The Film Investors Check List – Answers to tough questions your investors will ask

Why would anyone invest in your film?

A producer and entrepreneur I know (who I won’t name) recently shared with me her views on film investment at the lower budget end, with specific regard to private investment. What’s interesting about this person is that she has had an extremely successful career in business before changing gear to enter the film industry.

Unlike most filmmakers I know, she is used to rubbing shoulders with the business elite who are both successful and wealthy. That’s her club. Now she is on the hunt for investment for films, and from a purely business perspective, I asked her to share her thoughts on why on earth would an investor put money into a film?

She says… ‘Most investors aren’t doing it for the money. They say they are because they want to look savvy but they’re not really. Because any investor in his right mind wouldn’t invest in a low budget movie – there’s much better ways to invest your hard earned cash and many better SEIS opportunities (remember we are running our EIS / SEIS course in a couple weeks – there is an EIS podcast HERE).

So when answering investor’s questions you have to bear in mind: they are investing for the fun of making a movie, but they also need to look like they are financially savvy so they can justify their decisions to people who ask them. In a sense you have to help them lie to themselves and both of you need to believe and be comfortable with that lie. Which is what fancy dinners, screenings, asking their “opinion” and coming to the set is for.’

Assuming you can get into the position where you can credibly pitch your business proposition (that’s your film) she suggests that the top questions private investors will ask, in order of priority, are …

Q – What’s in it for me and can you prove it?

What’s the equity?
What is the structure of the deal on offer and how is it broken down, specifically. What do they actually get for their money?

How much will I make?
In most deals, they are looking for ten times their money back, but most know that they will likely see much less or lose it all – you can offset some risk by offering to protect their investment with the SEIS / EIS and UK Tax Credit schemes. This is very powerful as a good portion of their risk is ‘insured’.

How long will it take me to make it?
Not just the film, but make good on the deal – it’s going to take a minimum of three years to return their investment. There is the potential for a very long tail to investment if your film is successful.

What other movies like this have sold in the last 3 years? What was their budget? Did it have stars or no stars?
They are looking for precedent here, what similar projects with similar budgets and similar ‘set-ups’ are out there? How did they perform? In essence, can you prove you have a good business idea because someone else has already proven it for you? Don’t ‘spin’ too heavily here, remember, deep in their heart they know they are taking a risk. Integrity is essential.

Who bought those films and for how much?
Can you find out who bought those movies and how much they paid? Surprisingly, if you ask around, you start to get a sense of what movies are selling, to whom and for how much. Often you will be left feeling like there is a greater truth that is not being shared by producers and sales agents, but you can often get solid ball parks. You may even get full disclosure as long as it stays confidential (you can often ask if you can share the details with investors, verbally and behind closed doors).

How much did they make?
Again, they are seeking precedent. These are really tough questions, but you would ask them too if it were your money being invested right? You may be able to do some speculative maths and should be able to explain accurately how you came to those conclusions.

Will it be theatrical? Or just DVD, online, TV etc?
Everyone likes a theatrical release. In reality most films fail at the box office. There is an argument that a tactical release in theatres will bolster PR and raise awareness for subsequent DVD/ TV / VOD and foreign sales. But mostly, it’s for the ego and career strategy for all involved.

Will the film company have annual audited accounts, showing any income from sales and royalties?
You need to answer YES to this of course. Better still, hire a collection agent to collect monies from sales and then pay out in accordance with the deal, offering secure and protected channels through which investors money flows back to them. It’s very hard for anyone to get ripped off in this scenario which again, offers comfort to nervous (and rightly so) investors.

How many other investors will I be sharing proceeds with?
Who else has an interest? Is their interest on a level playing field with mine, or are they getting more or less? It’s usually best to give everyone the same deal. It’s fair and no-one feels like they are getting screwed. Watch Dragons Den and you will be reminded about how important it is to save ‘face’. No-one EVER wants to feel like someone else is getting a better deal.

What are projected returns across all of the territories?
Bottom line, how much will your film make? Sales Agents can offer projected sales. While everyone asks for this report, it is in large, a piece of fiction. No-one really knows what your film will be like, who will be in it, who will buy it, what genres will be hot in three years time… yada yada… But they still like to have the piece of paper. So give it to them.

Check! Good so far… let’s continue.

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