How To Raise A Lot Of Money In Private Equity
This is a guest post by director Lena Khan, who has been actively running a campaign for her next feature film, The Tiger Hunter. Just like me with mentorless, Lena has been sharing with her peers what she’s been learning and today she gives out some insights about something I have never tackled here before: financing an independent project through private equity.
The reason why Lena can talk about it is because she has raised money for The Tiger Hunter through private equity and is now completing financing through an on-going/almost fully funded Kickstarter campaign, asking for $55,000. As we’ve seen recently, even successful campaign like Ryan Koo‘s that managed to raise more than 100k through crowdfunding are rarely sufficient to produce a full feature.
Lena’s advice might/will/should come handy at one point or another so read, enjoy, and if you have complementary information on the matter or questions to Lena, don’t hesitate to share in the comments section below with us all:
How To Raise A Lot Of Money In Private Equity
For the past 8 months or so, I’ve been raising financing for my upcoming dramatic comedy, The Tiger Hunter. After having raised hundreds and hundreds of thousands of dollars through private equity (I know, it’s a movie rule to not reveal your budget – but it’s a significant amount), I have learned that there is a huge disparity between how most filmmakers try to garner investments…and how we should.
Here are some basic rules I have learned:
1. Don’t go to investors until you have a solid script…
…and numerous people in the industry other than yourself have told you it is good, and marketable. Try to get an agent to look at it or a reader to do coverage. If you really know nobody, several film festivals and services such as the Austin Film Festival will do coverage on your script. If your film isn’t good, work with a story editor (affordable, and amazing story editors online can be found at places like Flying Wrestler or Script Gal. Just search online)
2. Save money.
Yes, you need a certain amount of seed money to get your film off the ground. If you want to make a film around the likes of something like Celeste & Jesse Forever or other films in the $500K and up range, you’d need about $10K. Yes, this is a lot. But, if you just focus for some years and save up that money, in the long run it’s much better than just doing smaller projects for decades if that is not your end goal. I did this by making commercials and music videos—I thus got experience and money. You can also beg family and friends at this point.
3. Don’t approach investors until you have had your film budgeted…
… know how net profits will be disbursed, and all related questions like this. Here are some basic steps: find a line producer that you trust and get them on board, get the film budgeted by them, set up a Limited Liability Corporation (it’s easy to set up an LLC even online), then find a lawyer and have them make you an investors agreement and deal with investors. In this process you may have to set up an escrow account. This paragraph is where all that seed money leaves your bank account.
4. Find investors.
This can be anyone from the CEO of a major company who you heard happens to have an interest in your film’s subject material, to actual film finance entities. You would be surprised at how much of this (and even contact information) can be found through simple Google searches. I found one of our first investors by messaging him on Facebook. Go figure.
5. Do NOT promise your investors a return.
Even huge movies with Tom Cruise can fail, and so can your film. Instead, you convince investors by showing them you are doing everything in your power to buffer their risk. Treat your investors as people you hope to go back to later instead of people you are taking money from to make a big expensive movie. This means you should get them a substantial tax rebate by filming in a state with a great incentive program. This can buffer their risk up to 35% if you play it right. You should apply to as many grants as possible. You should even try to fundraise what you can, because that means effectively that your investors own a bigger portion of the net profits. And finally, instead of getting as big of a budget as you can (young directors love doing this because it’s easier to make a movie this way), try to make it as small as possible while still having the production quality you need.
6. Try to be a good person.
It sounds naïve, but it’s true. While the vast majority of our investors could care less about anything but the bottom line and monetary concerns, we did have two smaller investors who contributed about $10-25K each simply because they felt we were doing good things and would continue to try to do so through our work and lives. Namely, I run a blog for young filmmakers, and try my best to help other artists and filmmakers learn and move forward together. I work hard enough at this that it was apparent to them, and they invested partly for that reason.
These are just a few tips. For our part, we started in the initial stages raising private equity, then went on to actual film finance groups when we had money in the bank. We are now on the last step—raising money by fundraising. Currently, we are in the last days of a Kickstarter campaign, for which we are hoping to exceed our ambitious goal of $55K. If you benefited at all from this piece, or just want to support us, I hope you can visit our Kickstarter campaign website, pledge , and share. It would make me a very grateful person!
Good luck to all of us!