, , , , , , , , , , ,

When people find out that I recently directed a feature film, my L.A. acquaintances are quick to offer congratulations. Once those niceties are behind us, the curious hipster oftentimes takes a breath and asks (or wants to ask), “How did you pay for it?”

In the case of “Guys Reading Poems” we used a combination of private investors and crowdfunding to raise the funds needed to make the film.

But now that I’m back in the saddle to produce “Inside-Out, Outside-In,” I face the same question: How will we pay for it?

The way I see it, there are eight options for raising money for feature films. I’m sure there are more. But this is a start.

1. Private Equity Investors – Private equity investors are people who provide capital for a film in exchange for a percentage of ownership of the film or its profits.

Upside – Private investors are great because oftentimes you get more than just the capital. Because they’re motivated for you to win back a return on their investment, they often open up their rolodex and make introductions on your behalf that might be uber helpful to the film. This can lead to even more private investors or other relevant industry contacts. A lot of investors have tremendous business savvy to have achieved the sort of wealth needed for film investment and some of that business savvy might rub off on you.

Downside – It can take time to raise money from private individuals. It can be difficult to find the first investor to take the plunge as it is generally less risky to invest in a film the closer it is to being finished. Unlike crowdfunding, you are obligated to share the success of the film in a significant way with your investors (but hey, it’s only fair…).

2. Crowdfunding – Filmmakers use Kickstarter or IndieGogo or another site to pitch the projects to family, friends and fans, hoping for financial pledges in exchange for rewards related to the film or filmmakers.Kickstarter Congrats

Upside – With crowdfunding, you are not only winning backers, but rallying the front line of your fan base for your film. Although you must provide the rewards promised to your backers, the pledge amount is not money that will need to be paid back once the film starts generating income, a big advantage for your bottom line.

Downside – Take it from me, crowdfunding is a FULL-TIME job. For the weeks of your campaign, you will need to spend at least 40 hours a week working solely on the crowdfunding. Also, if you are too shy to ask people for money DIRECTLY (and yes, I mean making phone calls – personal emails don’t cut it much less just sharing on social media), it will be very difficult for you to crowdfund effectively. Filmmakers are now also facing crowdfunding fatigue as social media is flush with opportunities to back creative projects. You also need to budget to make sure you deliver the rewards promised.

More on the opportunities and challenges of crowdfunding in a future post…

3. Slated – Full disclosure, I have never used Slated.com to finance a film. BUT it’s the most interesting option emerging for the upcoming “Inside-Out, Outside-In.” So if I get any of the particulars wrong, forgive me and go check out their site yourselves. Basically, Slated is a curated community of investors, filmmakers and film professionals that facilitates introductions between parties. You build a portfolio showcasing your project and they go out and verify that you’re telling the truth! This is awesome because it prevents shady people claiming that Jodie Foster is attached to their film, when she’s not. They also ask questions about who has put together your proposal and their level of experience in the business. Then, based on all the information available, they assign you a risk rating in terms of investment potential and you are tasked with building a network, including investors, as you improve your project’s prospects with new attachments and more capital raised.

Upside – Slated is a reputable site where qualified investors and filmmakers intersect. Both parties WANT to be there, unlike those Kickstarter and IndieGogo posts which can become tiresome in your feed. Also, as investors, these people will be rewarded if the movie is a success and can open up not just wallets, but doors, if they choose. All the benefits of the private equity investor apply here as Slated investors often fit that mold – you are just reaching them in an innovative way.

Downside – You don’t personally pick and choose every single person that has access to your ideas and pre-production details. Filmmakers can be guarded about the concept of a film or potential key art. When you are raising money through private investors, it’s always YOUR CHOICE whether you get a good vibe to pitch to any one individual and want to show them your one-sheet or share your data and materials. With Slated, investors have more liberty to view your materials, which might influence their own projects.

4. Find a Studio or production company to back you – Maybe a senior VP will fall in love with your project and the rest is history (it happens!).

Upside – You don’t have to raise the money to pay for it. You may get additional resources and more experienced hands on deck to help complete your film.

Downside – You also may get pressure to step aside in favor of a more experienced director who’s made a film for studios before. There’s also the problem of limited access. A lot of filmmakers would love a studio to back their film, but a lot fewer have the access and connections to make that happen. Even if you get your foot in the door, you may have to make artistic compromises that dilute your vision and don’t serve your long-term career goals. It can take years and years to get the fabled “green light” to move a project forward so patience is needed. You also will likely not share in as many of the profits if your project turns into a studio project (although you will likely be paid more upfront).

5. Grants – This is money given by organizations to artists and filmmakers who embody their taste and values.

My favorite grant program so far is Creative Capital. I’ve attended their application information session and they seem legit.

Upside – The money is free – sort of (your project will have to adhere to the grant’s mission in some way or another). Also, the process of winning a grant includes networking with some very smart people that may help your project in all sorts of other ways.

Downside – Getting a grant is a labor-intensive process that can take a long time. Also, even if you are successful in winning a grant, it might not be enough to complete your whole project. It is more difficult to win a grant for a project that is for-profit than non-profit. Documentarians raising funds for a not-for-profit film probably have a much better chance here than narrative feature filmmakers, in my opinion.

6. Loans – I have personally never worked on a project where bank loans or loans from institutions were used to finance a film (maybe there was a time when I borrowed ten bucks from my cousin for lemonade for our crew but that’s another story….). However, from my limited understanding, loans are the best option if you’ve almost completed a film that needs a little more capital to reach the marketplace and that film has a demonstrable value. I don’t think independent filmmakers can get a loan to make a movie from scratch but maybe some project out there will prove me wrong.

Upside – Hey, you have money that you need to finish your film. And if the film is incredibly successful, you are only obligated to pay back the loan with interest, not a percentage of the film in perpetuity.

Downside – Investors may be resentful if your loan arrangement requires that the loan is paid back before the investors start being repaid. Specific deals with investors may prevent such an arrangement.

7. Pre-Sales – Truthfully, this is not an area of independent film with which I’m terribly familiar. We did receive one offer for a pre-sales for one territory for “Guys Reading Poems” about five weeks before we went into production, but our producer thought the amount was too low and we declined the offer.

Upside – You are getting money in advance of the film being made where you might get none at all. If the movie comes out, there is no guarantee anyone will buy it.

Downside – Our situation is not unique. The people buying your film upfront will want to pay less if they are giving you money before the film is complete because there is a lot more risk for them. What if the film turns out differently than what they were expecting? That could mean gaining in the short term but losing in the long term.

8. Self-finance – It goes without saying that if you have enough cash in the bank, you can finance your own film. Technically, this is actually an outgrowth of option one. It’s just that now, you are your own private equity investor.

Upside – The upside of this arrangement is that if you have the money in the bank, it’s easy to get the capital and you have control of it.

Downside – It seemed like a good idea until you have no more money to live and pay rent. Also, if you’re not careful, using your own money can get messy. An attitude of “it’s my money and I’ll spend it how I want” might lead to sloppy record-keeping (there’s no motivation to keep great books like an outside investor that forces you to justify costs). You as a private equity investor deserve that same clarity and spending control just as if it were another investor’s money. This can often put you-as-investor in conflict with you-as-filmmaker, a weird psychic conflict. Plus, you still have obligations to keep track of what is spent and earned for taxes, etc., even if you’re the only investor.

Some filmmakers may be in that frame of mind where they say, “Screw this!” and decide to charge the entire film to their credit card or multiple credit cards. I can say – with some inside scoop – that some quality directors made their first film that way and succeeded. So I do not judge anyone who decides on that path. However, I do think that you owe it to yourself to try some of these other methods of fundraising for at least six months to a year before you take the plastic plunge, as unsecured debt is almost universally despised as a terrible move financially.

Credit Card image - Blog

Hunter Lee Hughes is a filmmaker and actor living and working in Los Angeles and the founder of Fatelink. His current feature film Guys Reading Poems is touring film festivals and this blog is dedicated to the process of making his second feature film, “Inside-Out, Outside-In.” If you enjoy the blog, please support our team by following us on Facebook, Twitter (@Fatelink) or Instagram (@Fatelink).