Some advice when raising money for movies, etc.

[Heath McKnight]

This isn't really a thread for how to raise money, rather it's some GOOD advice I highly recommend you all follow. I'm a brash young filmmaker like many others, thinking I know it all. After 8 months of research, I realized I know a lot about filmmaking, but next to nothing about raising money.

Here are some tips you should follow. And trust me, "I know a good accountant" isn't a good excuse. No accountant would let us make some of the common mistakes made (like asking for donations for a for-profit film, or asking for money on a website, which is advertising, without filing with the SEC). And my accountant usually refers me to my lawyer most of the time, because of the money raising and dispursing (hopefully as profits come in).

1. File with the SEC, because they're the ones who make sure you aren't ripping off investors.

2. If you are taking money from investors ONLY located in your state, you don't have to file with the SEC, but you have a limited number of accredited and unaccredited investors. Then you can't advertise at all.

I'd STRONGLY recommend reading over SEC's site: www.sec.gov

particularly:

http://sec.gov/about/laws.shtml

(You are selling shares or units in your film.)

Many indie filmmakers don't follow those guidelines and end up in SERIOUS trouble. I've heard and read about horror stories. One guy couldn't sell his movie to a major indie studio, because of the way he raised money.

And PLEASE don't ask for donations unless you're a non-profit. I read people doing this all the time, and the next thing they know, the SEC is all over them like they're a HUGE corporation that ripped off the world. It's ugly and can end in jail time (remember Enron? There's now a zero-tolerance policy). I'm tired of hearing indie filmmakers say their accountant will take care of it. Really? No accountant I know will ever recommend that.

Lastly, you want to designate (incorporate, LLC, LLP, etc.) a SEPERATE company with a Federal Tax ID number, because of the extra protection. Also, you'll soon learn that having a seperate company secures the fact that investors are investing in your indie film, NOT your company. Or at least the seperate company making that particular film. A friend of mine made a film without a seperate company producing it, and one of his investors said he now owned a part of my friend's company. And guess what, he did. So my friend let the company expire to get out of it and created a new deal for the film investors.

And don't do the "we're non-profit now, but we'll be for-profit when the movie comes out." That statement usually equates lots of trouble, believe it or not. And if you anger your investors, they can report you to the SEC.

I'm not 100% on all this, but there are plenty of books in the library that can help out, esp. ones on creating corporations, etc., in your home state. And plenty of books on raising money and more for films. Check the net.

Ultimately, I let my accountant deal with a lot of that, then she refers me to my lawyer, who helps out with the rest. Protect yourself, then make great films! It may sound like overkill, but I've known filmmakers and read about others who got into SERIOUS trouble. Even over a $5000 movie.

heath

[Christopher C. Murphy]

Thanks for taking the time to post such valuable information Heath. It's the most valuable type of information any filmmaker can get. I think infinately more important than regular camera tech talk! You can get that information anywhere...it's this stuff that seperates the boys from the men. (I've always wanted to say that!)

I'd like to also point out that before you start making your film a business plan helps with attracting investors. Heath touched upon filing with the SEC, incorporating your business (film) seperately than your business you use to do videos for cash (like my Willow Studios is a video business...not really a incorporated film entity) etc. If your business plan has all those elements in there - it's much more professional than "I wanna make a movie!". It must read like you've paid some professionals to help you out (account and lawyer to start). Heath has the two key components and he seems to have everything lined up. Also, don't be afraid to call an entertainment lawyer and ask for free advice. They'd rather give you tips up front for free and get you as a paying client than possibly never at all. Plus, they usually love "entertainment" so they will pick up on your passion if you show it to them.

I really like these types of threads more than any other! I'm always reading and talking to people about these issues. It's the missing link to making a film for a lot of people...myself included.

[Heath McKnight]

Business is HARD, I admit it. Trust me, I do. And a GREAT business plan can help. I wish I wrote one for my first one--I probably would've raised more cash...

Just stay cool, be honest and make great films! And sometimes you can find someone else to help with the business, but at least sell yourself!

heath

[Jason J. Gullickson]

If you'd like to read enough about this to scare you into doing it the "right" way, check out the book "From Reel to Deal" (I'm sure you can find it on Amazon). Dov gives a good overview of all the legal/business/insurance issues and then provides a TON of resources for additional info.

I happen to have an in-house Attorney (Jamie my wife) and my co-hort in this business (Matt the Director) is an Accountant so I guess we're doubly blessed. Between the two of them they keep me on track.

From a "professionalism" perspective the post above is dead-on. Nothing makes the talent take things more seriously then having to sign numerous pages of legal documents. In our case we're shooting a documentary with many old friends and going through the signing process actually helped get them focused and take the project seriously whereas without this I doubt we would have gotten the same level of commitment and effort.

Plus it covered our assets...

[Heath McKnight]

That is indeed a good book. I wish I had an attorney and accountant at my disposal like that! <g>

heath

[Victor Burdiladze]

My strategy for financing films so far has been to keep production costs low (very low-about under $1000, in fact). This I do by thinking about it while writing a screept and deliting every scene that would cost me a lot.
Hopefully I won't have to rely on this type of budgeting for long.

My question is - what length films do you usually offer to your possible investors? and how investors react when they hear about producing a short film - are they less reluctant to invest?

[Heath McKnight]

Shorts--usually it's done as support to the filmmaker to get their name out there. I've made shorts for free with crew donating time and others coming to help.

heath

[Victor Burdiladze]

My first hope is to hit some important festivals and get awards (although I have very little respect for Film Festivals in general, I think for the begginers it's a great way to start).

Another thing I could do is to get some money here (in NY) and make a film in some Eastern European country...

[Heath McKnight]

Film Fests seem to be a dime a dozen, but they're important and considered not just an honor to be in one, but necessary for the move into "bigger" things. People will respect you.

heath

[Victor Burdiladze]

I'll start my 5-7 minute short sometime soon in february(shooting should not take me more than 3-4 days.) Week or two in post production than IFP and festivals....
Talking to my accountant and lawyer seems a good idea anyway...
I'll see what they offer me.

[Cemil Giray]

Does anyone know of a book or a bonafide site that has film financing information that applies to countries beyond the USA? Film financing has, after all, gone global. Our current major production is potentially receiving funds from seven countries.

[Victor Burdiladze]

Cemill, your production is receiving funds from 7 countries... that's impressive.
You see, financing works very differently in many other countries(I personally know about some counries in the post soviet space.)
Sometimes movie-making is less money oriented over there...

My sudgestion to you: go to the lokal book store and look for books in the film section, you'll probably find something.

[Joe Barker]

Good advise for people wanting investors to finance your films.
I must admit I have mixed views on this aspect if it involves first time short film or doco makers.
I was amazed when I went to film school and the first thing the instructor said was, Never use your own money, use someone else’s. Now I found this hard to swallow after running my own business and never relying on handouts to get ahead. I found that this doctrine convinced a lot of the students that the only way to make a film was to sit around waiting for a government-funding grant.
As we all probably know, artsy fartsy types staff most of these government agencies. With this in mind its almost impossible to get funding for something the general public might enjoy, the funds nearly always go to films that suit the obscure tastes of these controlling minorities. My point is, that after a year or so filling out forms and waiting around for funding, these once enthusiastic students get totally disillusioned and most just disappear back into regular work force.
I think all film schools should screen Steve Martins, Bowfinger (I’m not sure if that’s the right spelling)? at the beginning and end of each semester. This would give the students the inspiration to go out and just do it. It’s amazing what can be achieved by being determined and resorseful

[Joe Barker]

Good advise for people wanting investors to finance your films.
I must admit I have mixed views on this aspect if it involves first time short film or doco makers.
I was amazed when I went to film school and the first thing the instructor said was, Never use your own money, use someone else’s. Now I found this hard to swallow after running my own business and never relying on handouts to get ahead. I found that this doctrine convinced a lot of the students that the only way to make a film was to sit around waiting for a government-funding grant.
As we all probably know, artsy fartsy types staff most of these government agencies. With this in mind its almost impossible to get funding for something the general public might enjoy, the funds nearly always go to films that suit the obscure tastes of these controlling minorities. My point is, that after a year or so filling out forms and waiting around for funding, these once enthusiastic students get totally disillusioned and most just disappear back into regular work force.
I think all film schools should screen Steve Martins, Bowfinger (I’m not sure if that’s the right spelling)? at the beginning and end of each semester. This would give the students the inspiration to go out and just do it. It’s amazing what can be achieved by being determined and resorseful

[Jeremy Hughes]

This IS indeed a useful post and really bums me out thinking about it as well (in some ways). I have recently come out of a technology startup where we were pitching for VC constantly. I'm located in OH which is near the bottom of the VC foodchain. Anyway, a few tips I might add in ADDITION to what was said above -

A business plan is important to any business but if you're all about a single film youre trying to finance I would break that down every which way possible - thats what you're trying to finance. Show cost breakouts, targeted audience and why its hot or will be (market research), show exactly how the production and post will be handled and build in contingencies. Have AS MUCH preproduction done as possible - if not all. Storyboard it. See if you can get your talent onboard ahead of time. Invest in it. The more you have in, the easier it is for an investor to take the risk.

That also obviously includes your past experience. Demo reel and whatnot. I know a competitor we were up against that recieved $23m in round A funding bc they had a ton of proven experience on the team and they didnt have a product close to ours in the pipeline.

How much you can do yourself is key. No matter what business it is - the more people that become attached on top of you, the more you risk losing control of your baby. Be creative with business - I think the one thing that a lot of business people do not have at all is creativity. Creativity applies to everything we do thats human. Most people call it innovation though. But what I'm saying is a ton of this side sucks yet it can also be facinating, fun and pretty intense. Enjoy it but make sure you have everything done within your power before you go after outside money in my opinion. Figure out how to keep it from becoming a burden so you dont risk burnout at the parts you love! Enjoy.