Hey filmmakers! I hope you all had a terrific week. Mine was spent following up with some buyers that I met with at the Cannes Film Festival/Cannes Film Market last month. Mid-June is when many film buyers start to decide which feature films they considered at Cannes are worth making offers on. This buyers’ trend of waiting a few weeks after Cannes to decide on what to buy applies mainly to indie films, or well-made genre films that lack name stars. Star-studded films with healthy budgets were all bought and sold during Cannes, but the cinematic gems of a lesser demand have to wait on their fate.
So, this week is a perfect time to reach out to some buyers and see which one of the projects I represent are getting offers. This week is also a perfect time for us to discuss five more things filmmakers need to know before they approach investors. So, without further adieu, here are a handful of things to consider when dealing with investors:
Hiring Expensive Lawyers Don’t Increase Your Chances of Getting Funded
I love and respect lawyers, and I’m friends with many of them who charge more for one hour of work than most peoples’ car payments. However, just because you retain a $600 per hour lawyer to handle your film’s LLC, it doesn’t increase your chances to get funded. More often then not, investors don’t care who your lawyer is. Additionally, having an expensive esquire on your side may actually deter some investors, because they don’t want their investment wasted on expensive legal fees. Remember, most LLC documents are boilerplate in nature, so not only can a more cost-effective lawyer help you at a severely reduced rate, but also companies like Legalzoom.com can save you even more. You may also look up some books written by John W. Cones, who is an attorney who comprises legal film documents that all filmmakers need. I actually had John W. Cones build an LLC for me a few years ago (John was one of my graduate film school professors at UCLA). Additionally, Mark Litwak is an excellent lawyer, and he too has written many film-related books that filmmakers should take a look at.
Side Note: I know a filmmaker who kept calling their expensive lawyer to make contract changes so often that their $5,000 bill swelled to $30,000. The kicker is, the film never came together, so now they have no film, but a $30,000 legal bill to pay off. So, don’t be “that guy!”
Don’t Pay Yourself Too Much From The Budget
I know I’ve stated this in previous articles, but it’s worth repeating, because it happens time and time again, and it is a big reason that many investors shy away from investing. News flash, filmmakers: investors don’t want to pay you a hefty salary off their investment. This is because a) if you are a first time filmmaker, or a filmmaker who hasn’t made a commercial success, then they know your services are not worth a healthy fee, b) they don’t want you to get too comfortable financially during the making of the film, because they want you to work hard on the film, and c) they have no interest in replacing your income from the job you may be quitting to make your film. The bottom line is they are taking a huge financial risk on you, so the least you can do is be humble about what you take from the budget. Remember, one of the first things an investor will do is look at how much money you plan to pay yourself, and if that number is higher than it should be, they will probably close your investment package and pass on the investment.
Don’t Attach Elements That Won’t Enhance Your Package
One of the things that often times kills a potential investor’s interest in a project is when filmmakers attach their friends to the package. Unless your friends are A-list actors, producers or cinematographers, you shouldn’t attach them. Remember, the investors are already taking a risk on you, so they don’t want to take a risk on your friends too. The only exception to this general rule is if you’re making a micro-budget genre film. If you’re budget is south of $30,000 or so, then who cares whom your cast or DP are? At that budget range, you’re selling a concept and a genre – not a well-packaged film.
Always Allow a Substantial Amount of Time for Payback
Another thing that filmmakers should be aware of is that your perceived payback time is probably not realistic. Most business plans that I’ve read say that money should flow back within 18-months. While I guess that’s possible, it’s also possible for a herd of unicorns to run the Kentucky Derby next May. The truth is, no matter how good your intentions may be to your investor, it’s highly doubtful that money will flow back to your investment group in less than three years. Actually, four years is more realistic. Here’s why:
1 year to make the film.
2 years to sell the film.
3-6 months to be paid from international sales, after you’ve initiated your first sale – which may take 12 to 18 months.
2-3 years to be paid from domestic sales.
While many of these projected time frames listed above run concurrently, three to four years is still the range in which funds will start to cycle back to investors. Remember, the worst thing you can do is tell your investor they’ll see their money back in under a year to 18-months, when there is very little chance of that happening. I’d say 2-3 years is a better time frame to list, along with the caveat that it may run longer.
Side Note: These time frames are just to get the investment to start to cycle back, meaning that we are not talking about the investors getting all of their money back. We’re just saying it will start to cycle back.
Don’t Lie About or Embellish Your Credits
In today’s world of IMDB and Google, it makes no sense trying to lie about what you’ve done, because investors can cross-reference you within seconds. Thus, just be yourself, and hope that your presentation, project, and plan and strong enough to get multiple investors to cut you a check.
Okay friends, that is the wisdom (or lack thereof) I have for you today. As always, I thank you for lending me your eyes, and I look forward to borrowing them again next Tuesday. Until then, have a great week! I can be followed on Twitter @Lonelyseal.