I am looking to talk to a few potential investors very soon and to be honest I have no idea what to expect. We are only looking for equipment funding (maybe $10k or so) but still are not sure what kind of return percentage investors get, etc. Lets say this guy funds us $10k for the camera, boom, tripod, editing comp, what do we need to give back and over what period of time is reasonable in this scenario? We are a very devout small group, but we are just starting out on what we hope to be the road to success. Thanks for any and all input.
How to work with investors? Small budget
- Thread starter buijon
- Start date
weltonfilment
Active member
Well investments are a tricky thing. There are several different ways to approach the investing process: you can issue ownership (equity), bonds (debt) or some other form of loan or debt/equity hybrid (like preferred stock). Debt is more risky to the borrower because of the fact that if you can't pay it back, you're screwed (but if you can pay it back it's cheaper than equity in the long run). Equity is a less risky way to raise money because it's like stock -- not guaranteed for the investor (well, OK, aside from US Government Bonds, nothing is really guaranteed). The catch with this however is they will take a large portion of ownership. It's not uncommon for venture capitalists to demand 30 or 40% returns, and with a film it's likely you'll have to hand over 50% ownership unless you have some kind of proven, marketable track record. The worst that happens when investors take equity stakes in your business and the business fails is they lose their money (although if there are any assets left after creditors lay their claim, they can take those).
I'm not sure why the investor would just be funding equipment purchases. Are you looking to find someone for a film venture or just to start a production company?
Either way, you're going to need to construct a solid business plan. This will have everything they need to know about the investment: similar projects and how they fared in the market, full budget breakdown, timeline to completion, etc. There are plenty of books out there on how to construct a business plan.
Just remember, however, that the SEC has strict rules about soliciting investors. Don't break any of them just because you're an indie filmmaker.
I'm not sure why the investor would just be funding equipment purchases. Are you looking to find someone for a film venture or just to start a production company?
Either way, you're going to need to construct a solid business plan. This will have everything they need to know about the investment: similar projects and how they fared in the market, full budget breakdown, timeline to completion, etc. There are plenty of books out there on how to construct a business plan.
Just remember, however, that the SEC has strict rules about soliciting investors. Don't break any of them just because you're an indie filmmaker.
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The SEC? What is that? Also I did not really look for the people who may have interest, they both advertised they were looking to fund promising local films (treatments) and I replied, and they wrote back. So now I need to figure out what the next step is. Also, we can get almost everything we need for filming with our own pocket money and free from people we know, the only thing we lack is equipment, thus we need funding for the equipment. Helps to keep the cost of 'borrowing' down as well. Stil Have $8k in studay loans just on my end to pay, so I`d rather not be in debt until i die 
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weltonfilment
Active member
The SEC is the Securities and Exchange Commission; they govern all rules regrading issuance of debt or equity by private and public companies in America. If you take on equity investors, you will need to furnish them with financial statements and any other information that exhibits the true health of the company. The key here is transparency; stakeholders should be able to know what's going on in the production/company at any one time. This includes how money is being spent, how the project is progressing, etc.
These investors may want a stake in the management (or in this case, the production process), or they may want to be passive investors.
There is so much to talk about regarding investing that it's pointless to try to cover all of it. There are a few basic rules, however:
1) Make sure this investment offer is legit. If this ad was something that was posted on craigslist, I'd be a little worried, but check it out to make sure everything looks OK.
2) Contracts, contracts, contracts. You will need a lawyer for this part. You cannot skip this part or you will be screwed.
3) Make sure both parties (you and the investor) understand the risks in full.
4) You probably already have it, but make sure you have an official production company. These are not expensive to start (you can form an LLC for less than $500 is some states), but essential to have. An investor cannot invest money in an individual, nor would you want to be exposed if seeking a bank loan. LLCs offer protection should something go awry, and they do just what they say - they limit liability.
5) Business plan. This is not a one page document; this bad boy should be thick with information regarding the production. Budgets, financial forecasts, timelines, etc. As I said earlier, there are many books on this topic.
Let me know if you have any questions, but just keep in mind that this is not something where someone just hands you a check for $10K and "expects some money in return". That might fly if you're getting something from grandma, but not professional (or reasonable) investors.
These investors may want a stake in the management (or in this case, the production process), or they may want to be passive investors.
There is so much to talk about regarding investing that it's pointless to try to cover all of it. There are a few basic rules, however:
1) Make sure this investment offer is legit. If this ad was something that was posted on craigslist, I'd be a little worried, but check it out to make sure everything looks OK.
2) Contracts, contracts, contracts. You will need a lawyer for this part. You cannot skip this part or you will be screwed.
3) Make sure both parties (you and the investor) understand the risks in full.
4) You probably already have it, but make sure you have an official production company. These are not expensive to start (you can form an LLC for less than $500 is some states), but essential to have. An investor cannot invest money in an individual, nor would you want to be exposed if seeking a bank loan. LLCs offer protection should something go awry, and they do just what they say - they limit liability.
5) Business plan. This is not a one page document; this bad boy should be thick with information regarding the production. Budgets, financial forecasts, timelines, etc. As I said earlier, there are many books on this topic.
Let me know if you have any questions, but just keep in mind that this is not something where someone just hands you a check for $10K and "expects some money in return". That might fly if you're getting something from grandma, but not professional (or reasonable) investors.
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Beat Takeshi
Two-Hip Shakur
Also make sure you keep the equipment in pristine condition in case you have to sell it off to pay back the money.
Hmm...now I`m seeing why the credit card root is attractive to so many versus investors of any kind. I do not have an LLC and not sure I even have the money for that right now. And a lawyer on top of it would likely be a few more thousand. I am waiting to meet with one of the guys which was a craigslist ad so I already had worries to start off, but I`ll determine more once I meet with him. The other is an retired lawyer who wants to support local film, so that also intimidates me as I don`t know about law. I also haven`t finished all of the scripts to protect that we are shopping with, so I`m weary about letting those ideas out until then. So many worries :embarasse
weltonfilment
Active member
Hmm, here's my take.
Don't do it.
I don't know anything about these people, but essentially you're shopping an unfinished, non-registered script and (no offense) you aren't very knowledgeable about the process of raising money. They will take advantage of this. You have little leverage in a situation like this, and since you are looking to raise $10K, this can far better be accomplished through either a bank loan or a very low rate credit card (look for those offers that state 0% on balance transfers for X number of months).
I would still form an LLC if I were you. In Washington it can be done for around $100, but I'm not sure what it is elsewhere. Just do a google search and you will come up with lots of information for your state. You may or may not eliminate the cost of a lawyer, it just depends on the nature of the company you set up.
Basically, your needs are small compared to what the headaches and additional costs bringing on a private investor can be. Having an investor is good when you need to raise a substantial amount of money that cannot be obtained personally. When large sums are involved in risky investments, that offsets the additional problems and complications brought on by involving outside investors.
Don't do it.
I don't know anything about these people, but essentially you're shopping an unfinished, non-registered script and (no offense) you aren't very knowledgeable about the process of raising money. They will take advantage of this. You have little leverage in a situation like this, and since you are looking to raise $10K, this can far better be accomplished through either a bank loan or a very low rate credit card (look for those offers that state 0% on balance transfers for X number of months).
I would still form an LLC if I were you. In Washington it can be done for around $100, but I'm not sure what it is elsewhere. Just do a google search and you will come up with lots of information for your state. You may or may not eliminate the cost of a lawyer, it just depends on the nature of the company you set up.
Basically, your needs are small compared to what the headaches and additional costs bringing on a private investor can be. Having an investor is good when you need to raise a substantial amount of money that cannot be obtained personally. When large sums are involved in risky investments, that offsets the additional problems and complications brought on by involving outside investors.
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Allen Green
Active member
Buijon,
Dude for 10 grand I would work my a!@ off and save for three or four months eat beans re-write and pre-pro the heck out of the project and do it with your own bucks. Then it's YOUR GEAR you can work it without the worry of creating some bad credit, repo or whatever. Youcandoit.
Good luck
A.G.
Dude for 10 grand I would work my a!@ off and save for three or four months eat beans re-write and pre-pro the heck out of the project and do it with your own bucks. Then it's YOUR GEAR you can work it without the worry of creating some bad credit, repo or whatever. Youcandoit.
Good luck
A.G.
weltonfilment
Active member
Allen has a good point. Between 2 people, $10K isn't impossible to raise in less than a year's time. In the meantime, you'll be finessing your project. At the end of the year when you've both socked away enough money, you'll hopefully have a worthwhile project that looks a hell of a lot more professional and polished than where you are now.
Jim Brennan
VHS Member Old Skool
I am curious where these people were "advertising". It never hurts to have a meeting, but I will bet dollars to donuts that in exchange for their "help" they are going to ask you for something up front; some sort of "good faith" money to help cover the initial expenses. Run away if that happens. I don't know of any legitimate investors that take out ads looking for places to put their money. They usually have a line of people with their hand out already waiting for them to sign a check.
Also, there are legit ways to avoid SEC issues. 504 thru 506 offerings can give you some exemptions, depending on factors that include (but are not limited to) your budget. Also dealing with "sophisticated" investors may help, but it is an undefined legal term. "Accredited" investors however have a legal definition, and dealing with them can give you some exemptions in dealing with the SEC.
So, get a lawyer. There are also some good legal books out there for you, such as "Risky Business" by Mark Litwak, "The Independent Film Producer's Survival Guide" by Erickson, et al, "Producing Financing and Distributing Film" by Baumgartner and "Filmmakers and Financing" by Levison.
I also agree that you are better off scrounging the funds at that level. Friends and family are more likely to pony up a few bucks than a real investor.
The attitude you have to take when approaching someone has to be "I know that milk is spoiled, but you can drink it anyway" Filmmaking is not a sound business investment, especially in the indie world. I'm not trying to discourage you, because there are people out there who will supply you with money. Just do your homework about the people you are dealing with.
Hope that helps.
Also, there are legit ways to avoid SEC issues. 504 thru 506 offerings can give you some exemptions, depending on factors that include (but are not limited to) your budget. Also dealing with "sophisticated" investors may help, but it is an undefined legal term. "Accredited" investors however have a legal definition, and dealing with them can give you some exemptions in dealing with the SEC.
So, get a lawyer. There are also some good legal books out there for you, such as "Risky Business" by Mark Litwak, "The Independent Film Producer's Survival Guide" by Erickson, et al, "Producing Financing and Distributing Film" by Baumgartner and "Filmmakers and Financing" by Levison.
I also agree that you are better off scrounging the funds at that level. Friends and family are more likely to pony up a few bucks than a real investor.
The attitude you have to take when approaching someone has to be "I know that milk is spoiled, but you can drink it anyway" Filmmaking is not a sound business investment, especially in the indie world. I'm not trying to discourage you, because there are people out there who will supply you with money. Just do your homework about the people you are dealing with.
Hope that helps.
I totally agree with about everything. I don`t know much about the raising of funds (which is why I`m posting, have to learn somewhere). It does sound more like a headache than the wall of sacrificing 5 months of pay from my job. I do want the equipment to be mine as well (as i`ve already turned down borrowing others equipment and doing my schedule around theirs). I don`t have any family that could afford to give me money, it`ll all be coming from my pocket. I have a credit card that has 1 year no interest, so its looking more attractive to get a second one, and start the year with a nice cam/tripod purchase. Though it`ll still take some guts to take the plunge. Its a scary thing. I`m confident however in our potential that`ll it`ll all pay off...but still scary.
One ad was craigslist, the other in person at a film makers meeting that meets once a month in the capital. I do think perhaps that your all right though, on this small of a budget its better to do it myself and not worry about legal bs. I`ll see where this project goes, if well then I can inch more into the indie legal stuff.
One ad was craigslist, the other in person at a film makers meeting that meets once a month in the capital. I do think perhaps that your all right though, on this small of a budget its better to do it myself and not worry about legal bs. I`ll see where this project goes, if well then I can inch more into the indie legal stuff.
dickie flicks
New member
Seriously it's sounds like your not trying to make 'a summer block buster!' 10K seems like a chuck of change just for a small film's equiptment. I got my equiptment in the bag for about 3000bones....just had to shop for the right pakage price...and **** man have a bake sale or fundraiser for your first project if your choosing a small indy film...creative financing...I lucked out and sold an old car I fixed up...but sooner or later you will have to learn the hard part of producing films ***investors & biz plans, convincing money folk that your's is the right project*** or convince a producer to do it for you...good luck!!!
dickie flicks
dickie flicks
Grug
Veteran
Way I see it, if these guys want to support local indie film-making with their own money - that's a bonus for you. They're not chasing down your involvment either, they're asking for submissions (treatments of scripts) and they intend to help finance the best one the come across. If they think your treatment is good enough to put their money into, I'd say work with them.
And so what if they own 50% of the film, they make it possible for you to make it in the first place, I'd say that's a fair trade. And if you do actually break even or turn a profit somehow, they may well let you keep the equipment.
My 2 cents...
And so what if they own 50% of the film, they make it possible for you to make it in the first place, I'd say that's a fair trade. And if you do actually break even or turn a profit somehow, they may well let you keep the equipment.
My 2 cents...
Not a 'summer bloxkbuster' as we don`t know when they`ll be done...but it`ll be some stuff that hasn`t been done before, and quality that hasn`t come out of this area before. I`m more attracted to the idea of doing things on our schedule etc for it, but I still want to at least meet with these 2 guys. Grug is right, since they were the ones putting out the ads there is a chance they will be less greedy about the whole thing, maybe just maybe they have money to burn on what they see as a fun experiment or something. It would all come down to how much control etc they want to take, if I don't like it we'll do it ourselves. Also the $10k would be for camera, tripod, boom, new editing machine (mines getting old) and maybe costume materials and weaponry. Its a rough estimate, but if I`m dropping the money I want equipment that will last and be useful for many years. We have about 10 story synopsis` right now, so this first one won`t be our last by any means.
Jim Brennan
VHS Member Old Skool
Nobody is saying to not look into it. Just be wary. There is no sin in turning over half (or even more) of your profits, if that works for your project. But look for the fruit on the tree. Find other people who have worked with these folks and grill them about their experiences. Craigslist is a haven for scam artists, and if they need to advertise there, find out where else they advertise that actually costs money. Anybody can be anybody on the internet. Definitely check it out, but be careful.
weltonfilment
Active member
First you need to finish that script. I wouldn't even talk to anybody until you are satisfied with it. Any serious investor will not consider a project unless there is a solid script, a definitive budget, an established timeline for completion and a plan for getting the final product distributed. Do these first before even talking to money people. In the meantime, save up cash so you have a back-up plan (always have a back-up plan).