In this week’s filmmaking question, a reader asks the following about investing in a film.
Question: I’m doing a film and I am distributing to iTunes. I’m not launching till at least Feb when everything is done. I am doing this out of pocket and need funding. I don’t have wealthy friends nor do I know any rich people. What’s the first step in obtaining an investor? Is there a group of people that invest? I’ve tried those crowdfunding sites to no avail. Any suggestions?
One of the most frequently asked questions in filmmaking is: How do I find someone to invest in my project? While the answers vary from asking your dentist for money to calling your rich uncle, I am going to tell you a secret that most filmmakers don’t want you to know. Are you ready?
How To Access The Secret Film Investing Club
There is a top secret, underground group of prospective film investors who are hungry to invest in unproven projects, produced by unknown filmmakers and they are chomping at the bit to give you their money. That’s right. I’m taking about the secret film investing club…
But before you can be admitted to the club, you must first decipher the secret password.
Just kidding… There really is no such secret film investing club.
But there is a myth perpetuated in this industry that leads most filmmakers to believe otherwise. This is evidenced each year by the gazillion, first time, hopeful filmmakers who flock to The American Film Market and end up hobnobbing with Hollywood posers who pretend that they are actually interested in financing unproven projects.
While some filmmakers get lucky, many leave AFM with a list of “good contacts” and “great feedback” on their project and spend the next two years chasing a carrot on a string. So instead of taking this route, I suggest learning how to think like an investor.
What’s the first step in obtaining an investor?
When I started out, I didn’t know any rich or successful people. I grew up in a small town surrounded by factory workers. Like most filmmakers, I spent a lot of time trying to figure out how I would find an investor for my projects. At one point I read a book totally unrelated to filmmaking called Rich Dad Poor Dad. The book talked about rich people – how they think and what they look for in investments.
Inspired by the book, I started asking friends if they knew any rich people. One of my friends mentioned a local auto dealer who owned a dozen dealerships. One day I picked up the telephone and called his dealership. I left a message with his secretary. And to my surprise, the prospective investor called back and agreed to meet.
That single meeting was the beginning of a business relationship that I still maintain to this day. (For the record, this guy was worth 67 million dollars.)
Later when I worked with a producer in New York City, I found out that the strategy for finding investors wasn’t much different.
So the first step in finding a prospective investor is to ask friends and family if they “know of” any rich people. If someone mentions a name, reach out and request a meeting. If no names are mentioned, then I would pick up the Yellow Pages and look for the biggest ad. People pay a lot for those ads – so if you find one, why not attempt to connect with the CEO for a meeting?
Is there a group of people that invest in projects?
If you Google “investment clubs,” you will get a ton of results. Just know that if you find a legit group, they probably focus on popular investments like stocks or real estate. While I would encourage you to attend a few meetings, refrain from pitching your agenda until you make sure members are open to new types of investments. Your initial goal with any first meeting is to make friends and see where it takes you.
Assuming you take the necessary actions that lead you to prospective investors, I would not make a pitch until you figured out how to answer a few basic questions, usually as part of your business plan:
- How will the money be spent?
- How will you recoup the money?
- How soon will you recoup the money?
- What is the projected ROI?
- Why should they invest in your project over other investments?
Think of it like this – Most investors make 8% to 12% on their money in a good mutual fund. Add the fact that a solid real estate investment could produce this return, plus cashflow and it is easy to understand why asking people to invest in an unproven project is challenging.
Thoughts on Crowdfunding?
Aside from raising money, the more important aspects of crowdfunding include testing, proving and pre-selling a concept. Additionally, a crowdfunding campaign allows you to test the footprint of your social influence. When crowdfunding attempts fail, it could mean the concept is not yet interesting to the marketplace, the filmmaker’s social media reach is limited or both.
When in doubt, think of your project from the perspective of a prospective investor. What seems more risky? The guy who just had a successful crowdfunding campaign, sourced a mailing list of 10,000 people and has advertisers offering to buy advertising space… Or the unproven project with no plan for ROI. Don’t be that guy.
Just because you are filmmaker, producing a short, webseries or feature film does not mean that you are no longer bound to the general principals of business. You must never forget that you are creating a product. So before you approach any prospective investor, you need to first figure out how your project will make money.
In the end, while there is no such thing as a secret film investing club, the are financial rewards if you’re willing to hustle. If you like this film finance advice, check out the Film Finance Guide.