The independent filmmaking industry needs a new relationship with investors [UPDATED]

LONELY INVESTOR Photo by Alejandro Escamilla

LONELY INVESTOR Photo by Alejandro Escamilla

Prolific indie film producer Ted Hope, who spent the past year as Executive Director of the San Francisco Film Society (as of June 2015, a Production Executive at AMAZON STUDIOS), recently posted “Towards A Sustainable Investor Class: Accessing Quality Projects” as a call to build a healthy independent filmmaking industry. As always, he makes an astute and excellent comment about the big picture of indie filmmaking. We engaged in a conversation, and here’s my comment about the industry and investors:

There existed at the turn of the century a game, it was fun and I’m sure you know of it, called Hollywood Stock Exchange, and I’m surprised to check now and find out it still exists.

I lost touch with it but as I recall, it treats the concept of movie values as a game; one “invests” in movies as one might in the stock exchange, but without any real money.

It always seemed to me that this is the perfect example of how investors perceive movies: a game to play, not an environment for real investment. It has always amazed me that investors, who build their reputations  — well-known or personal delusions — on wise analysis of facts divorced from emotional tugs, suddenly fall prey to this prejudice about movies.

Almost every investor with whom I’ve had the discussion buys into an unexamined prejudice about movie investment.

For instance, most cite the fabled “Hollywood accounting” that seems to preclude real returns from “profit participant” schemes, and wholly swallow that as proof of the fallacy of movie investment, even though it is the unique purview of Hollywood studios and has nothing to do with independent motion pictures (see my blog post “Profit Participation at the Hollywood Studios is Impossible — Not so for Small Indie Producers”)

Others cite “investment” disasters that I have always called the “Car dealer from Ohio who wants his mistress to be a movie star” syndrome: that is, some energetic kid wants to make a movie (as opposed to “compelled to tell a story,” by the way) and talks someone in their small town into investing $35,000 to make the thing. Which, of course, is shitty, never completed, and nobody ever gets to see the mistress in her starring role. The car dealer then says that all movies are worthless. That is the definition of “dumb money,” the term the professional fundraising community likes to toss around with derision. Except … many themselves readily absorb that nonsense when it involves movies.

Investors routinely consider movie producers to be liars selling blue sky, yet a kid with an app for an iPhone is routinely “forward thinking” and “promising.”


To accomplish what the indie film industry needs to accomplish in order to have a strong infrastructure, we as a community must find a way to overcome the nonsense that passes as unique “investment wisdom” concerning the independent filmmaking industry.

How can we do that?

I suspect, and have said this often, that part of the problem is the outrageous breadth of what we term as “independent film.” The term is used to describe $100 million Oscar-winning productions and the tons of cheap crap that gets posted on YouTube where only the filmmaker’s mother will endure it. In this outrageous breadth, everything in between those two extremes falls into the same classification as “indie film.” It is no wonder investors become incompetent at determining where real value might be.

What is more concealed in our economy than the successful and profitable indie motion picture? It is never in a producer’s best interest to be clear about the so-called “budget” (a term as fluid as jelly, mistakenly thought to be some magic absolute) for their movie, and it’s equally against their best interests to be clear about their profit-and-loss. Somehow, however, it would be valuable if the independent feature film industry could aggregate information that shows a realistic and clear picture of profit-and-loss for indie motion pictures, narrowing in on those indie films that specifically start out with ROI as their intention.

I suspect this move would be the most important step in making the independent filmmaking industry palatable to serious investors.

What are the problems?

Most investors are swarmed by filmmakers only when the one filmmaker has the single motion picture that immediately needs funding. That is out-of-step with the environment investors live in. Most investors, to my knowledge, live in an isolated world that includes business start-ups as a matter of routine, and serially. It is a clubby atmosphere where one start-up wizard is introduced by another start-up wizard and they discuss long-term dreams and goals. They exist within communities of both investors and start-up entrepreneurs. However, in the independent filmmaking industry, we are quite a closed community, frequenting festivals and seminars and screenings and mingling among ourselves, only leaving that environment to do a hit-and-run on investors at that one moment when we need money for our film. This is a wrong approach and keeps the investment community confused and distrustful of us. We need to find ways to integrate normally with investors.

Further, our approach obscures one of the clearest facts that would clarify the potential investment for investors: every single motion picture is an entire start-to-finish business operation of its own. Iconoclastic artists love to think they are unique, but not only does that make them at odds with the investment community, it also is not true. Every ROI motion picture uses the same steps as any company, such as: creation of a product concept, analysis of a market, formation of a business entity, development of the product, pre-planning for the product’s production, manufacture of the product, distribution of the product, sales and marketing, distribution, invoicing and returns, and exit. These and other steps are easily identifiable and quantifiable to investors, but iconoclastic filmmakers fail to present the business operation terms, thinking that it is at odds with their art and unique vision. Except: it has always been this way and always will be. The only thing different is that now, in order to save the independent film industry, we must start vocalizing the fact that each motion picture is an entire business operation from start to finish.

Not only will that awareness allow investors take notice, but it also reveals something else investors want to see: STAGES OF DEVELOPMENT. Filmmakers are notorious for wanting all cash up front in one shot for everything, but investors think differently. It is more attractive to investors to fund, perhaps, development, and then production, and then post-production, and then marketing and sales and distribution (the real-world terms for “P & A”), and then account for the receipts and eventually exit the business.

New opportunities

With the recent announcements by the SEC regarding implementation of the JOBS Act, independent filmmakers will soon be able to use a variety of approaches to investors. Donor Crowdfunding has existed, and continues to serve in a “patrons of the arts” capacity, offering support for non-equity participation (perks, fame, etc.). The new General Solicitation allowances mean we can now legally (naive filmmakers have always done this illegally) advertise our projects and seek “accredited investors” (simply defined as millionaires) for routine equity investment. The existing rules, under exemptions from the routine SEC regulations, are still in place for those filmmakers who want to reach out to investors to include a few dozen non-accredited investors. The upcoming rules allowing Equity Crowdfunding will bridge the gap, so anyone, accredited or not, can become an equity investor. (My personal opinion is that Equity Crowdfunding will be the appropriate place for the controversial “celebrity fundraising” efforts. See Crowdfunding and “Hey Zach Braff STFU and pay for your own movie”)

Filmmakers will likely want to blend these various options into a strategy, since each has its benefits and its drawbacks. In each of these options, some so new they are not even effective yet, filmmakers will want to develop the ROI concept for their project in the most professional manner that is acceptable to the investor class.

How can we fix this?

At the moment, the concept of an indie film industry infrastructure is a shaky concept because there is not a sustainable investor class, nor is there enough sustainable employment within the filmmaking community. It is impossible to build an industry infrastructure when the working class of the industry is routinely working for “no pay but credit and reel.”

So…HOW CAN WE FIX THIS? I hope we can.

What are your thoughts and suggestions?

17 thoughts on “The independent filmmaking industry needs a new relationship with investors [UPDATED]

  1. The issue needs data that can elevate the discussion. Some will be proxy data, some will be disclosed private data (a highly biased sample), some will be data supplied by formal surveys.

    I think the only people who collect business data for assessing the prospects for a movie are studio executives, and in the final analysis they probably go with their gut regardless. That assumption about studio executives is itself a glaring example of opinion without substantiation.

    Therefore, the first thing I’d suggest for Indie movie makers is to hold a conference on what a business decision support system for Indie movie makers should provide. I would be surprised if there were much interest in such a meeting, because the root meaning of Indie is Independent.

    So, instead of a convocation of Indie filmmakers, the next best thing would be an entrepreneurial exploration of providing this capability as a for-fee marketing service. The clients would be Indie producers, not the directors. The producer is the practical business manager of an Indie production, the producer needs better ways to raise money. The director is too preoccupied with being creative.

    The added value proposition is this: you put a little money in, you might get more money out. Not through a Ponzi scheme, but through better managed risk.

    That’s the bottom line for investors, managing the risk. Risk management even applies to the cause-driven or patronage-driven investor. Their Return On Investment is an ROI of good feelings. If it is a worthy story it doesn’t need to make money, because the profit in the form of values satisfaction is guaranteed. Managing the risk in this case means making them feel good about signing a check, with no further expectations than the money will used well.

    The skilled development officers for non profits understand that donors are buyers, not investors. Patrons are buying an expression or implementation of the patron’s values, and they seek assurance that the supported project will effect this end. A marketing service for Indie producers would gather data and model scenarios that an Indie producer can present to select investor prospects, encouraging these prospects to perceive a highly managed risk.

    There is another model for Indie investment, the gambling model, and a whole host of metaphors flow from that, none of them about risk management, all of them about superstition. Even a crap shoot makes money for the House, so there really is no risk to manage. You make money if you own a casino, you lose money if you gamble there.

    I don’t buy into this characterization of movie financing as a gamble, because I think that the contemporary model for Indie financing is really a patronage model where non-profit monetary rules apply, and the risk to be managed is the perception that the patron’s cause has been done a disservice.

    But this is only my opinion. I have no data to back it up!



  2. Thanks for that, Michael. It got me thinkin’! With one $10,000 feature under my belt, I’m about to take on another cinema-venture. This time looking to raise about $100,000. You’re words rang a true tune for all. The film community mingles only among themselves until they need the “money.” We are essentially “users.” We as a community need to cultivate trust and relationships within the investor community. What about a film series of successful indie films where investors could be educated on the whens & when-nots of investing into indie film? Might kick some filmmakers to also “step it up” in the quality department on what sells and to whom – a basic “know your audience” before you shoot kind of thing. Having managed the press screening at Sundance for years in the past, ran other events at fests on both coasts and now working mostly in the marketing of Studio content, I see where most indie filmmakers are dropping the ball. Understanding how to sell their movie from the get-go — first to investors then to the market.


  3. Wow, these were some great responses to the article that prompted this very valuable discussion. I have been a professional in the film industry for almost 13 years, producing the last 5 years and am close to funding my first feature-film for $2.1 million. We have a few different investment options on the table to fund the film and now it’s just a matter of seeing which “option” is the best fit for the Team/Project.

    I wanted to share just a few things I did along the way to get to this point and maybe shed the light on different ways to make your project a success before even being funded.

    My project is about a hot “social issue” that happens to tie into my own personal experience, but the key phrase is “social issue”. My project, Supernal Darkness (pronounced “sue-purr-nol”), deals with child sexual abuse/trafficking (think “Silence of the Lambs” meets “Saw” sprinkled with “Law & Order: Special Victims Unit) and is “inspired by true events”. My plan was to NOT do the traditional documentary presentation, but to make a feature-film that if written well can Entertain as well as Enlighten. Choose a “worthy” story, the public is into to the “real” life stories as well as The Avengers…….

    The first, and BEST, thing I did first was gather a team around myself that where “smarter” than me in the film production side of the industry.
    TAKE ADVANTAGE OF “FREE”…….Not having a lot of money to begin with, I researched what I could do so I am not waiting around until my “miracle” happens. I started a Facebook page, website, and had a photo-shoot to produce the poster (had over a 100 “likes” ). I also wanted to tie the film in with “giving back” to the community and those who have been, or are, directly or indirectly affected by child sexual abuse/trafficking so I came up with some interesting ways to do just that.

    There will be a clothing line, a tea, a pizza/sub sandwich so far and a specified percentage of the proceeds will be set aside for child abuse/trafficking organizations. These are just a few things I used as a way to create “buzz” for my indie film which also builds a SOLID foundation to build upon. This also is a great sign to investors on the fact that I have put in serious “sweat equity” besides just creating an idea and script but also thinking “outside the box”.

    Research film-tax incentives, attend networking functions, apply for state grants that help local filmmakers who produce their project(s) in their home state and present those findings to investors. The one thing I was told from the investors was that they appreciated me taking the time to search out and take FULL advantage of every possible medium that could help bring additional monies, rebates, A-list actors, etc to the production.

    “I didn’t just walk into the room with a script in one hand and a dream in the other……”

    Lovie Ray Johnson Jr.


  4. I think Mike Timm makes and excellent point. I would also like to add that the Indie film makers never forget who their audience truly is, so the investments would be wise ones for the right film(s) involved. The scripts are usually better and the story lines tend to be more credible. The audience for indie films is growing because the viewers are becoming increasingly disenchanted with the constant marketing to teens and ‘tweens in the movie theaters. There is a growing population which will make up an older audience within a decade, and they simply do not want to shell out money to take the kids and grand kids to movies that they feel are pointless and have no real meaning.

    Keeping this in mind, to me is very important.


  5. Re:Film Investors needed.

    First, Let me say, in my experience, the common reaction to funding film at any level, by private or institutional investors, is immediately– “close the door.” NO Thanks!

    Even crowdfunding contributors are mainly family and friends that are willing to say” goodbye”, to their money. A great Idea with a noted director and name talent, attached, may successful, but the rest stand little chance of completing their goal.

    In order to gain the attention of the “General” investment community, the film industry, MUST first invest their own money into a central structure, that will ensure a quality and credible, unified group of industry and business managers. They must work towards and develop a serious approach to organizing the film-funds seekers with investor needs, under a central and monitored format. This will attract the investor because, they will see a cross-section of film, production, writer, director, crew and general financial business professionals, all working in one well established, accountable direction, representing both the investor and the ultimate recipient of funds.

    The above MUST be independent of any GOVERNMENT INFLUENCE, except for the normal tax and civil laws that apply to any business.

    Once we, as the film community, build and launch this Central Vessel, the promotional teams, representing the (Clearing House styled) Organization, can approach the investor community with a high-quality road-map, that clearly outlines a standardized representation and balance of accountability, for all relevant Parties, participating in the Central Film Funding Organization.

    This concept is not rocket-science and does not re-invent the wheel. Rather, it would follow the history of many Joint industry-segments, that control, monitor, and take responsibility for their unique members and stake-holders.

    Thereafter, those requesting funds can approach the Funding Org. and apply for funding by following clear, visible and meaningful formats, reporting their information to all Parties involved. Results of the activities would be available to all parties on a regular basis.

    The above will satisfy the necessity for film makers to disclose detailed information about their project, provide a measure of (until now, unclear) details for the investor, and offer the investor a “general” investment option on the overall success of the Funding Org., or introduce them to individual projects, vetted by the Organization.

    This entity is not designed to be a social forum or an introduction/networking, blog site. It will however offer quality and timely functions for all members, that satisfy a funding format.

    Except for some very specific and detailed terms and condition for all those that would wish to become members in either category, the concept should work well and put to rest the misconceptions and doubts that prevail about independent film investment/funding..

    Give me your thoughts..

    Philip Hay
    Exec. Dir.
    Wild Horse Media Productions.


  6. I wish I had an answer. I believe that investing in single pictures is a fool’s game. You either should invest in distribution, or you should invest in a slate. Investing in one picture is like going to Las Vegas and thinking you’re going to win if you put all your money on red. How many single picture investments actually make their money back? I just don’t know the answer, but I’m guessing it’s a small percentage.
    Ruth Vitale


  7. Comment from Ruben Arizpe, Principal of ECMG Inc.
    via LinkedIn

    In order to build a sustainable investor class you will need a number of consistent factors:
    1. An Independent Film Union. A membership of filmmakers who come together to become and indie studio. Where the governing panel will accept submissions from its members of films where the panel decides which films will be produced.There is too much competition in the market and investors need some sort of organization or management team they can rely on.
    2. A consistent distribution outlet. A distribution company who will serve the union to deliver the film into the market in an organized fashion. A distribution company that will deliver and sell both foreign and domestically.
    3. A marketing firm who will use commercial dollars to provide P&A by including Product integration and product placement. Advertising dollars are the only way an independent union can compete with the major studios. A film may integrate products, place products prominently or sponsor a film if the film in a period piece.
    4. Solid contracts with exhibitors. The majors consistently pull films from the market if they are not performing leaving the exhibitors with dark time. This dark time can be filled with indie films. Or we simply cut a 10% to 15% market share deal with the exhibitors granting the exhibitors a larger percentage of the film if they contribute to its advertising dollar. I.E. when an exhibitor advertises the cineplex it would include short excerpts from the indie films, since its success would be in their best interest.

    We seek out individual investors, have them invest in our films, it is usually ONLY THEN do we think about distribution. What we are doing is giving the distributors more product to choose from. If I have a rare Spanish doubloon from a 18th century shipwreck, it would be valuable since it is very rare. However, if everyone in the US had one just like it, it would be worthless, common. This is called over saturation of a market. Our egos scream, my film is the best out there. Well, 9,999 out of 10,000 its not.

    An investor really does not care about who’s in the movie, or what it is about, unless they are just spending money to hang out with stars and to say “Hey I made a movie”. They care about 1) the market 2) How do you intend to sell? 3) Do you know what your doing? 4) when and HOW do I get my money back?

    An organization like a film union would, select films to be produced, produce them, sell them into the market with its distribution ties, all with funding provided to the union by investors who see a solid organization with a proper corporate structure and product outlet.

    Filmmakers should be licensed and voted into the union. We must initiate some kind of control over our market. Other wise we will be in a consistent search for evasive investors.


    • I think the comments that suggest organizing an independent film producers’ organization, with tie-ins to financing and distribution, is brilliant. Especially if there are knowledgeable and experienced readers who can discern those projects that are worthwhile producing, and a roster of experienced artists and crew who want to work in independent films. How do we do this? I would love to be part of it. I have produced two ultra low budget features and three short films, and am working now on two other features. Is there anyone there who can actually get this started? It is certainly a worthwhile project.


  8. Our Company want to do something about this. We are launching a New TV Channel to broadcast throughout Europe,and are eagerly seeking New Content. There needs to be open Channels for people like Us,established directly with small Production Companies who are not so tied up to big Distributor Moguls contracts. By sourcing first second and third Productions,TV Stations such as Ours can in the future finance Production Companies to breakout into larger budget /exposure status,and to find lesser restrictions upon them within the Industry.

    Columns like Yours Sir,are truly valuable,and these friendly,less Mogul Corporate connections should be encouraged.
    We are accepting submissions at present,if Content owners are interested.


  9. I only came on here to read all your views – My company has already started this colloboration idea last year and will post more once it is finished you will be amazed – thanks for the feedback. I am glad to see that it’s not only me who was thinking this.


  10. Possibly examine what went down when and where an indie filmmaker did find and obtain adequate funds from investors. Plenty of films have been made. Find out how they did it. Research success rather than failure.
    I do know this. Many very successful indie films were produced on a very low budget, seen at festivals, and then released on a wide, popular scale. Once a filmmaker had great success the investors jump on board with wild abandon. I have learned that people invest in a person far more than an idea ( not that it should necessarily turn out this way).
    My thoughts, from”the peanut gallery” are… make a low budget film just to get on the map, even a great short. Then the filmmaker has a bargaining chip when dealing with investors. Talk is cheap, but a good product sells itself!


    • Pamela – I couldn’t agree more. My first feature was shot for $10k, won several festival awards and much respect from seasoned producers. Currently, I’m shooting another micro-budget while shopping a bigger project. As indie filmmakers, things in motion stay in motion.


  11. I enjoyed this article (and the commentary), very much. It was great to see that people actually have civil discussions with regards to the funding of independent film projects.

    I do know of a sure-fire way to lose potential investors:
    Don’t approach a solid prospective investor with threats and demands, and please skip the “ticking time bomb countdown”, for example (here is a quote from an email I received):

    “Ms. Dagan-Foxman, you have now been informed. You only have 7 days left to contribute to the making of our film, if you do not fund our film, you are guilty of denying a film of epic importance from being made, thus you are complicit in a greater conspiracy, denying historical events. Know that we will be offended and take action!”

    (Personally, I thought that this was quite creepy and off-putting. I was very cordial in my dialogue to the aspiring Filmmaker.

    I only asked a few questions, after I had researched the subject matter of the project and found several major discrepancies.)

    My general suggestion would be to stress a sense of urgency (and passion) for your film, but to not cross over into hostile / forceful demands in an attempt to gain funding for your project.

    L. Mary Dagan-Foxman


    • Mary Dagan Foxman you are a troll and you know nothing about investments, writing or the film industry. Are you changing gears from chasing down missing people, questionable deaths and potential (in your sick mind) child abusers. Face it, you are a keyboard know it all, with no career, identity or power to do anything except to meddle in everyone else’s life. I guess this means you are done with “The Dirty” even they didn’t want you around with your sarcasm twisted warped mind. You think everyone should be listening to you and that only your opinion matters. You are mistaken, that is why you will never make it as a writer, humanitarian or fund raiser that you claim you are.

      If any of you listen to this parasite Mary Dagan Foxman, aka The Terrorist Barbie, you are as crazy as her. Get a life Mary.


  12. I am willing to invest in any independent film, the are so much fulfilling than these drab films Hollywood slams out. My background is in Silcon Valley, high security, Mitigation Loss at Banks, did I mention that I am a Reporter with Reporters Without Borders. Since I am crazy about Nik Ritchie and am a groupie on “The Dirty”. My company Panaloop is successful, venture capital, investigative journalist, total bad arse “super masonic jew”
    I am it ALL and cand DO IT ALL.


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