Handling an investment at DVinfo.net

Jay Thompson · June 25th, 2003, 08:44 AM

Greetings all,

I have been filming a documentary for almost a year now. Most has been self financed, however now a potential investor has approached me as I am nearing the editing stage of the process. My question may be rather elementary but how does this work? They put forth 'x' amount of dollars, but what do they get in return? Do they get a percentage of profit? Of sales? A lump some promised by certain date? I am really new to people wanting to invest in me or my project. Please help by sharing experiences.

Thanks!

Robert Knecht Schmidt · June 25th, 2003, 10:14 AM

My suggestion would be to get an experienced lawyer involved as soon as you believe substantial money will be trading hands. Whenever you allow someone to invest in your film, you are selling securities. Your investor may never see return on his investment and indeed may never see his money again. Good paperwork that hammers out the details will be good protection for you both no matter what the fiscal outcome of the project. And if you haven't already you will need to incorporate or form a DBA for the purposes of accepting money, as you wouldn't want to be held personally liable.

--------- not a lawyer, only the son of two
V

Jay Thompson · June 26th, 2003, 08:39 PM

Thanks for the info Robert. I was planning on getting a lawyer to hammer out the finer details of the contract, but I still am unsure as what to offer the investor as far as the return. What is 'standard'? I want them to profit if it is there, but I dont know if I should offer % of sales or a specific amount.

I can't believe no one else out there has had any experience with this. Please post if you have! :)

Thanks again!
Jay

Rob Belics · June 27th, 2003, 07:33 AM

It depends on what they are offering you. Why are they getting on board now? You have the upper hand because you've already reached the editing phase and spent most of the money to create it. So how will they be able to help? A distributor gets 50% of the net profit (gross sales minus costs).

Jay Thompson · June 27th, 2003, 08:46 AM

Good Question Rob.

While I am nearing the editing phase, I still have at least 4 more big shoots to go. One involves a trip to Germany. The potential investor (whom I met on a shoot a couple of months ago) is seeing the big picture and realizing the possible draw of what I am putting together as it has real promise to be commercially popular .

\Distributors get 50 % of profit. .. hmm.. didn't know that. That's useful information. I appreciate it!

Don Donatello · June 27th, 2003, 03:48 PM

there is no standard on what to offer a investor.

for most investor's it comes down to RISK vs. REWARD

if odds are 90% the person will never see a dime returned then risk is great and the rewards should be LARGE ... ( most independent projects are in the 90-99% of no return)

if you will payback investor his $$ in 5 years even if the project never makes a dime then the risk is very low so reward is small..
in that case if person has CASH they can get .75 at bank .. maybe buy a good bond that has 6% return but risk is very very low.

investors shoudl only get a % of what $$ goes to you ( producer) .. so if they get 25% that is only 25% of the $$ that you recieve not what the box office took in or what the distributor sold it for -

as other have said PUT it ALL in writing ... it use to be that you could approach ?? under 10 ? 20 ?? investors without filing sec papers ..

these days it is very easy to set up a LLC ... this limits liability for you and investor. if they share in the rewards they will also share the liabilities = protect your ASSets and you investors = set up LLC

June 25th, 2003, 08:44 AM	#1
Jay Thompson New Boot Join Date: Jul 2002 Location: Greensboro, NC Posts: 24	Handling an investment Greetings all, I have been filming a documentary for almost a year now. Most has been self financed, however now a potential investor has approached me as I am nearing the editing stage of the process. My question may be rather elementary but how does this work? They put forth 'x' amount of dollars, but what do they get in return? Do they get a percentage of profit? Of sales? A lump some promised by certain date? I am really new to people wanting to invest in me or my project. Please help by sharing experiences. Thanks!

June 25th, 2003, 10:14 AM	#2
Robert Knecht Schmidt Wrangler Join Date: Feb 2002 Location: Cleveland, Ohio Posts: 1,933	My suggestion would be to get an experienced lawyer involved as soon as you believe substantial money will be trading hands. Whenever you allow someone to invest in your film, you are selling securities. Your investor may never see return on his investment and indeed may never see his money again. Good paperwork that hammers out the details will be good protection for you both no matter what the fiscal outcome of the project. And if you haven't already you will need to incorporate or form a DBA for the purposes of accepting money, as you wouldn't want to be held personally liable. --------- not a lawyer, only the son of two V __________________ All the best, Robert K S Search DVinfo.net for quick answers \| The best in the business: DVinfo.net sponsors

June 26th, 2003, 08:39 PM	#3
Jay Thompson New Boot Join Date: Jul 2002 Location: Greensboro, NC Posts: 24	Thanks for the info Robert. I was planning on getting a lawyer to hammer out the finer details of the contract, but I still am unsure as what to offer the investor as far as the return. What is 'standard'? I want them to profit if it is there, but I dont know if I should offer % of sales or a specific amount. I can't believe no one else out there has had any experience with this. Please post if you have! :) Thanks again! Jay

June 27th, 2003, 07:33 AM	#4
Rob Belics Major Player Join Date: Apr 2003 Location: St. Louis, MO Posts: 581	It depends on what they are offering you. Why are they getting on board now? You have the upper hand because you've already reached the editing phase and spent most of the money to create it. So how will they be able to help? A distributor gets 50% of the net profit (gross sales minus costs).

June 27th, 2003, 08:46 AM	#5
Jay Thompson New Boot Join Date: Jul 2002 Location: Greensboro, NC Posts: 24	Good Question Rob. While I am nearing the editing phase, I still have at least 4 more big shoots to go. One involves a trip to Germany. The potential investor (whom I met on a shoot a couple of months ago) is seeing the big picture and realizing the possible draw of what I am putting together as it has real promise to be commercially popular . \Distributors get 50 % of profit. .. hmm.. didn't know that. That's useful information. I appreciate it!

June 27th, 2003, 03:48 PM	#6
Don Donatello Hawaiian Shirt Mogul Join Date: Nov 2001 Location: northern cailfornia Posts: 1,261	there is no standard on what to offer a investor. for most investor's it comes down to RISK vs. REWARD if odds are 90% the person will never see a dime returned then risk is great and the rewards should be LARGE ... ( most independent projects are in the 90-99% of no return) if you will payback investor his $$ in 5 years even if the project never makes a dime then the risk is very low so reward is small.. in that case if person has CASH they can get .75 at bank .. maybe buy a good bond that has 6% return but risk is very very low. investors shoudl only get a % of what $$ goes to you ( producer) .. so if they get 25% that is only 25% of the $$ that you recieve not what the box office took in or what the distributor sold it for - as other have said PUT it ALL in writing ... it use to be that you could approach ?? under 10 ? 20 ?? investors without filing sec papers .. these days it is very easy to set up a LLC ... this limits liability for you and investor. if they share in the rewards they will also share the liabilities = protect your ASSets and you investors = set up LLC