The Final Round of Financing and Distribution Model Changes.

 The Final Round of Financing

and Distribution Model Changes

Usually what happens is you get most of the challenges in your capital raise for a film in the first round of equity investment or whatever financing structure your using at the beginning of the fund raising journey. Let's be clear, this project had that, it took three years in fact to get it where it is now. Not actually that unusual. Right now at this moment we have literally millions of dollars in the bank, name actors signed and a major relationship with a Digital distributor. So no, before you ask we did not get cough in the pre-sale theatrical window nightmare that most of the rest of the indie and blockbusters this summer got stuck in. #Covid-19 new normal 2020. We actually have been able to raise over $1million in equity during quarantine. 

This was so impressive to one investor that they offered me money to do something else, that I will put in my next post. 

The issues with this final round are unique because of covid, and the shake up in film/financial markets. It has both good and bad aspects too it. People are worried so they are hesitant to invest, BUT people are also looking for new ways to diversify and our model has very low risk. 

We (the team following our lead producer/director) came up with a distribution model that makes more sense and ... I can't talk about it. I know I know, what's the point of reading the blog if I can't talk about it. 

What I can tell you is where the industry seems to be going from my perspective. We have $1 million left to raise in one month and I think it will happen. What I am seeing is new business models in which the waterfall of film financing is getting rid of major sections of the in between people that eat into profits, dilute the process, and very very expensive. 

Part of this comes with the Studios finally giving in during covid and saying "Ok we get it, we live in a digital world".  Which means digital content which means the 100 year old contracts with the movie theaters and distributors is changing. It means that all the people in the middle of getting a project into 20 different kinds of producers whom the question "What exactly do you do again?" could be applied aptly. They don't raise money, they are not the studio, they don't run production, or post production and have no part in distribution except when the box office comes in. 

At Sundance in 2015 we took meeting after meeting met with this person and that person who had no interest in actually helping us with our project. But they could connect us with important people that could. It was bull, all of it. NOT ONE SINGLE LEAD FROM SUNDANCE in 2015 worked out the way that it was presented to the team I was working with at the time. What did happen however is I met a whole bunch of people that are not financing, distributing, or making films. Many of them have huge mansions in Park City, some have mini-festivals associated with Sundance, some have great parties, some have great resume's and are looking for a job. Nobody that I saw was a way to finance, cast, make and distribute a film. Now that said, if we had a packaged film, with a NAME or TWO attached and our little $50K first in then maybe it would have meant more. Maybe we could have gotten somewhere. But we went with two no name directors, very little money, and two films with zero actors attached. We...well in the end "I" got crucified. One of those films turned into another film and has been in post for two or three years now. The other got made with name actors and real money....and has not been released and its been two or three years now(I think it might have gotten stuck in the covid theater trap I mentioned before). The point is, even when everything comes together it was still "a tough row to hoe". 

What I see know, what I am even honored to be apart of now, is a different process. One in which much of the "middle man" issues are streamlined. The process is not only a lot more painless but it actually makes a ton more sense. Trying to explain the 50/50 traditional split, and how it actually works to investors was complicated and frankly embarrassing most of my equity network in Chicago is made up of high finance, or business professionals and it sounds like a bad deal every time I said it. Its a really really shitty business model, especially for film makers and investors. And yes it is absolutely the Distributor/Theater relationship that is to blame. 

Did you guys read the trades this month? Not sure how many articles talked about the new business model in Hollywood but it is great great news. Tried to link it but this computer having Technical issues. Look at the Hollywood Reporter and Variety. It should be out there, sorry for tech issues. Will post it when I can. 

OK, so now that your all up to speed lets look at the financing we need to get. Lets say for instance we need to cover some additional costs caused by Covid and flesh out our budget for some possible added shoot days. Just giving the creative folks some more space to do what they need to do. Maybe we through in a drone unit, just for some coverage. 

Lets say we have $3 million in the bank (No these are not real numbers, I literally am never going to tell you the real numbers of a project I am working on. Yes, it's in the millions of dollars on this one.) 

We need a final million. We get $300,000.00 from people that are already invested and a little bit from a new party. Now we are at $700k. But all our usual folks are tapped, our Roladex(list of people who have money) is either already in this or has already passed. We have gone back a re-approached the people who have passed and they passed again. 

The film has everything, in place, and is going to shoot and be distributed. That part is pretty well in hand, and the tax credits and everything else is buttoned up. We are fill swing into production in less than 30 days. 

Armed with all of this, we, have to open new fresh leads. Raw completely blind leads. It's good for two reasons. 

1. It's new leads, which expand our investor base and help diversify the investor pool  

And my personal favorite ...

2. It's uncomfortable. That's right, going after new money is uncomfortable. It's tough, you have to find people who have money and are willing to talk to YOU (in this case me). Not in person,(remember it's covid, and in the US a bunch of civil unrest. Everyone is freaking out about politics also) so the old tricks of going golfing and going to a country club, or associating where rich people are might now be enough. More than they normally are not enough, lol. This probably has to be done entirely digitally. 

I have a plan and when it's done I will definitely share if it was successful or not. The methodology may kinds become trademark so well see in the process. I wish all of you well, don't forget to be kind to yourself and trust the process. You can do this, until next time. 

Break a Leg!