investment percentage

A

Alicia Ferrows

Member
can someone give me some help on this theoretical scenario.

Lets say i have a feature film completed and distributing it independently on DVD. Lets say i had 3 investors who put up money to make the film, promote the film and produce the DVD's ready for sale. Lets say these 3 investors put up 3k each. What kind of deal would a small film company offer these guys in the first place which is fair but inviting enough to get them to want to invest. A percentage of all sales? there original fee made back plus a percentage to a certain sale point?

Thanks guys
 
The "standard" investor/producer split would mean they should get all revenues until they're paid back in full, and then half of anything going forward.
 
Thanks Barry, always the man of wisdom around here. i suppose the 'half' becomes a lot smaller when you have more than one investor attached and it has to be split accordingly.
 
Can you list the features you've produced Barry where you solicited funds from investors where you offered them that "standard producer/investor" split and they went for it?
 
craigbowman said:
Can you list the features you've produced Barry where you solicited funds from investors where you offered them that "standard producer/investor" split and they went for it?
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Of the features I've done, all were financed by private interests who were also the producer. Getting money from others is not really all that simple, without them having some vested interest in it. In late 2010/early 2011 I will be doing another and am counting on Section 181 to deliver a few investors, and the offering will be half. And in late 2011 I'm packaging a decently-budgeted feature that, if all goes according to plan, will be financed largely by an arrangement that won't involve having to pay anyone back.

Every deal is different.

Why do you ask?
 
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Alicia Ferrows said:
Thanks Barry, always the man of wisdom around here. i suppose the 'half' becomes a lot smaller when you have more than one investor attached and it has to be split accordingly.
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Not sure what you mean here, but ... if there are three investors, each contributing equally, then each would be entitled to 1/3 of the half that is allocated to investors (or, round numbers, about 17% each).

Now, keep in mind that what's "typically" done, and what actually happens in anyone's particular case, may not be the same. Maybe your investors aren't okay with half. Maybe they want 70%. Or 80%. Or 90%. Whatever it is that you and they agree to, is what it is. But if you're asking for a place to where people start the negotiations, it's basically half to the producer, half to the investors. And the producer divides up their 50% among whoever they have to, to get the picture made (allocating points to the cast, key crew members, whatever). And the investors will frequently (if not always) insist upon getting full "recoupment" before allowing any revenue split, so they'll want to get all their money back, before they start splitting up profits.
 
Barry_Green said:
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Why do you ask?
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I'm putting together the financial package for a feature project right now and any examples of projects that only offered a recoup of the initial investment before the producer split takes place is helpful. The advice I keep running into has been that besides first position on recouping investment is to also offer an additional 25 to 30 percent ROI before the producer split. If you had a list of feature projects you did which flew in the face of that advice it would have been great supporting data for the Scotsman in me.

The provincial and federal tax credits are there of course to help soften perceived risks.
 
No, I don't have any specific examples, but I can easily see why they'd ask for that, especially in this economy -- money's tight, and people want a) to get their money back, and b) to make a profit, before sharing. So that's a common element in business plans, to specify a certain percentage of recoupment before profit splitting begins. The "typical" starting point is 100% recoupment before splitting profits, but like everything else, that's subject to negotiation -- they may ask for 150%, or 125%, or ... whatever.

Film financing, at least at the digging-up-your-own-investors level, really isn't standardized. It's whatever you can get, with whatever you're comfortable giving up. Dov Simens' advice is: if it's your first film, you do whatever you have to, to get it made. If they want 90%, you give 'em 90%, but you get the film made. On your NEXT film, that's when you make the "deal". You're not in a position on the first film, but on the next one you're a known quantity and can command a better negotiating position.
 
Barry is 100% correct. That is the usual split, 50% to investors, 50% to producers.

As for recoupment, on my film I am just getting back 100% before splitting, but it's fairly common for there to be interest given as well, like money back plus an annualized 10% ROI (that's a bit high but it's also high risk), or even 6%, so that if they put in $100,000 and three years later there is money to be repaid, let's say $200,000, investor gets $100,000 plus 6% per year is $18,000 additional then split the remaining $82,000 50/50.
 
I have Dov's book Barry. That was in fact the first reference advice I came across several years back which recommended offering an additional 25% ROI before producer split. I just wasn't aware that anyone was actually only getting just their initial investment back without any extra ROI before the producer split. When you indicated to just offer the 50/50 I was hoping to have some examples.

Jonathan, from what you mentioned to the community previously, you're the investor in your project and the producer is the company with the track record you hired. A sweet deal indeed!
 
I retained a bit over half (a controlling interest), but yeah there are a lot of ways to do things. You may also have some deferred pay in the project itself, so it's not as simple as that. If you are doing the project for the amount of money that the investors put forward, but not paying yourself a fair salary, you have every right to say, "Great, so here is the money you put up, you get that back first, but then when we start making a profit I get the first $50,000 to cover my deferred pay for the project," then you split after that. Really, there are a ton of ways to do things. Certainly investors have to appreciate a plan where you are paying yourself nothing out of the budget but putting it all up on screen, so in a case like that they should understand that you are deferring your pay rather than taking it out of the budget and therefore are the first to be paid out of the profits as you are essentially someone who worked on the movie and just didn't yet get paid. That's you doing them a favor, not the other way around.

Yeah, in my case it was kind of unique, because it creates some odd situations when you're the EP and the director. I mean, producers are above the director, but the EP is above the producers, and obviously on the tiny budget that I had I couldn't afford to pay any producers on a standard rate or fee structure so it was better to have a partnership with an established company. It really is all about what makes sense for the project. I'm sure there are so many ways to structure a film's financing and back-end, but ultimately you really should consult an attorney before anything is set in stone. I definitely did that before I signed anything.
 
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