18 April 1999 - 16 March 2000
Business Plan
Leo Grillo
7:02 am Sunday April 18, 1999
Dear John:
I have tried to email you several times and it was returned by the server. Running a search I came up with this site.
Please forgive my not being "on topic" -- but could you reply so I can capture your new email address?
I have yet another project in preproduction and I need your services again.
BTW: reading some of these posts, I have information or opinion to offer some of these people. How do I do that without mucking up the integrity of your site? Or should I just mind my own business? I know you'll shoot from the hip on that one!
If you hit my web site (leogrilloproductions.com) you'll see the project on the list: THE PEDIGREE. We have a distributor.
Thanks,
Leo Grillo
Limited Partnership
trey
9:47 pm Friday April 30, 1999
I have a $400,000 film that I'm looking to finance through independent partnership. Where can I find a limited partnership template form so as not to have legal problems? Any suggestions as to how to get these forms done relitivly painless? I'm kinda new at this. Any help would be greatly appreciated.
commissions and finder's fees
10:35 pm Wednesday June 30, 1999
I am in the process of trying to find funding for an independent feature about a stock broker with a gambling problem. If I was to use third parties to raise the money, would it be legal to use part of the proceds from the money raised in order to pay those third parties a "commission" or "finder's fee". More info about this project can be viewed on my web site www.otcproductions.com
Thanks for your time.
re: commissions and finder's fees
10:35 pm Wednesday June 30, 1999
Frank:
As a general rule, if you are raising money for your film by selling a security (i.e., corporate stock, units in a limited partnership or limited liability company, or other forms of investments in which the investors are passive), it is not legal to pay persons who are not licensed as NASD/SEC broker/dealers or registered representatives of such broker/dealer firms, based on a percentage of the money they raise. Such unlicensed persons are typically referred to as finders. It is ok to pay finders fees if you are not selling a security (i.e., you are raising money from one or two active investors). On the other hand, even if you are selling securities (and under limited circumstances), you can pay executive producer fees out of the film's budget, so long as you do not base such payments on a percentage of the money raised by such executive producer. In such situations, these executive producers must (1) be upper level management of your organization, (2) have other duties besides raising money, (3) not be compensated on a transaction-related basis and (4) not have engaged in the sales of securities in the past 12 months.
John Cones
IRS At Risk Laws
Brett Thornquest
8:18 am Sunday July 4, 1999
Dear John,
I am currently visiting the USA from Australia. I have been researching portions of the US Tax Code and was hoping you could clarify one point in particular, please. The tax code outlines that an investor is "At Risk" for all cash and full recourse debt contributions involved in an activity, less any guarantees or like instruments in place (Sect 49, 465). John, Australia's equivalent to the IRS, the ATO has a similar definition, however it usually does not view minimum guarantees etc provided by distributors, sales agents as mechanisms to reduce the "At Risk" contributions made by investors in relation to film production investments. Their view is that when a minimum guarantee etc is contingent on an event such as delivery of the negative, even if supported by a LC, the investment is still fully "at risk" due to the possibility of this not occurring. The ATO does not reduce the amount of losses that may be claimed initially until the min guarantee is earned and paid and therefore assessable as income. In some cases this is 24-60 months out from initial investment, assuming no other revenue is earned from territories not covered in the structure. My question is : Does the IRS share a similar view in that min. guarantees, negative pick-ups etc contingent on certain events, still leave an investor fully "at risk" for their contribution to the scheme? Are there any case law examples accessable on the internet allowing or disallowing the above scenario? I am aware of the Active vs Passive classifications of the IRS.
I appreciate your time spent on this question.
Yours sincerely,
Brett Thornquest
Limited Liability Companies
Bruce Vilders
8:30 pm Tuesday July 6, 1999
We have been advised to form a Limited Liablility Company (LLC) for our investors(funding a independent film). What exactly are the benifits of the LLC for the passive investor i.e. what liabilities specifically are limited?
re: IRS At Risk Laws
John Cones
8:04 am Friday July 9, 1999
Brett:
Sorry, but your question is a very technical tax question that would best be directed to a tax attorney or accountant.
John
re: Limited Liability Companies
John Cones
8:17 am Friday July 9, 1999
Bruce:
The choice of entity can be a complicated analysis, if all factors are considered. But the liability protection offered by an LLC is pretty much the same as that offered to investors in limited partnerships and corporations (i.e., their liability is limited to the amount they have invested). In other words, they are generally not personally liable for the debts or claims of the entity, and not liable beyond their original investment. For purposes of low budget filmmaking, one of the important differences between an LLC and a limited partnership is that an individual manager of an LLC enjoys limited liability, whereas an individual general partner of an LP does not. So, a lot of my clients who are raising money for low budget films, tend to prefer the LLC, since it offers the individual manager limited liability, without the necessity of creating a second entity to serve as the manager (or GP of an LP). On the other hand we usually conduct the LLC offering and raise the minimum before creating the entity.
John Cones
Investors looking to finance Feature Film
Efstathios Fillis
11:27 am Wednesday July 14, 1999
I have Middle East investors that are looking at investing in A grade movies that will provide some form of guarantees if the film is not a success. Please could you advise which companies would be interested. Preferably the big movie companies like warner Brothers, Sony Pictures or any major Independent company with a proven track record.
Thank you
Efstathios Fillis
re: Investors looking to finance Feature
John Cones
2:38 pm Wednesday July 14, 1999
Efstathios:
I have no way of knowing which established film companies might be interested in the proposed investor financing you may be able to offer. You will have to contact those companies directly. Best of luck.
John Cones
Efstathios:
I have no way of knowing which established film companies might
be interested in the proposed investor financing you may be able
to offer. You will have to contact those companies directly.
Best of luck.
John Cones
Hello -
I am producing a low budget feature for $60,000.
Do I need to set up an LLC, and do a disclosure document?
If so, what's involved in the disclosure document?
How long does it usually take to do/prepare a disclosure
document?
Are there other alternatives to the LLC and disclosure document
that may be more expedient and less expensive?
Thanks in advance for the info - and - I appreciate your website!
Marilyn Freeman
Marilyn:
If you intend to raise the $60,000 from passive investors, people
who are not regularly involved in helping you make important
decisions regarding the project (active investors), then you are
selling a security no matter what you call it. The securities
laws generally require that you provide a disclosure document,
explaining in writing everything that is important about the
deal, to all prospective investors prior to their investment.
When I am working with low budget independent producers, I
provide them with a checklist of the information needed for the
disclosure document, then produce 1 to 3 drafts (typically) for
their review, until we finalize the document. The process can
take as little as a couple of weeks, depending mostly on how much
of the information the producer needs to provide is readily
available. Sure, there are lots of alternatives. For that
discussion see "43 Ways to Finance Your Feature Film".
John Cones
Dear John,
I have completed the first four of a twenty video phonics series.
I just sent you an email (before I toured your site and got a
little hatting). I mentioned in my email that I have a celebrity
who has read my script and asked to see it once produced. I'm not
at liberty to mention his name in a public forum.
So far, I have financed the project myself through my tutoring
income. My profits are absorbed by this project every week.
Because of a turn-over in videographers, talent and other help,
I've had to train up in videography by practice and observation
of other video works. I also had to Direct the editing to ensure
it came out as I wanted it too. After mohths of hard work, I
have my first finished products and have obtained new support
willing to help finish them off. Some of this support does work
as well, with the celebrity mentioned in my email. I have many
communication lines opening up every day and have recruited the
assistance of one of the top two infomercial/media buyers in the
country before even having funding to get them going. I am
determined to get the videos out for at least part of the
Christmas market.
My question to you is, how do I introduce myself to potential
investors who do not know of me or of my product? What do I say
in my first communication to get them to respond with some
interest?
I feel I'm giving too much data or lacking needed data for them
as I'm not getting responses. I have a stock of video demos to
send to prospective investors - if they would just become
prospective. Ethics are good. Power flows are increasing daily,
but I got stuck here on this step of approaching funding sources.
I need about 50K for an infomercial pilot and initial
product fulfillment.
Any tips?
Appreciated,
Dear Tracy:
My suggestion is that you develop a traditional business plan
explaining what your product does (i.e., what problem or need it
is designed to resolve), how an investor may make money by
investing in the informercial pilot; give something of your
background and why that background prepares you for this
opportunity; some informatoin about the field of infomercials,
how you expect to use the money provided by investors, that sort
of information. Arrange it in a logical manner in the business
plan, and make sure all of your language clearly indicates you
are seeking just one or two active investor partners. Then you
can use that business plan (or a summary of it) to introduce
yourself to anyone and talk to them about the possibility of
investing in your venture. You might also use this generic
business to help introduce yourself to people who might help you
raise the money. Keep in mind, that it is permissible to pay
finder's fees when you are seeking an active investor for your
venture. It's only when you starting seeking money from a group
of passive investors that the securities law become invovled, and
under those circumstances, you can only pay pay commisions to
licensed SEC/NASD broker/dealers and/or their registered reps.
John Cones
Currently, we have a client seeking film financing for its new
movies . Our client is a reputable film production company in
Asia. It offers both high-quality feature films and TV programmes
throughout the world. The aggregate amount of the fund required is
about US$10M-US$20M. (each project seeks fund in the range of
US$1M to US$2M). If you are interested in this deal, pls contact
me.
Thank You!
Shirley
Is there any limit to the number of shares of stock I can issue
to people who have worked for my film production company or who
have invested money? The people who have invested the money and
time have had an active roll in helping me manage and establish
the direction of the company.
I did not induce anyone to work with promises of stock, and no
stock was issued prior to work having been done. I would like to
gift this stock to these people to reward them for their efforts.
Can the state, or federal, SEC come after me in any way, even if
I gift 100 people common stock when the law in this particular
state says that you cannot make more than 10 OFFERS?
One attorney here says that the SEC will always interpret any of
your actions in the worst possible way for the entreprenuer and
the bets possible way for the investor. Besides being unfair and
anti-business, is this true? Where do the lines get drawn? How
can I safely proceed and reward people by giving them a piece of
the action when I have such possible threats hanging over me from
the government?
Ed:
I have to disagree that the "SEC will always interpret any of
your actions in the worst possible way for the entrepreneuer",
however corporate stocks are securities and they must be issued
in compliance with both the federal and state laws relating to
the issuance of securities. The number of shares your
corporation issues is first limited by the number of shares
authorized in your corporate charter. In addition, you want to
be careful not to issue so many shares that you lose control of
your corporation. That is a practical limitation. Further, you
want to be sure that whatever you do is authorized by the
corporations' board of directors and supported by minutes of the
board. Beyond that, I think the best thing for you to do is find
an experienced corporate/securities attorney in your home state
and carefully go through the fact situation with him or her and
obtain advice tailored to fit your needs and based on a more
thorough discussion of both the facts and the law.
John Cones
John Cones,
Thanks for your help, this forum is a fantastic resource!
-Alexis
Alexis:
Investors in LLC's are generally offered a percentage
participation in something called "Distributable Cash" or a
similar defined term, which refers to a net level of revenue
received by the LLC following exploitation of the feature film
in
all markets and media. This "Distributable Cash" is divided
between the producer/manager group and the
investor/member group
in accordance with a revenue sharing ratio set out in the
private
placement offering memorandum (assuming the offering was
a
private placement as opposed to a public/registered
offering).
The share of revenue to be divided amongst the investors is
divided pro rata among them, thus there is no direct
relationship
between the number of shares offered and the amount of
money
received. It's a little more indirect. So long as the minimum
number of interests or units are sold in an offering, the
unsold
units become irrelevant.
John Cones
It's not very difficult at all to get financing if you are an
established Director/producer. However, for the first-timers
independent film makers, it's a completely different story.
Take my story for example. I have everything necessary to
make
a film except production financing (which is absolutely
necessary unless I work for 10 years to save enough). I
have a
dedicated cast and crew, great script(I know everybody says
that), but believe me, there's a lot of really crappy sripts out
there, and even those get made - ie. Fist of honor 7, you
know,
those types of movies. But let us not forget that there is a
market for that garbage, and distribution rights to them are
valuable, hence they can be financed. My film could be
made for
around the $100,000 range, not including post-production,
but I
suppose I'm considered untouchable because I am young for
one
(only 21) and have no big name talent attached to the
project.
Whatever it takes, though, I WILL make my film, I only wish
I
could make it sooner instead of later. I had one question
you
might possibly be able to answer...why is it that many of
the
"so called" film financers don't even bother about the script.
And the ones that do are untouchable, like the big time
companies? Also, know anyone with a spare 100 grand?
(joke,
unless of course you do.) Thank you very much. Great
forum.
JW:
I understand your frustration. If anyone holds themselves
out as
a film financier but they are not interested in the script, you
may want to consider looking elsewhere. Chances are that
such
persons will eventually tell you that you need to put up a
good
faith deposit of your own before their money comes in, and
they
will run off with your deposit. On the other hand,
entertainment
lenders are not that interested in scripts because they are
relying on the judgment of the distributor who has already
provided its distribution agreement and guarantee before
the bank
will enter the picture. $100,000 is not that much money
relative
to the production costs of most films. Try to find one or
more
individuals who will agree to serve as executive producers on
your project and let them help you raise the money. If you
are
raising money from a large group of passive investors, make
sure
you are in compliance with the SEC's issuer sales rules.
John Cones
Hi John, I'm a screenwriter and have a question about
executive
producer fees. A producer/manager is interested in
representing
my script to studios and distributors. The contract he sent
me
is for 15-25% of the writing fee (it slides up from $250,000
to
a million. Is that customary and normal? I eventually will
have
an agent also, I imagine, and together they will take at
least
25% of the writing fee. If they work hard, I really don't care
that much, since they will enable me to work, which is all I
want. But should the producer fee be negociated as a
separate
above-the-line fee? Thanks for any input, John.
all i have is the script,a hundred frames,40 scenes of a
film "undraped":a probe into the indian female sexuality,with
related myths and folklore as the subtext:popular and
subaltern,and ofcorse,i haven't a cent!i want to start
shooting
next winter here(i happen to based in southwest india,a
place
known as deccan).anybody out there?
regards
Tim:
I'm not the right person for this question. You need to find
entertainment attorneys who are regularly negotiating
producer/manager deals. They might have a feel for what is
typical. Again, my area is investor financing of
entertainment
projects.
John Cones
Upen:
Yes, there is somebody out there. But this site is not for
posting financing solicitations. Besides, some of the people
out
there are U.S. (federal) and state securities enforcement
regulators who are monitoring these illegal solicitations on
the
Internet. If you want to come to the U.S. and conduct a
securities offering seeking money from passive investors and
comply with the various laws that apply, get back in touch.
Otherwise, I can't help.
Best wishes,
John Cones
Dear madame dear sirs,
for university I am searching for papers about marketing
measures
when starting a new film.
Are their any papers in the web to download or is it possible
to
send me some. In Germany no good papers exist in
the web.
Many many thanks
Henner Graubitz
Hi John,
we're Los Angeles based film production company. Our
recent
agreement with the prestigious Non Profit sponsor allows us
to
sollicit and receive the tax deductable donations of money,
goods and services while remaining For Profit Company. We
have 4
projects for the feature lengh films (completed scripts,
director, producer and some cast attached). Our previous
feature
received critical acclaim. Where do you suggest us to look
for
the donors?..
Thank you for your time.
Best regards,
Anki Bergstedt
I have a screenplay I commisioned and a high-profile producer
attached. I am trying to secure some financing for him to be
able to package the script and I have interest from a financial
group to give him a loan based on collateral. Is this scenario
worth bringing to him (LOAN?)? Do producers use collateral when
securing a loan to finance PACKAGING a script?
Thanks
John:
We are developing an independent feature in the $10 million budget
range with an A list actor attached. We are raising the
production and distribution financing at the same time. Our
intent is to form a distribution company to distribute the film.
This is the only way we believe we will see a return, survive the
experience, and live to make more films. Though we will employ an
attorney to guide us through financing, what financial instrument
would you recommend for film financing from private sources. ie.
limited partnership etc.
Thank you.
ADP:
I am sure that there have been film producers at some time who
have chosen to put up their own collateral to obtain production
money loans for their film projects, but the preferred scenario
for lender financing is that the package be submitted to film
distributors, who then commit to distribute the film when it is
completed, and the producer then uses that distributor's
commitment as effective collateral to obtain a loan from an
entertainment lender in the business of loaning production money
for films based on the credit-worthiness of the distributor.
John Cones
Chance:
You have asked a rather broad question that cannot be properly
addressed within the space and time limitations here. The issue
of whether you choose a limited partnership or an LLC, for
example, will be partly based on state law. In some states,
Texas for example, LLC's are taxed at a higher rate than LP's so
LP's are generally preferred. Also, the question of who will
serve as the Manager of the LLC is important. One or more
individuals can serve as Managers of an LLC and still enjoy
limited liability. On the other hand, individuals serving as the
general partners of an LP do not enjoy limited liability
protection. That's why you often see corporations serving as the
general partner of LPs, but for many low budget film projects,
that doesn't make sense, because that's two entities along with
all of the time, trouble and expense associated with creating and
maintaining two entities. The source of your investor financing
will also play a part. For example, if you are getting the $10
million from one or two active investor partners, you might want
to utilize a joint venture, instead of an LP or LLC. But if you
are raising the money from a large group of individual passive
investors, the LP or LLC usually works best. Selling corporate
stock has also been tried. You will have to determine whether a
private placement or public offering is the right way to go. You
may want to check out my book "43 Ways to Finance Your Feature
Film" and narrow the focus of your next question.
John Cones
John:
We are in Utah and we believe the majority of our financing
for the production of our film will come from passive investors in
Washington state. If we establish our LLC or LP in Utah under
it's laws, do we face any particular problems with funds coming
from out of state?
In addition, our in-house attorney does not possess your
expertise in entertainment law and specifically as it relates to
the independent film market. Is it reasonable to think that we
could employ an attorney such as yourself as a legal consultant
for our attorney with a successful outcome?
Chance
Chance:
As your local counsel knows, the creation of the LLC or LP is a
function of state law. Typically, you form the investment entity
in the state in which you are based. Some states' laws will,
however, permit out of state owners to create an entity in
another state. For example, I sometimes have out of state
clients who choose to create a California LLC for purposes of
conducting a film offering not only in California but in other
states. In your case, there is nothing wrong with creating the
LLC or LP (the choice of which will depend on Utah law)in your
base state and raising money in any other state in the country
including Washington. You merely have to include in the
disclosure document all required legends and purchaser
representations required by Washington law and the laws of any
other states in which you hope to offer or sale units. And, you
need to comply with each state's notice filing requirements.
Quite often I am requested to prepare a feature film private
placement offering disclosure document in cooperation with a film
producer's local counsel, who then takes the responsibility for
reviewing the LLC operating agreement (or LP agreement) to insure
compliance with state law. I would be happy to discuss that
arrangement with you or your counsel at your convenience.
John Cones
This might be a little outside your range, but I'll try ya -
I'm doing a multi-media project, one aspect of which is a digital
film documentary series involving travel, adventure and music
(sorry can't be more specific). I'm planning on hooking up some
deals with Internet TV Stations and either Web or print
publications as well as likely getting funding from a private
source. I have been hearing that some companies that manufacture
equipment, especially the new cameras, may be willing to loan or
give equipment as a promotional tool for themselves. Kind of the
way endorsement deals work in the music industry. Do you have any
information on this kind of backing?
Thanks.
Mr. Cone,
I'm a first time producer that is attached the a project with
real potential and and A list person involved in post. We've
decided to go the route of private investors and major
distribution before we even shoot. Our budget is about $1.8
million, which includes the 10% continency. Our problem is I
can't physically find a phone number to get in touch with anyone
that I can pitch to, or agents, or other producers or frankly
anyone who can point us in the right way. I can't even find a
phone number for The Completion Bond Company. Where are these
companies listed and what is the protocol for approaching
investors and distributors, respectively? Thanks
Yes, you're right, this question is beyond the scope of this site
or my expertise. I did include chapters in my book "43 Ways to
Finance Your Feature Film" on Domestic Studio Facilities Deals,
Film Laboratory Deals, End-User Financing and Foreign Below-the-
Line or Facilities Deals. Maybe that will help.
John Cones
I suggest that you either go by or call the Samuel French
Bookshop on Sunset Blvd. in Hollywood between La Brea and Fairfax
and ask them about the several film industry directories that
list film distributors and completion bond companies. They exist
and are readily available. I would suggest that you contact the
completion bond companies first because they are quite
knowlegeable and can give you lots of helpful advice with regard
to approaching distributors, including which distributors might
be interested in the type of project you have. You may also want
to call the Academy Library and find out which issue of the
Hollywood Reporter or Variety lists the entertainment lenders.
That's another group you will want to approach. In order to put
together any of the many forms of lender financing you will need
a distributor, a lender and a completion bond company, along with
your own entertainment attorney, and it wouldn't hurt to start
with the attorney. If you need the names and phone numbers of
several entertainment attorneys here in LA, call me at 310/477-
6842 and I'll give that to you.
With respect to investors from outside the film industry, there
is no formal protocal with respect to approaching them, but you
need to know whether you are seeking one or two active investors
that does not involve a securities offering and therefore may be
handled with a producer's package or generic business plan, as
opposed to seeking a larger group of passive investors, in which
case you will need to provide them with a securities disclosure
document before they invest.
John Cones
I would like some information on how to write up a proposal for
financing,I own the script and the story. I have an agent in
Hollywood currently trying to sell it. I am interested in doing
a project on one of my scripts.
Marisa:
First, it is necessary to focus on a particular project. You
initially indicated that you have a script and an agent is
attempting to sell it. Then you said you would like to go
forward on one of your projects. Of course, selling a script
through an agent is a form of finance, but it may result in
another entity owning your project and producing it with or
without you. If that is what you want, it may work out fine. If
on the other hand, you want to produce one of your other
projects, then you will want to look at many of the options and
determine which is best for that project. For example, if you
decide to go after some form of lender financing, you will need a
fully developed script and elements attached. You will then need
to approach and discuss the project with credit worthy
distributors who are capable of giving you a distribution
agreement and guarantee that you can take to an entertainment
lender for a production-money loan. Your "proposal" for this
type financing is generally referred to as a producer's package
and may include the script, possibly a synopsis, the budget,
along with biographical information or credits for the producer,
director, lead actors and actresses, plus any employment
agreements. You will also need to identify a completion
guarantor for the completion bond. Understand, that most
entertainment lenders prefer experienced producers with a track
record for bringing in films on time and under budget. If that's
not you, it may be necessary to co-produce with someone who has
such a track record.
If, on the other hand, you want to seek financing outside of
Hollywood from a large group of passive investors. That
generally involves a securities offering and in that situation,
you will need a disclosure document and be familiar with all of
the federal and state rules that need to be complied with for
such offerings.
Pitching, as per your subject line on your original message, is
generally associated with the oral presentation of an idea for a
movie to studio creative executives for the purpose of obtaining
a development deal. All of these activities are distinctly
different and require different support materials.
John Cones
I have been in the feature film Indusrty for a while but have
never personally raised money. What is the best way to find an
Investor. I have already produced one short(we raised $10,000)
but I am now looking for around $50,000. I a commercial
director/ and a film editor not a "Producer". Do you have any
advice?
W:
Most of my clients that have successfully raised money from
investors during the past 12 years have raised fuhds from people
they know, or from people with a pre-existing relationship to
other "upper level management" of the organization issuing the
securities (i.e., issuer sales). In other words, if you feel you
do not have a large enough pool of prospective investors with
whom you have the required "pre-existing relationship"
established prior to the start of the securities offering, to
successfully raise the amount of money you are seeking by means
of a private placement securities offering memorandum, you should
try to find one to three other people who do have such pre-
existing contacts with prospective investors and arrange for them
to help you raise the money. The issuer sales rules require that
such persons be upper level management of the issuer
organization, have other duties besides raising money, not be
compensated in a transaction-related manner and not have been
involved in the sale of securities in the past 12 months.
Respecting such rules, you can still agree to compensate such
persons with arbitrary executive producer fees to be paid out of
the film's budget, assuming the minimum amount of your offering
is successfully raised.
John Cones
Hello Mr. Cones,
My name is Tony and I have read Mr. Jaeger's article, "Why
Invest In A Movie?..A Radical Upside View". I have always been
interested in movie investing and executive production. His
article was very informative and inspiring. I know it can be
seen as overly optimistic, but the principles and potential are
there and even if it was only a third as good as what he wrote,
it would still be worth it to seriously consider getting
involved in movie financing.
As I said, I have always considered this as a business option.
But I don't know how to get started. I am 31 years old and have
no hands on experience in motion picture production. All I have
is book knowledge, a lot of ideas, and a desire to see certain
types of motion pictures made. But I have never been in the
actual "mix" of filmmaking.
Consider me a newborn baby when it comes to motion picture
production and investing. What would be your advice for me?
What books would you recommend for me? Would you recommend
Matrixx as a good company to "get my feet wet" in this arena?
What about minimum investment amounts.....is $1,000 enough to
start off with? What about the legal/contractual concerns? I
know before investing anything I would need the assistance of a
qualified, experienced lawyer/rep who knows this business and
what to look for in a film investment contract, correct?
I'm serious Mr. Cones. I really want to do this and appreciate
any info you could give me. It's time for me to get started.
Thanks,
Tony:
There are a lot of ways to invest in the film business. I am not
intimately familiar with the opportunities offered by James
Jaeger's company, but I have known him for several years and find
him to be a knowledgeable film industry professional and capable
businessman. Of course, on the other extreme, you can buy stock
in a major studio/distributor. Or you can look at the film
business plan summaries posted at Surview.com and talk to those
producers about becoming an active investor on their projects.
On the other hand, $1,000 won't get very far in that arena. To
invest that small amount, you will probably have to find a
feature film private placement offering for a low budget films
that will allow a small investment. If you want hands on
experience as an executive producer you will need to get involved
with one of these productions by helping to raise their
production money. Good luck and let me know if you have other
specific questions about investor financing of feature films.
John Cones
Thanks for the reply Mr. Cones. I'll keep you posted and be in
touch again.
Tony
Hi,
I am doing a project for a class @ Northwestern University and
was wondering what influence the Independent Film Channel and its
production and finishing companies have had on film investment.
Do you happen to know anything about the kind of deals they
offer and the limitations they set? Do you have any
opinion on how they have affected the
hollywood/independent scene? Anything would be useful. Thanks
Sally:
For independent film, every little bit helps. Although, the
Independent Film Channel cannot avoid being helpful to the
independent community, it also makes no significant impact
overall. Afterall, there are so many hundreds of independent
films produced each year, that it continues to be a struggle for
the vast majority. I recommend you contact the IFC directly,
however, for information re their deals.
John
Please tell me how to make a feature film to be Oscar nominee in
2001 or 2002.
I have a vision and script idea of de Sade as a wholesome and
honest man. Movie be historic, fun, high tragedy as people
perceived de Sade as they thought themselves he was dirty - to
the contrary de Sade probably was one of French revolution
ideologists who made also a United States` founding.
Please reply to my e-mail if you can help.
Projected budget approved at 30 million.
Rodian:
Your question does not directly relate to investor financing, but
you will obviously need to develop a script. That means you
either write it yourself or hire someone to do that for you. If
you do not have the money to hire a writer, you may need to
conduct an investor offering for development monies, so that you
can use the investor funds to hire and supervise a writer. Since
a possible $30 million production is well beyond reasonable
limits for investor financed film productions, you will likely
have to also raise additional monies to attach elements to the
project in order to attract industry or bank financing. You may
also want to check with at James Jaeger to
see if his online school could provide you with additional
detailed training.
John
I have a script and budget for a feature set at 2.5 million. I
plan on approaching several well-heeled investors who have
expressed early interest in the project later this month.
Questions: Do I need a biz plan? Do I need prior formation of
corp or LLC, or would a pre-formation plan work? Do I need both?
What would you recommend is the most professional document I can
show them at this point? TIA.
Mark:
The key is trying to determine in advance whether you feel you
can and want to raise the entire amount needed to produce the
film from one or two active investors who will be helping you
make important decisions along the way, as opposed to a larger
group of passive investors who will not be actively involved in
management. In the former instance, it is fine to approach your
prospective investors with a business plan drafted specifically
for the limited purpose of seeking funding from active
investors. The latter requires the use of a securities
disclosure document. If you are not sure, or feel you may need
an opportunity to establish a pre-existing relationship with a
larger pool of prospective investors before starting a private
placement securities offering, you may want to opt for the
business plan, because with such a proposal (ostensibly only for
seeking a few active investors)you can approach anyone, even
people with whom you have no pre-existing relationship. If after
introducing yourself and your project to a sufficiently large
enough number of prospective active investors, you find that not
that many want to come into the deal with such large chunks of
cash, you may want to convert your business plan into a private
placement securities offering, and start that offering with the
knowledge that you have now established the required pre-existing
relationship with all of those people you contacted while still
using the business plan. Another way to expand that pool of
prospective investors within the context of a private placement
is to rely on the pre-existing relationships of your upper level
management who also comply with the other so-called "issuer rule"
relating to the sale of securities.
No, it is not necessary to form the
entity before the offering. You can go out into the marketplace
and offer pre-formation shares, units or interests in a
corporation, LP or LLC to be formed upon funding. You just have
to be sure that it's all properly disclosed in your offering
materials.
John
Logline: An average man goes through an unbelievable week while
trying to find a way to pay his rent, this experience alters his
perception of the world around him.
Dear Reader,
My name is John Blandino and I'm here to tell you about a
screenplay I have written called Night Life...I am looking for
someone to put a small amount of money behind this project...
Night Life is about the hardships and turmoil that can transpire
during the course of a week. Frosty James is the main character
in this story who's week starts off with him trying to figure
out a way to keep his apartment and leads to a confrontation
with an ex-girlfriend, a breakup with his current girlfriend, a
kidnapping, a robbery, and being thrown in jail. All the
members of the cast are 18 except for a few parts. This movie
is based on quick, interesting and intelligent dialog.
Cost effective means producing a great high quality product in
an environment that will not cost a lot to shoot in. This
project takes place in various places all which can be acquired
at a low cost. The script has been written with the mind set
that production would be an issue, so there are no big special
effects just powerful conversation that will make people think,
along with allowing them to laugh. Night Life is a small but
important project that will be a new piece of film making. It
will take a different direction that what most other teen movies
have concentrated on. The people do not swear every two
seconds, there are no physical fights, just verbal jousts. A
long the lines of a film such as Can't Hardly Wait, except the
focus is only on how one character's life has been influenced by
the people who are in it.
Thank you for your time and please respond with any comments you
feel are helpful,
Sincerely,
John Blandino
John:
First, we must remind you and other readers and contributors to
this Q&A site that it does not exist for the purpose of posting
solicitations for money. This site is here for asking questions
about investor financing of entertainment projects. Second, we
must remind those who have not picked up on the distinction that
the federal and state securities laws generally consider the
posting of solicitations on the Internet as a form of advertising
(or general solicitation) which is prohibited except within the
context of public offerings (i.e., offerings registered with the
SEC at the federal level and with the state securities regulators
in each state in which you hope to offer or sell the
securities). There are some limited and permissible ways to post
information regarding prospective financing of film projects on
the Internet, but this is not the place.
If you want to produce your script, however, you need to come up
with a solid budget. That will give you and others some useful
guidance regarding how best to go about financing the film. For
example, if it's going to cost $20 million or more, you better
start focusing on how to get your film into the studio system,
because they are pretty much the only game in town for higher
budget pictures. If you can produce your film for something like
$5 to $15 million, that's more in line with the budget levels
financed through entertainment lenders. But, you'll will
probably have to raise some money to package your project (i.e.,
attach recognizable talent or and/or a name director) before you
will be able to obtain one or more distribution deals that the
banks will effectively use as collateral for such loans. If, on
the other hand, you are producing a low or ultra-low budget
picture, and you and/or your associates feel you can raise the
amount of money you need from a large group of passive investors,
then you need to utilize the services of a securities attorney
and conduct a securities offering (whether public or private).
If you feel you can raise the money you need from one or two
active investors, you can do that (if the deal is properly
documented) without conducting a securities offering. These
choices, however, tend to start with your budget decisions.
John
Dear Mr. Cones,
I am a law and MBA student, as well as an aspiring producer,
currently researching the process of individuals investing in
independent films. Are there any books, articles, or other
sources you could recommend to me?
Mark:
My book "43 Ways to Finance Your Feature Film" (published by
Southern Illinois University Press)has a section on investor
financing. Another book, not yet published, is titled "Investor
Financing of Entertainment Projects". Both those publications
have extensive bibliographies on the topic. Also, if you are
interested in the Intenet angle, Denis T. Rice wrote an
article "The Internet and the Cybersecurities Marketplace", that
may be useful to you. It is posted on the Internet, I printed it
out, but can't remember off the top of my head how I found it.
John
Interested to know who are the players in providing
bank/insurance instruments for financing independent
films...what would be their requirements? pls advise...thank
you.
VJ:
That's not an investor financing question. The insurance-backed
schemes are all lender financings. Go to some of the industry
directories and call some of the firms that provide production
insurance services and/or the bond companies and ask them. They
are more likely to know. Also, the entertainment lenders should
know that.
John
Hi John,
Thanks for a delightful forum. I am an Executive Producer in
search of some guidance. I have a new film Co with a slate of 5
films. I have one finishing post production and just applied to
Cannes. Two have strong attachments and are ready to shoot this
summer upon financing and two in development. I have a major
independent production co involved and they will finance 50% of
one of the films this summer. They will also provide completion
bonds and assistance with distribution. However I am intersted
in positioning this company as an entertainment conglomerate
raising funds for the entire company as opposed to one film at a
time. i see this a better way to leverage the risk as opposed to
investing in 1 film at a time.
I have an MBA and 10 years of professional business experience
in marketing, advertising management etc. I am fairly new to
this arena but catching on quite quickly. I put together an
extensive business plan that includes 3 phases of development
and financing and would like to consider an IPO in 3-5 years.
We are seeking phase 1 financing of 9.0 million to complete the
two films and overhead.
Question is: I have been told that there are entertainemnt
attorneys who represent these types of deals as brokers. Where
can I find an attorney who would represent us in this manner?
Question 2: We are really seeking private equity financing. I
have seen some Film funding companies on the internet who claim
that they do this type of financing, do you know of any
reputable ones that I can contact?
Thanks,
Mariana Cooper
John,
Have you found that placing classified ads in the business
section of the paper or internet is an effective way of getting
private equity investors?
Are there any professional organizations of film investors or
venture capitolists that I could join?
Thanks again for your help.
Mariana
Mariana:
Unfortunately, I do not specifically know of any entertainment
attorneys who broker the kind of deal you describe. But, you
might obtain a list of entertainment attorneys from the Beveraly
Hills Bar Association or the Loyola of Los Angeles Entertainment
Law Journal. I also cannot make judgements about the legitimacy
of all of the companies online that purport to be able to help
raise monies. I can say with certainty, however, that some are
scams, so proceed with caution.
John
Mariana:
Classified ads can only be legitimately used to solicit investor
funds if you are seeking a very small number of active investors,
or if you are conducting a public/registered offering. In any
case, I'm not aware of much success using this approach. There
are several sites on the Internet that allow you (for a fee) to
list your offering (even a private placement offering) and then
the site allows their pre-screened accredited investors to review
it. The SBA's Ace-Net also provides such a service. Again,
however, it's a bit early for those facilities to show much
success, but you may want to consider them for the future.
John
Do you know of any funds or venture capital tupe companies that
pool investor money to finance films? Why aren't there more of
these? Do you think such a fund makes sense or am I missing
something?
I have my private placement memorandum together for my first low-
budget feature but need to find some boilerplate on the web for
a subscription agreement and the limited partnership agreement.
Are there web sites available where I can find these?
Thank you,
Phil Howe
10:27 am Sunday August 22, 1999
Low Budget Financing
Marilyn Freeman
1:29 pm Tuesday September 14,
1999
C&P Studios
re: Low Budget Financing
John Cones
8:22 am Wednesday September 15,
1999
(no subject)
1:35 am Monday September 27, 1999
Tracy Sherwood
ED Superphonics.com
re: Informercial Pilot
John Cones
3:56 pm Monday September 27, 1999
re: Investors looking to finance
Feature
Shirley
1:31 am Monday October 4,
1999
Gifting/Issuing Securities
Ed Thorton
1:54 pm Monday October 4, 1999
re: Gifting/Issuing Securities
John Cones
8:37 am Tuesday October 5, 1999
Unsold Interests
in LLCs
Alexis Van
Hurkman
12:23 pm Friday
December 10, 1999
I've been researching LLCs towards the purpose of setting
one up,
but I've got one question. I understand that an investor's
share
of the potential revenue from a given project depends on the
number of units (interests?) purchased. My question is,
supposing
the LLC was set up to raise $1000 (just to keep the example
simple) and the division of units reflects this, but the
filmmakers only sold $500 worth of units and were able to
complete
the film and get a distribution deal for this amount. What
happens
to the unsold units? How do the potential profits get divvied
up
in this case?
re: Unsold
Interests in LLCs
john
Cones
9:44 am Saturday
December 11, 1999
unfortunate
JW
3:30 am Sunday December 19, 1999
re: unfortunate
John Cones
11:40 am Sunday
December 19, 1999
Producer Fees?
Tim Garvin
6:15 am Tuesday
December 21, 1999
finance for my film to be
shot insouth-w
upen
9:17 am Tuesday
December 21, 1999
upen
re: Producer
Fees?
John
Cones
2:14 pm Tuesday
December 21, 1999
re: finance for my
film to be shot insou
John
Cones
2:18 pm Tuesday
December 21, 1999
Marketing
Measure
Henner
Graubitz
7:30 am Saturday
January 15, 2000
Non Profit
donations
Anki Bergstedt
10:59 am Saturday
January 15, 2000
Loans
ADP
10:48 am monday january 31, 2000
financing instrument
Chance Williams
10:42 am wednesday february 2, 2000
re: Loans
John Cones
2:28 pm wednesday february 2, 2000
re: financing instrument
John Cones
2:38 pm wednesday february 2, 2000
Interstate investment sources
Chance Williams
5:29 pm thursday february 3, 2000
re: Interstate investment sources
John Cones
9:33 am friday february 4, 2000
johncones@mediaone.net
310/477-6842
Equipment Deals
Diana Trimble
4:56 pm thursday february 10, 2000
where are they?
duck
11:33 pm thursday february 10, 2000
re: Equipment Deals
John Cones
10:04 am friday february 11, 2000
re: where are they?
John Cones
10:15 am friday february 11, 2000
Pitching for financing
Marisa Reilly
12:59 pm sunday february 20, 2000
re: Pitching for financing
John Cones
9:34 am monday february 21, 2000
film finance
W
10:25 am monday february 21, 2000
re: film finance
John Cones
4:01 pm monday february 21, 2000
Aspiring movie investor
Tony
5:14 pm saturday february 26, 2000
Tony
re: Aspiring movie investor
John Cones
12:12 pm sunday february 27, 2000
re: Aspiring movie investor
Tony
1:04 am monday february 28, 2000
Independent Film Channel
sally
8:28 pm monday february 28, 2000
re: Independent Film Channel
John Cones
10:48 pm tuesday february 29, 2000
Marquis de Sade
Rodion Kulichkin
6:59 pm wednesday march 1, 2000
re: Marquis de Sade
John Cones
9:37 am thursday march 2, 2000
next step
Mark D.
1:44 pm thursday march 2, 2000
re: next step
JOhn Cones
8:59 am friday march 3, 2000
Script
John Blandino
6:29 pm saturday march 4, 2000
re: Script
John Cones
10:17 am sunday march 5, 2000
individual investors in independent film
Mark
10:59 am tuesday march 7, 2000
re: individual investors in independent
John Cones
6:39 pm tuesday march 7, 2000
financing
vj
3:23 pm wednesday march 8, 2000
re: financing
John Cones
4:17 pm thursday march 9, 2000
Executive Producer Question
Mariana
4:05 pm sunday march 12, 2000
Classified Ads
Mariana
4:11 pm sunday march 12, 2000
re: Executive Producer Question
John Cones
9:21 pm sunday march 12, 2000
re: Classified Ads
John Cones
9:25 pm sunday march 12, 2000
financing
Mike D.
10:45 pm wednesday march 15, 2000
Boilerplate on the web
Phil Howe
10:50 am thursday march 16, 2000
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