Raising money for a movie often feels like a Sisyphean task of constantly pushing a boulder uphill. As documentaries become more popular with audiences (both in theaters and on streaming platforms), nonfiction seems more commercially viable today than it has in the past. Equity funding, also known as hard money (as opposed to donations, which are soft money), has increasingly become a component of many documentaries.
But there are sometimes hidden dangers in finding generous investors, as filmmakers sometimes unknowingly strike Faustian deals out of sheer desperation. As long as realistic expectations are set, funders can be not only benefactors but also team players, mentors and sponsors of future projects.
At last September's Getting Real conference, IDA convened a panel of experts from the fields of finance and film to openly discuss the changing landscape of documentary funding.Documentarycaught up with the same panelists over the phone a month later to dig deeper into the ins and outs of equity financing. His advice is a guide for filmmakers on how to avoid some common pitfalls, dispel misconceptions about investors, and make the most of the kindness of strangers.
Documentary: What is one of the main issues that arise when equity investors invest in nonfiction?
Justine Nagan, CEO of American Documentary Inc.; Executive producer,point of view;Executive producer,redesigned america:Investors are usually very successful individuals who have often made money in other fields and tend to apply the same rules to documentaries that don't. They seem to think the genre is more lucrative than it really is, because there are now billboards for documents on Sunset Boulevard.
Brenda Robinson, entertainment rights attorney and philanthropist; Member of the Board of the IDA; Creative Investor, Sundance Institute Catalytic Forum:I was both an investor and a beneficiary, so I had the opportunity to observe the funding process from both sides. It is important to emphasize that a documentary should not be seen mechanically as a source of income, but as a way of conveying an important message. So it's important for investors to understand that they cannot treat this as a transactional thing like B. Selling a property where you expect to make a profit. Investors shouldn't see this as a transaction, but an opportunity to back something impactful.
D: How do you deal with investor expectations, especially when they come from a completely different area from which you measure success?PhraseProfitability parameters?
BR:Remember that for some investors, the movie business is not their main area of expertise; so, as a filmmaker, make sure you spell out the terms and conditions clearly and clearly. It is helpful to bring in entertainment attorneys who can review terms and conditions on both sides so that all parties have a clear understanding of the structure of your application.
JN:Hopefully a filmmaker isn't working in a vacuum, but has a good lawyer or producer who has worked with investors who can help with that training. Organizations such as Impact Partners or the Chicago Media Project, which often work with investors, can meet these expectations. Articles and conversations like this one help. When I was at Kartemquin, we consistently worked to educate investors about the reality of most documentaries. I hope this is a collective effort and not just one director, as he is dealing alone with a new investor and has to carry that weight.
BR:Most people invest in or support documentaries as an opportunity to support something impactful. But the market is changing and people are increasingly involved in supporting documentaries. When documentarians make capital investments, it also means they are under pressure to recoup that investment. Every documentary I've been involved in has typically had a combination of donations or easy money and equity investments that helped get it to the finish line. Nowadays both are often needed.
Josh Penn, documentary and short story producer,A shot in the dark,contemporary color,Beasts of the Southern Wilds:I've been open to taking action on most of the projects I've done. I just remember one movie I did where I didn't take capital, and that's because it was a non-traditional release and it didn't make sense to take the investor's money because it would have been too complicated to do that to pay back.
They want to do something that pays for itself and is artistic. There are cases of misaligned money.
D: What do you mean misaligned money?
JP:I think when key partners on a project have a different idea of what a project should be in general, or different priorities, or different goals. This can lead to many problems in the future. Producers often push this under the rug in desperation to get the money, believing it will be resolved later. But when these important things get misaligned, even if everyone is very kind and polite, it leads to huge disagreements across the board.
Even when priorities are different – say, one person wants to make a lot of money and the other wants to run an impact campaign – when people have different expectations or hopes for something, it can create a lot of headaches later in the process. . And that usually shows up in post-production.
It takes longer when investor relations go wrong. If you have to spend a lot of time on communication, the film suffers a lot. This is a situation that does not encourage creativity.
D: What advice would you give to filmmakers looking for funding?
JP:I find that setting realistic expectations isn't always the best short-term sales tactic, but it's better for the long-term relationship.
BR:It is important to explain and discuss cash flow with your investors. Have an open conversation. Explain your production schedule. Don't always assume the line is closed if you haven't heard from an investor. There's nothing wrong with politely reaching out to your investors to see if they're still interested in backing a project. If there are gaps in communication, it could very well be that the investor forgot about the project or that they switched and invested money in another non-film related project.
A polite follow-up is good, as the door is not necessarily closed.
D: What are investors looking for in exchange for their participation in a film?
JP:Understanding what an investor wants from their engagement is the most important thing, because there are many different goals with doc funders, from social impact to cultural impact, to learning how to make and produce films, to funding arts. It varies a lot, and often filmmakers don't know this and it's not part of the process to explicitly ask what the investor is looking for. Pay attention to the reality of the situation; Sometimes people's stated goals differ significantly from their everyday desires.
D: What is the biggest misconception filmmakers have about investors?
JN:One of the biggest misconceptions filmmakers can have is that all financiers are created equal. Because you had a relationship with one, it will be the same with another. The investment world is like any other facet of the industry. People who invest in documentaries are motivated in different ways and have different interests and goals. Some investors like the art, others want to cash in, although the upside is important to them. And these two types of investors will handle the transaction very differently. Every time you deal with an investor, financier, distributor or sales representative, every deal is different, every conversation is different, so proceed accordingly.
BR:One of the biggest misconceptions of filmmakers is that they lack leverage when it comes to asking investors for support. Filmmakers must understand that filmmakers, like investors, have the resources to make something possible, they have one important aspect: a strong story. Because of this, most investors and filmmakers should think of this less as a transaction and more as a partnership, as together they can create something very impactful by contributing their respective resources.
D: What mistakes should filmmakers avoid when it comes to financiers?
BR:Filmmakers should view their relationship with investors or financiers as a partnership, a long-term relationship, not just a short-term cash injection. Try to keep them in your circle, in your network. Don't just focus on finishing your current movie. Think long term about your career. Don't always think of the investor as just a check writer. Think about how they can help you or your project. Look at her as a whole person. Use them as a link to your larger network. Personally, I see how strategic a filmmaker is when dealing with investor relations.
JN:Talk to other filmmakers who have worked with a particular investor to get a clear sense of how they like to work and what contract terms they signed that worked for the project. These relationships often last for years. The more real and reliable information you have before signing the contract, the better.
As a filmmaker, remember that you have something of value. They are exhausted and in need of money and resources. Some investors treat movies like widgets and commodities. But it's important to remember that all money comes with conditions. Sometimes tired filmmakers accept really bad terms because they're so desperate. I've seen filmmakers sign terrible deals because they needed the funds. Sometimes they knew the deal was terrible, but they took it anyway. But sometimes it was because they didn't have the bandwidth to do the research or there were other extenuating circumstances. Sometimes the terms and conditions are a high percentage or give the investor control over the distribution. There are times when it makes sense to apply these contractual terms, but depending on the film, it may not always be appropriate. Note that increased equity investments affect distribution agreements as well as the ability to raise other funds.
D: How would a later settlement affect your sales?
JN:Some filmmakers want maximum impact; they want a robust outreach campaign, such as a public television broadcast. If they sign with an investor that is not aligned, the investor can pressure the filmmakers to pursue the most profitable deal, even if it doesn't align with the filmmakers' other impact goals.
D: Documentary budgets are very fluid and sometimes budgets go up. How are investments managed?
JN:It depends on the agreement and also on the equity limit of the film. Be sure to calculate equity as a percentage of total budget, not total equity. So, if the net worth is only $100,000 out of a total budget of $1,000,000, you must separate the funder's money from the investor's money. If the budget increases later, the share is valued with the existing budget at the time of investment.
Some investors are first money, so it's riskier money. Even if they give less money, they have more favorable conditions. Other investors, despite having entered the last money, expect to receive the first money. It's a reminder that the more communication you can have so that there are shared expectations on both sides, it truly becomes a positive experience for all sides.
D: How do you attract investors?
BR:Clearly communicate to investors your passion for the subject, the intended impact, your long-term goals for the film, and get the message across. Make it bigger than just generating revenue. Keep investors involved in your project by letting them get updates during production, or maybe spend a day in the editing room, attend a conference call, and definitely a premiere.
JP:Everyone likes to get involved, so don't be afraid to show them a rough cut. A lot of people want to learn, want to invest money to be part of the process. I hear what investors often complain about is that sometimes they're afraid to get investors involved. You don't show investors cuts of the movie until they're really confident it's good, instead of sharing something and saying, "This is far from done, but you're part of the team and we want your feedback now." It's not perfect, but if you want to help us get there, we need your input. . And sharing really helps maintain good relationships in both the short and long term.
JN:I have friends who are investors and what definitely motivated them was learning the process and getting to know the community. I've worked with other investors who are genuinely interested in the awards and the brightest aspects of our industry. For most people, it's a number of things that draw them to the field. The reality and instability of our market will discourage the type of investor who entered because he really thought he could make money and didn't have a more complex motivation.
BR:Many projects that are raising money have also had a social impact campaign associated with the project. Filmmakers should consider what their long-term goals are for the project beyond the initial screening. Think about what you hope to do with the film. Start involving people during filming. During production, plan how to keep your project alive and how to give it a longer life after completion.
D:What other problems have arisen with the increase in the net worth ratio?
JP:It is very important that the credits are transparent and reflect the work done in the production. Otherwise, when investors often get credit just by writing a check, it gets hard when you go out as a producer and get a job, and people don't know if you actually worked at it or just put the money into it.
Therefore, filmmakers should join the Documentary Producers AllianceGuidelines for Recommended Credit Levels for Financing. Producer, co-producer and supervising producer credits must not be acquired. But there are plenty of credits to buy, such as Executive Producer, Co-Executive Producer, Contributing Producer or "This film would not have been made without the support of...". If you add corporate loans, it's even more.
D:How do filmmakers find investors?
JP:I've been doing this for ten years and it gets easier the longer I do it because everything I do opens new doors for me. But I think it's really challenging early on in your career to find people who have money and want to put it into movies. Even ten years later it can be a mysterious process as you look for new people interested in your subject who have funded like-minded documentaries in the past.
They might make a movie about the healthcare industry and someone might have a family foundation focused on improving the healthcare industry and they might not be interested in other movies but yours has exactly the theme they are committed to, where you hit the target.
BR:Many of the films presented to me or to other investors passed through laboratories such as Sundance or Chicken & Egg. Funders sometimes find new projects by attending film festivals or other similar gatherings. I go to these festivals to see what new projects are out there and to make myself approachable. In my experience, I have found that this is a closed-door industry and my goal is to try to open doors where I can. Many filmmakers have made great sacrifices to get to the finish line. Once you've attracted that first group of angel investors, it's good to try to keep them on board as you develop future projects. This is a good long-term strategy.
JN:I hope we continue to expand the field of investors who understand the big picture and who really care about the well-being of artists. And that the terms presented reflect the larger ecosystem.
We are such an understaffed area that we really need new money. But it's up to all of us to do that kind of education and have those conversations so we can move forward together.
Darianna Cardilli is a documentary filmmaker and editor based in Los Angeles. Her work has aired on Bravo, A&E, AMC and The History Channel. She recently finished editing the documentary8 billion angels.