Crowdinvestment for Filmmakers

Film Finance from the Crowd

Funding a film is usually a haphazard endeavor. As an independent producer, there is no go-to place to find funding. You might apply for a grant, or get friendlier with your grandmother, or meet someone at a party who loves your work and wants to fund your next film . . . or mortgage your house.             

Crowdinvestment makes the film-funding process more efficient and transparent by providing a platform for filmmakers to pitch directly to interested supporters. Instead of producers raising production capital from a few disparate sources, producers using crowdinvestment will be able to connect with a large number of investors and manage those relationships all through a single website (why am I speaking in the future tense? . . . more on that below).

 

Crowdfunding is Already Here

Crowdfunding—the process of raising money from many small-scale contributors—has been happening online for four years. In that time, crowdfunding websites have successfully funded thousands of independent films. Users of Kickstarter, one of the most prolific crowdfunding websites, have raised over $177 million to fund films since the website’s launch in 2009.

However, crowdfunding is still in its infancy, and many people in the film industry doubt its potential. As of now, crowdfunding is contribution-based. Funders contribute (most people would say “donate,” but crowdfunding websites typically don’t like that language) their money to projects in exchange for “gifts” or “rewards” offered by project creators. Crowdfunding for contribution is well adapted for small-scale projects—the majority of successful film projects on Kickstarter raised under $10,000—but it’s difficult to raise large budgets from dona— ahem, excuse me, contributions. On top of that, many once-benevolent crowd-funders now complain of “Kickstarter fatigue” – irritation at being asked too many times by too many people to contribute to Kickstarter campaigns.

 

The SEC and the Jobs Act (Title III)

But that’s all about to change. On April 5th, 2012, a bill was quietly signed into law that will soon open up vast potentials for crowdfunding. The bill was the JumpStart Our Businesses  Act (AKA Jobs Act), and Title III of the Jobs Act is written to make crowdinvestment possible. Unfortunately, Title III of the Jobs Act has yet to take effect. It’s been, let me check my calendar, a year and a half(!!!) since the bill passed, and the Securities and Exchange Commission (SEC) is still writing the regulations for crowdinvestment. (For more details about the state of crowdinvestment and Title III, check out blog, “What Up With Crowdfunding?”)

The delay is understandable. Crowdinvestment will radically change how people are able to invest their money—and who those people are. If you’ll permit me, dear reader, a short tangent . . .

 

Occupy Hollywood (Online)

You want to know how we actually occupy Wall Street?—by utilizing Title III of the Jobs Act! Up until now, only accredited investors have been able to invest in early stage companies. To be an accredited investor, you must make $200,000 a year, or have a net worth of $1 million—so, you have to be rich. Title III allows non-accredited investors, non-rich people, to invest. Until now, someone with a big idea who wanted to start a company would have to raise investment from a small number of rich people. Now a large number of not-so-rich people can invest in that big idea!

So, this is a big deal, and the SEC is taking its sweet time figuring out the rules. In the meantime, Indywood is developing a model for crowdinvestment tailored specifically to film production.

 

Crowdinvestment in Moviemaking

Crowdinvestment as a funding tool is a good match for filmmakers in several important ways:

(1)  Audience: Indywood films will start generating buzz while they’re being funded. Even if people don’t invest in the film, they will still be able to follow the film and receive updates about it.

(2)  More Potential Investors: Indywood will be a community of filmmakers, investors and viewers, all unified with a common mission of making good films. Putting a film on Indywood will allow a filmmaker to connect with people she otherwise might never have known.

(3)  Standardization: Indywood will provide an interface between creative folks and curious benefactors. We’re building a simple, reliable tool to handle the money, so users can focus on the creative parts of the process instead of getting muddled in the numbers.   

(4)  Viral Advertising: Anyone who has invested in a film is probably going tell his friends about that film. If a filmmaker has a wide array of investors, she has a built-in army on social media. 

(5)  Constructive Feedback: If a campaign doesn’t get funded, the filmmaker can tweak some things and try again . . . and again . . . until he gets it right.

 

We’re Getting Ready

The Indywood crowdinvestment portal is currently in development. If the SEC sticks to their projected deadline, Title III is expected to go live in April, 2014. However, the SEC has not been very timely since the Jobs Act passed, so it might be later than April.

Either way, we’ll be ready. We’re excited to be part of this new era in film funding.