Investor Advice

CJInzana

CJInzana

One of my new crew members has really stepped up as a Production Coordinator... Unit Production Manager... Producer.... whatever you want to call it. But he recently found us an investor that has his hands in a lot of local investments. He is willing to put forward around $8,000 dollars expecting a %50 yield in our next two films.

This at first sounds like great news, but I'm very cautious going ahead with this kind of deal. I've come up with a complete budget for the short film that is next up which ranges from $1,600 to $6,000 dollars depending on how many favors we call in, crew we pay, etc. This $8,000 would be fantastic for that, but chances are we won't make much money back on a short film around 15 minutes long.

Then there's the issue of the feature we're planning on making. I'm still in the process of figuring out a projected budget, but it's looking like it's going to cost around 3x as much as the short film if we're going to do things right. By the time we get here, this investor's money is about to run out and we're going to need to pull in more investments probably with equally expected yields.

My question is, what is your advice on investors? Is 50% a high yield on things like these? Should I completely turn this opportunity away and use crowd sourcing fundraising like I was planning on originally?
 
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A bird in the hand is worth two in a bush. Personally, I wouldn't even think about turning down an investor, in favor of crowdfunding. And by the way -- congrats! :)

Okay, before I answer your other questions, here's the disclaimer that I'm not speaking from personal experience, but from doing a bunch of googling (and asking questions on here), because I've had the same questions.

50% is quite normal. But not for someone like you (or me). 50% is the deal that is negotiated for an experienced, proven commodity (aka - someone other than you or me). For relative rooks, the executive producer often gets more than 50%.

But the thing is, you're going to be paid for your work as producer, director, writer, actor, or whatever. And that comes before profit. The executive producer is paying you, even if the movie makes zero money. So they are actually the only person taking any risk. Keeping that in mind, I think a 50/50 split is very fair.

For more detailed answers, check this thread, in which I basically asked the same question.

By the way, how do you think you'll turn any profit on your short? Generally speaking, there's no money in that. Just my two cents -- if you've got an investor, and plans for a feature, forget the short and make the feature!
 
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Cracker Funk said:
By the way, how do you think you'll turn any profit on your short? Generally speaking, there's no money in that. Just my two cents -- if you've got an investor, and plans for a feature, forget the short and make the feature!
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:lol: Yeah, this is kinda what I was wondering.
A - I've not heard of too many shorts making any money but d@mn near all of them costing plenty.
Money down a hole, IOW.
B - What kind of film "investor" thinks he/she is ever going to get ANY money back from a short? There's a better chance of someone eventually getting some sort of earnings (AKA not "profit") on a $8k feature rather than an $8k short. Those are some Neill Blomkamp or Gareth Edwards odds on a short.

https://www.youtube.com/watch?v=iNReejO7Zu8

https://www.youtube.com/watch?v=dvZ2GTGyE8s
 
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I would love to dive right into my feature, but I want to have something proven under my belt before I take the leap for a feature. I would prefer to crowd source the short and then get investors in on the feature. I know the short isn't going to make any money, but it will probably help me be a better filmmaker, which will in turn make my feature better, which should mean the feature would make more money.

Regardless, I'm going to tell my "producer" to do whatever he thinks is best for this situation. He has plenty more experience in the business, although he's an actor by trade, and I really want to be able to focus on my directing and writing foremost.

As long as 50% doesn't seem unreasonable, then I'm good I guess. I just don't want to end up owning someone money... god knows how much I already owe to that damn university.
 
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Best bet is to have an experienced entertainment attorney go over the contract. Sometimes you can get one pro bono from schools or firms that do some volunteer work for people who don't have the money.
 
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Have you spoken to him regarding the 50%? Make sure you are
clear - in writing - what 50% means. 50% of what?

Depending on what he means, 50% could be very unreasonable. If
he puts $8,000 into a short and nothing into the feature that you
say may cost between $4,500 and $18,000 ("but it's looking like it's
going to cost around 3x as much as the short film") then 50% of the
gross is unreasonable. Make sure you know 50% of what. That's VERY
important.
 
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directorik said:
Have you spoken to him regarding the 50%? Make sure you are
clear - in writing - what 50% means. 50% of what?

Depending on what he means, 50% could be very unreasonable. If
he puts $8,000 into a short and nothing into the feature that you
say may cost between $4,500 and $18,000 ("but it's looking like it's
going to cost around 3x as much as the short film") then 50% of the
gross is unreasonable. Make sure you know 50% of what. That's VERY
important.
Click to expand...

He is hoping for 50% yield. Which means that he is putting in say $8,000 dollars and expects to make that back plus 50% of his initial investment. So he's expecting $12,000 back at least. My producer has made it pretty clear that I don't retain any liability in this case, and would technically be an writer/director being hired.
 
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CJInzana said:
He is hoping for 50% yield. Which means that he is putting in say $8,000 dollars and expects to make that back plus 50% of his initial investment. So he's expecting $12,000 back at least.
Click to expand...
I don't know what "yield" means in this case. I hope your producer does.
 
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Cracker Funk said:
A bird in the hand is worth two in a bush. Personally, I wouldn't even think about turning down an investor, in favor of crowdfunding. And by the way -- congrats! :)

Okay, before I answer your other questions, here's the disclaimer that I'm not speaking from personal experience, but from doing a bunch of googling (and asking questions on here), because I've had the same questions.

50% is quite normal. But not for someone like you (or me). 50% is the deal that is negotiated for an experienced, proven commodity (aka - someone other than you or me). For relative rooks, the executive producer often gets more than 50%.

But the thing is, you're going to be paid for your work as producer, director, writer, actor, or whatever. And that comes before profit. The executive producer is paying you, even if the movie makes zero money. So they are actually the only person taking any risk. Keeping that in mind, I think a 50/50 split is very fair.

For more detailed answers, check this thread, in which I basically asked the same question.

By the way, how do you think you'll turn any profit on your short? Generally speaking, there's no money in that. Just my two cents -- if you've got an investor, and plans for a feature, forget the short and make the feature!
Click to expand...

I am proud of you Crack Funk..!
 
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CJInzana said:
Which means that he is putting in say $8,000 dollars and expects to make that back plus 50% of his initial investment. So he's expecting $12,000 back at least. My producer has made it pretty clear that I don't retain any liability in this case, and would technically be an writer/director being hired.
Click to expand...

Oh, yikes. That's not the kind of 50% I was talking about. The way you describe it, that sounds like a loan, with a 50% interest rate.

As it's been explained to me, the standard is that the executive producer splits profits with the working producer (after the executive producer recoups their initial investment). So, let's say you spend $8,000 on a feature -- part of that budget is your own salary, as producer. So, you get paid upfront. Let's say you're able to sell the movie for a total of $10,000; in that scenario, a 50% split would mean that the executive producer first gets their $8,000 back, then you both split the remaining $2,000.

Nick -- thanks! :)
 
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Cracker Funk said:
As it's been explained to me, the standard is that the executive producer splits profits with the working producer (after the executive producer recoups their initial investment). So, let's say you spend $8,000 on a feature -- part of that budget is your own salary, as producer. So, you get paid upfront. Let's say you're able to sell the movie for a total of $10,000; in that scenario, a 50% split would mean that the executive producer first gets their $8,000 back, then you both split the remaining $2,000.
Click to expand...
That's more accurate. Which is why I don't understand what CJInzana
means by"yield".

You make your movie for $18,000 - he puts in $8,000 which means
$10,000 has come from other investors. You’re saying he gets $12,000
before anyone gets anything?

Unreasonable.

Where does the $12,000 come from? First sale? What if the upfront sale
is less than $12,000? Let’s say you get a $10,000 upfront and then a
percentage of sales and rentals paid quarterly. He gets $5,000 up front
and 50% of each quarterly check until he sees $12,000?

Unreasonable.

What if it’s $15,000? He gets $12,000 and the people who put up the
other $10,000 get $3,000?

Unreasonable.

There are ways to make his investment reasonable - even if he is expecting
his investment back plus another 50% of that investment. But nothing you
have said here seems reasonable to me.
 
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Thank you that's what I was thinking. I have no liability in this case, but I still don't want to see some guy ruin a film that I care about just bc he's not investing his money the right way. We still haven't made a deal yet, so I'll talk it over with my producer.
 
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You shouldn't let him into profits for any future film. I don't know any investor who would invest in a movie where they are profit sharing with an investor fom another film, they are effectively giving part if their recoupment away.

He should expect that, if your short generates money, he gets 100% of revenue until he has recouped 120% of his investment. This is pretty standard. After that, you can split profits. 50% should be fine.

I have produced several short films, always from private equity. I always tell my investors that it is unlikely they will see their money again but what I am offering them is the chance to be involved in an exciting venture that can launch the creative careers of the director and actors. I also make sure I am armed with every piece of tax deduction, deferment that they may be eligible for.
 
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