor cast in the right part, whether they are well known or not, makes a movie good, and good adds value, regardless of the level of his or her celebrity,” Gavin Polone writes for Vulture. “I asked the successful head of marketing at a major studio if he needed a star to market a movie,” Polone continues, “and he responded:”
‘People pay money for concepts. Having a star doesn’t matter. There are a couple of stars who work within a concept. Daniel Craig is the best example; he hasn’t worked outside Bond. There is a legitimacy in Liam Neeson. I feel that Brad Pitt legitimized Inglourious Basterds. It made it mainstream. But if you have to take a leap with the concept, like on [Johnny Depp’s] Rum Diary, then it doesn’t matter. I’d rather have a $6 million actor and a good concept than someone else for $15 million and hope that the concept works.’
Traditionally, studio films cast their leads by analyzing candidates’ previous box office successes and failures, not by finding the right actor for the right role and trusting that this match will attract an audience. As indies, we can afford to bank on the value of good, because we’re not juggling hundreds of millions of dollars. This doesn’t mean you shouldn’t cast international sensation Jean Claude Van Damme in the role of friendly gas station attendant, but it does mean you should consider the soul of your film. Is Van Damme your best bet, or is undiscovered Actor (X) a better fit?
Remember, too, that casting an actor about whom a potential investor is excited can encourage him to write a check. This would be a valuable talent attachment regardless of a foreign sales agent’s input.
Attaching a Director
Attaching an established director to your film – via a pay-or-play deal or otherwise – is as viable a way to build credibility and encourage investments as attaching talent. When you’re just starting out, the more experienced your crew, the higher your chances of fundraising success!
To identify established directors who might fit your project, list films that are similar to your own in genre, mood, target audience, etc. Note these films’ directors and search IMDB Pro for their contact information. You also could request a copy of the DGA Membership Guide, query the DGA’s online Member Directory, and/or crawl the web for a director’s details.
If you can contact a director directly, invite her to read your script. If you reach only a director’s agent or manager, ask them to pass your script to their client. Dangle that pay-or-play carrot where appropriate.
Attaching a Distributor: Negative Pickup Deals, Pre-Sales, & Film Markets
Some filmmakers pursue distribution as a part of their fundraising strategy.
In a negative pickup deal, a studio agrees to purchase a film for a negotiated amount on a given date. The filmmaker receives a contract guaranteeing payment from the studio upon delivery of the film. In turn, this contract can be used to secure a bank loan and/or private investment, essentially funding the film before it’s made.
In The Bronze Age of Independent Film Financing, few and far between are major studios’ global deals covering all territories and distribution outlets; not even negative pickup deals are so sweeping. Instead, split rights deals are commonplace. Indies tend to sell domestic and foreign rights for different distribution outlets separately.
In fact, selling distribution rights for different territories before a film is made – called “pre-sales” – can fund a film in the same manner as a negative pickup deal. It’s also possible to contact sales companies, both domestic and foreign, for sales projections, ie., estimates of how much money your film will make in different territories. These projections may lead to a pre-sale, but regardless, they can be used to manage risk for a potential investor.
For example, imagine that Wild Bunch, a leading foreign sales company, estimates a minimum profit of $500,000 from home video sales of your lo-fi sci-fi, The Final Frontier. If you’re inviting an HNI to invest $1,000,000, you can highlight that Wild Bunch predicts that 50% of that investment will be returned – before a domestic sale. Combine this with some First Dollar In incentives, and you’ve created a powerful call to action.
Just as you identify directors who’ve directed work similar to your own when pursuing a directing attachment, so you identify sales companies that’ve sold work similar to your own when pursuing a distribution attachment. You can submit your package – ie., your script, budget, existing attachments, and other value-builders – to these companies for estimates and a shot at pre-sales. Pitching a sales company is like pitching an HNI; both want to know something’s in it for them.
You also can meet sales agents at film markets, essentially trade events where producers and distributors license films. Cannes Film Festival’s Marche du Film is one such event, and The American Film Market (AFM) in Santa Monica is another. If you attend, don’t waste the opportunity by hiding in a corner! Build relationships, and remember that your film is an opportunity. If you do not believe this, then Return to Start (“Business, Not Charity”).
It’s worth noting that pre-sales can be hard to come by in The Bronze Age of Independent Film Financing. To add insult to injury, they’re not worth as much as they used to be. Moreover, a pre-sale could shortchange a film that meets with unexpected success. Your film’s performed amazingly in the States, setting the stage for a lucrative foreign rights deal? Tough luck, if your pre-sale covers those territories. A major studio wants to put your film on thousands of screens across the country? Doesn’t matter, if you’re committed to a domestic rights deal with a small distributor.
Nofilmschool reports that at SXSW2014, a panel of prominent independent film distributors “pointed out that it’s difficult enough to coordinate windows for TV, cable, iTunes, and so on without having pre-existing agreements… [In fact,] Dori Begley of Magnolia Pictures encouraged filmmakers to resist the urge to sell off rights to the film before it’s done unless you really need the money to finish it.”
At the end of the day, it’s up to you to decide how, if at all, you attach a distributor as a part of your fundraising strategy. Some say a bird in the hand is worth two in the bush… But perhaps not, if the two are within reach.
One of those birds may be money you save from deferred salary deals.
You might consider deferring a percentage of your salary so that you can pour more into what appears onscreen. If appropriate, you could ask other players – ie., your director, your writer, your actors – to defer percentages of their salaries, as well. This has the added bonus of demonstrating to current and prospective investors that you and your team are willing to go the extra mile for your film, and thus for their investment.
Ensure that the money you’ll save is more than the rebate you’d receive from your tax credit. Also, in your contract(s), stipulate that once the film generates profit, deferrals come out in first position before anything else.
How Do You Juggle All of This Stuff?
HNIs, MPIs, Talent Attachments, Directing Attachments, Distributor Attachments, Salary Deferrals, Finishing Funds and Gap Financing… The commercial arena of investments can feel more like a maze than any sort of stadium, full of puzzles, tripwires, and dead ends.
Every filmmaker would love to find an investor who’s excited to cover the entirety of a project’s budget. If you do, congratulations! But it’s more likely that you’ll have to enlist multiple investors and explore a myriad of fundraising channels discussed above. How to juggle so many balls?
“A film can be built like a house,” Malloy explains in Bankroll. “You can start with the foundation (a piece of equity), move on to framing (attachments), then go to exterior finishing (tax incentive), and finally end with interior finishing (finishing funds).” The house is built piece by piece. In the words of my father, “The key to eating an elephant, is to do it one bite at a time.”
Eating an elephant is a full-time job. “Things may come to those who wait, but only the things left by those who hustle,” Abraham Lincoln reminds us.
So do the work. You need to be building every piece of the house all the time. Don’t throw a line out to an HNI and then sit on your hands while you wait to hear back; instead, approach other HNIs, explore attachment possibilities, and figure your MPIs. A business plan is a living document because it needs to reflect the growth of your fundraising process!
Just Do It
Take action. Set a specific goal and pursue it to the best of your ability; control the things you can control, and control your reactions to the rest.
Things may not work out the way you plan. Brace yourself for rejections, and press forward.
Malloy relates an inspiring story about a real estate salesman that I hope you’ll take to heart:
Turns out this guy would take it very personally when people said no. It would ruin his day and put him into a depression and he wouldn’t get anything done. So one day a master salesman approached him and they discussed the problem. The master salesman asked, ‘How many ‘noes’ do you get before you get a ‘yes?’’
The depressed real estates salesman thought about this and said, ‘About thirty. I get thirty ‘noes’ to every one ‘yes.’’
So the master salesman taught him a new technique. ‘If all it takes is thirty ‘noes’ to get to one ‘yes,’ you should be elated every time you get a ‘no.’ Each ‘no’ is one step closer to you getting a ‘yes.’ Think about it as if you need to ‘collect the noes’.
The sooner you start collecting, the faster your film will get made!
Michael Koehler, with
For more details, explore the rest of our in-depth series about how to finance your indie film:
Part I – Beginner’s Guide to Independent Film Financing
Part II – 3 First Steps to Finance Your Indie Film
Part III – How to Get Donations and Grants for Your Indie Film
Part IV – How to Find Investors for Your Indie Film
Part V – How to Use Crowdfunding to Finance Your Indie Film
If you’re looking first to learn how to make a film, we invite you to check out our affordable online filmmaking course – more curated than a blog, more interactive than a textbook, more flexible than traditional film school.
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