Hi ,
Broken Record Speech: No one can or will invest when there is no investment. You cannot write a check to a script or to an idea. If you want investors, you MUST have an investment!
OK, now that our message repeated 1000s of times is out of
the way, put your Film Investor hat on. Which of the above charts shows the better investment? Which chart better demonstrates a filmmaker who takes their project, film, budget, financing and producing seriously? The answer is obvious, but here are some details as to why...
When deciding which investment breakdown is better, filmmakers need to evaluate their specific project needs, goals, and risk tolerance. Here’s a breakdown of both scenarios and exactly the type of
language you want to use in your investor meetings. Show them your thought process, logic, effort, insights and most of all, speak their $$$$$ language, showing what's in it for them:
1. **Mixed Investment Breakdown (10% Tax Credits, 10% Product Placement, 10% In-Kind Donations, 70% Private Equity Investors)**
**Advantages:**
- **Diversified Funding Sources:** This approach spreads the risk across different types of investments. If one source falls
through, the others can still provide backing.
- **Tax Credits:** Tax credits reduce the financial burden on the production by returning a portion of expenses, depending on local incentives. It can enhance the value of the production without requiring full cash investment.
- **Product Placement:** By leveraging product placement, you’re getting extra funding and in-kind benefits, like props or set design, which lowers out-of-pocket expenses.
- **In-Kind Donations:** These donations may
include locations, equipment, or other essential services, reducing costs while allowing for more creative freedom with less cash burn.
**Disadvantages:**
- **Complexity:** Managing multiple funding sources means more paperwork, negotiations, and potential delays. Each type of investor may have different expectations and requirements, making it harder to manage.
### 2. **100% Private Equity Investors**
**Advantages:**
-
**Simplicity:** Having one type of investor means less complexity in managing financial commitments. You’ll only have to deal with private equity contracts and terms, simplifying the legal and administrative workload.
- **Higher Cash Flow:** Private equity provides direct cash funding, which gives filmmakers flexibility in managing the production budget and ensuring that the film is produced to a high standard without worrying about additional contributions like product placements or
donations.
**Disadvantages:**
- **Higher Pressure for ROI:** Private equity investors typically expect a higher return on investment. This can put significant pressure on the film to perform well financially. They may demand more creative input, or focus on commercial viability, which might compromise artistic integrity.
- **No Added Value from Partnerships:** By not using tax credits, product placement, or in-kind donations, the project might lose out on potential
cost-saving benefits. These sources can reduce the need for cash outlay, freeing up the budget for other areas.
### Which Investment is Better?
- **For Low-Budget or Independent Filmmakers:** The **mixed investment approach** (tax credits, product placement, donations, and private equity) is better. It reduces reliance on a single investor, maximizes available funding sources, and allows flexibility in the creative process. This approach can help balance
financial demands while ensuring the project stays manageable.
- **For High-Budget, Commercial Projects:** **100% private equity** might work if the filmmaker has access to large investors who believe in the project's commercial success. However, they should be prepared for significant financial expectations and potential influence over the film's direction.
In summary, the **mixed investment breakdown** is often better for independent filmmakers or those
with more creative projects. It offers greater flexibility, lowers financial risks, and keeps more of the creative control in the filmmaker’s hands. The **100% private equity model** is simpler but comes with much higher stakes and risks, making it more suitable for experienced filmmakers working on larger, more commercially viable projects.
Learn More About Indie Filmmaker Options:
- 10 Things You MUST Do To Attract Film Investors
- Do you need a PPM?
- Film Funding Options
- Film Financing Stories from the Pros
